A key aim of the Making Tax Digital service is to ‘close the tax gap due to errors with people making their VAT returns’, according to HMRC. An alternative – and perhaps better – way to deploy technology to improve compliance is set out in an Office of Tax Simplification report. Better HMRC guidance, the OTS says, is likely to lead to more accurate tax reporting and ‘help to close the tax gap, as taxpayers should have a better understanding of HMRC’s view of the law’. Read more:
HM Revenue & Customs estimates the total UK tax gap, the difference between the tax collected and the amount that should be collected “in theory”, at £34bn. Just £1.7bn relates to avoidance (excluding international tax planning strategies such as profit shifting, which are being addressed slowly but multilaterally), and £6bn relates to interpretation of the law.
In contrast, criminal attacks account for around £5bn and evasion another £5bn, while £3.5bn is attributed to the “hidden economy”.
Read more: My article for AAT Comment, 12 January