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Tax Tip

The Tax Gap 27/09/11

The amount of tax that went uncollected in 2009-10 was estimated to be £35bn, which was £4bn less than the previous year and the lowest since 2004-05, HM Revenue and Customs (HMRC) has said.

The tax authority said the key reason for the drop was the reduction in VAT from 17.5% to 15% from December 2008 to the end of 2009.

In total, 7.9% of all tax went uncollected in 2009-10, compared with 8.1% the previous year.

VAT remained the tax recording the biggest shortfall, with £11.4bn uncollected. That meant 13.8% of the total amount of VAT due was not collected in 2009-10.

The next largest loss was £5.8bn of income tax due to inaccurate self-assessment returns.

The annual amounts of tax lost to deliberate evasion are relatively small. Of the £14.5bn of direct taxes (income tax, national insurance and capital gains tax) not collected, £1.3bn was attributed to "ghosts", who are people who fail to declare their taxable income, while some £1.8bn was attributed to moonlighters who fail to declare income from a second job.

Treasury, David Gauke.

"Just in the last few weeks we have challenged offshore tax evaders, closed tax avoidance loopholes and created a new HMRC unit to ensure that the wealthier members of society pay their way."

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