HMRC tackling tax avoidance & tax gap

Whilst the likes of Google, Starbucks, Amazon and Vodafone may be some of the more renowned businesses in society, a recent report has revealed that it is the contracting profession that has been attracting the attention of HMRC concerning tax evasion.

Succeeding these revelations, HMRC has come under fire from MPs and other establishments. A committee of MPs said that British officials had “lost their nerve” in tackling tax avoidance by global corporations and have presided over a £35bn tax gap as they pursue easy prey such as small businesses and individuals.

HMRC brought in £475.6bn in revenue for the government in 2012-13, an increase of £1.4bn over the previous year. Having said this, the ‘tax gap’ – between the amount owed to the Exchequer and the amount collected – grew by £1bn to £35bn.

In this respect, the intense degree of concentration encompassing the contracting sphere is clearly illustrated as a HMRC spokesperson said they had “secured more than £50bn of additional tax from our compliance work since 2010, including £23bn from large businesses.”

This evidence accentuates the contrast, as the SME and contracting community clearly accounts for a significantly higher proportion of the tax retrieved by compliance operations than large businesses.

This report follows a series of damning reports into HMRC by the committee, which have previously addressed its failings over taking on big companies.

In addition, HMRC have further fell short of delivering on their promises, as last year the customs, headed by Chief Executive Lin Homer, promised to launch an unprecedented campaign to increase tax collection, particularly from large corporations. This has yet to be applied, and considering these recent revelations and consequential backlashes, is unlikely to be anytime soon. 

Margaret Hodge, the chair of the MP committee, concluded that HMRC had not clearly demonstrated it was on the side of the majority of taxpayers and had failed in its ambition to crack down on tax avoidance.