HMRC’s latest report show that 60% of the UK’s taxes are owed by small businesses, who are the biggest contributors to the £46.8 billion tax gap, say leading audit, tax and business advisory firm, Blick Rothenberg.
Fiona Fernie, a Partner at the firm, said, “The report shows that we have a 2-tier tax system where the wealthy are subjected to rigorous enquiries, when most have no intention of defrauding the Exchequer, and small businesses, many of whom are deliberately committing tax fraud are pursued much less thoroughly and frequently.
“The tax gap is the difference between the total amount of taxes owed by taxpayers and the amount that is paid on time. For years small businesses have made up the largest part of the stated tax gap at 60%. Which is astonishing considering the second largest part is large businesses at 12%.
“In percentage terms the tax gap has remained fairly stable in recent years at around 5.3 – 5.6%, it is 5.3% again this year. However, the absolute figure has again increased to £46.8 billion out of a theoretical tax liability of £876.0 billion.”
She added, “Individuals and wealthy only represent 5% each of that figure, making it odd that so much of the Government and HMRC’s focus appears to be on these latter groups, which is driving a number of wealthy individuals, who based on these statistics largely do pay their taxes, to leave the UK. Much of their focus in recent years has been on stamping out avoidance such as film schemes and remuneration trusts when the amount of the tax gap attributable to avoidance only represents 1% of the total.
“The tax gap increase shows that the theoretical tax burden on the British public due to non-compliance is becoming increasingly onerous. I accept that there are a huge number of small businesses and therefore it is logistically difficult to pursue outstanding liabilities from all concerned. I also recognise that each settlement is likely to be comparatively small and that HMRC get ‘more bang for their buck’ if they pursue those that may have large liabilities.
“But it is clear from these statistics that HMRC and the Government must act to stamp out non-compliance by small businesses as it is costing the economy, and honest taxpayers dearly.”
