Mind the gap

Mind the Gap...

Do you ever wonder if you are paying the right amount of tax?  We’d like to think that if you’re a client of ours, then the answer to that question would be a resounding ‘yes’!  Maybe a better question is, am I paying the lowest amount of tax that I can while still being within the rules and legislation?  Read on for more details.

Every year, HMRC takes a guess at how much tax should be paid over by the country overall and then compares this to what it actually receives.  The latest figures are out, and while the numbers involved make your head spin, the 2019-20 results show that the tax gap for that year was a staggering £35 billion, or 5.3% of the country’s tax bill.  Perhaps more importantly, this is an increase on the previous 2018-19 year, when the gap was ‘just’ 5% or £33 billion in real terms.  There are plenty of areas that are identified where insufficient tax is paid, and interestingly, the findings highlight that one of the single biggest issues responsible for the tax gap is a ‘failure to take reasonable care’ – their words not mine – that accounts for nearly £7 billion alone.

As a child I was always warned to ‘mind the gap’ when we travelled by train to see long-distance relatives; always making sure to stand clear of what seemed like a huge and dark chasm between the train and the platform.  I wonder – does HMRC feel the same way about the tax gap that it sees each year, or does it want to dive into the darkness regardless in order to squeeze out every penny that’s due. HMRC no doubt takes the latter view, but it’s hard to say whether this means we will see an increase in HMRC enquiries in the future.

If you think that you may have left something off your tax return, and whether it creates more or less tax to become due, here’s what to do:

1. Don’t panic – these things happen and can usually be resolved without too much trouble.
2. Make a list of anything that you may have forgotten.
3. Decide how many years are affected – is it last year or have there been a couple of years.
4. Establish how much has been missed off for each relevant year.
5. Speak to someone who can help work out what the net tax effect will be.

The Haines Watts tax team can help you with each step, and provide advice along the way until matters are resolved, especially when it comes to dealing with HMRC, whether they raise an enquiry or not.  In most cases where additional tax is due it’s better to offer an unprompted disclosure of the facts, and if you’re due a refund, the quicker any amendments are submitted the better.   

If you think that you’re part of the tax gap, we don’t mind and are here to guide you out of that darkness, in the best way possible.  Get in touch with me or your usual Haines Watts contact if you’d like to find out how we can help.