One in three guilty of Tax Underpayments

News, Tax,

A study by the University of Warwick and Centre for Competitive Advantage in the Global economy (CAGE) has found that one in three taxpayers under-report, costing the Government £8 billion every year.

Additionally, three million of the eight million who complete a tax return each year do not pay the full amount of tax they should.

The CAGE report recommends that the focus of these employees be on targeted audits. The report has estimated that if HMRC took a longer view, they could recover between £10,000 and £15,000 per audit.  It suggests this will not only close the tax gap, but also improve the quality of the submissions made by those reviewed. People who have been audited report higher levels of income for five to eight years after being audited than their peers.

Numbers of targeted audits carried out by HMRC have been falling for many years, though HMRC will reveal the ‘tax gap’ figure later this week. Dr Advani, author of the report said ‘Cutting auditors is the hallmark of short-term thinking. It reduces current costs, while money from past audits keeps rolling in. But that is not a sustainable strategy.’

Interestingly, most of the £8billion tax underpayments is owed by a very small minority of taxpayers. Only 2% of Self Assessment taxpayers, or 200,000 people, account for over half of the amount, at £4billion.

  • Men are one and a half times more likely to under-report than women and – since on average they have higher incomes – they also underpay more.
  • A quarter of people with property income under-report, but that quarter under-report more than half of the property income they receive.
  • On average people in the top 20% of incomes owe about one and half times as much as those in the bottom 80% of incomes.
  • The traditionally targeted industries of Construction, Transport and hospitality continue to be those in which tax underpayments are most prevalent. The amounts concerned are also significant, at more than half of the income of those who under-report.

If you’re unsure whether you’re declaring all that you should do, please get in touch. With the emphasis on Self Assessment, it’s essential that you are confident in your Return being accurate, to avoid penalties and interest charges later.

Should HMRC contact you about your Return, as a client you are automatically included in our Fee Protection Scheme, so please refer them to us.

Finally, remember that HMRC will never email or text taxpayers asking for personal information or about tax refunds or claims. If you receive any such communications, sadly it is likely to be a scam of some kind. Please don’t click any links or provide any personal details. Either delete the request, or send it on to us to check on your behalf.


You can find out more about the CAGE Report here:

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