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Contractors are Major Contributors to Tax Gap Claims HMRC

According to a report published by HMRC, Limited Companies and Small to Medium Enterprises (SME’s) made up nearly half of the 2013-2014 tax gap. This figure comes up to around £16.5bn, (49 per cent) according to HMRC’s Measuring Tax Gaps 2015 document, which is the amount of tax which should in theory be collected, compared […]

By Alex Graham on 29 Oct 2015
Read time: 1 minutes

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According to a report published by HMRC, Limited Companies and Small to Medium Enterprises (SME’s) made up nearly half of the 2013-2014 tax gap.

This figure comes up to around £16.5bn, (49 per cent) according to HMRC’s Measuring Tax Gaps 2015 document, which is the amount of tax which should in theory be collected, compared to what is actually collected. The tax gap margin has dropped from 6.6 per cent in 2012/13 to 6.4 per cent in 2013/14, whilst large businesses account for £9.5bn of an estimated £34bn.

Surprisingly, contractors operating through limited companies may find that corporation tax gap is an area which has decreased. This reduction, just over half, has been the largest reduction since records of this kind were kept in 2005-6. This corporation tax figure of £1.4bn makes up 7 per cent of tax theoretical liabilities and has had a 1 per cent improvement since 2012-13.

Whilst the tax gap is reducing steadily year on year, the type of tax mostly responsible for the tax gap has been narrowed down to the largest contributor, income tax, national insurance and capital gain tax which adds up to 41 per cent, equating to around £14bn.

Despite the tax gap slowly reducing due to a Government crackdown, the overall tax gap figure remains at £34bn, showing a minimal improvement in the last year.

If you would like to speak to an accountant about any questions you may have about contracting, please call us on 01253 362063  or email craig.whelan@nixonwilliams.com

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