Taxman ‘missing out on £15 billion VAT payments’

UK is fourth on the list in terms of total VAT uncollected, latest data finds.

HMRC failed to collect around £15.1 billion worth of VAT in 2014 alone, new data from the European Commission (EC) has found.

Despite crackdowns on Corporate Tax dodgers and unpaid tax on foreign investments, the taxman failed to make any serious headway on the huge gap between what it believes it is owed in VAT and what it managed to collect.

The VAT gap sits at 10.1% in the UK, virtually unchanged from 2013, according to the EC.

Beginner's guide to stocks & shares ISAs

How do we compare to other nations?

It means Britain’s taxman is better at collecting VAT than many other EU nations.

In Romania the VAT gap is a hefty 37.9% whereas Sweden has the smallest gap at 1.2%.

In terms of overall value, Italy is failing to collect the most VAT with €36.9bn (£31.3bn) uncollected, followed by France with €24.5bn (£28.8bn). The UK is fourth on the list.

However, HMRC’s failure to collect £15.1bn that it is owed in VAT accounts for over a third of the total unclaimed taxes in the country.

In 2014, HMRC failed to collect taxes worth £34 billion that it calculated it was owed.

This means VAT makes up 34% of the overall tax gap.

Uncollected VAT - figures from European Commission

Will we close the VAT gap?

“The UK has one of the lowest tax gaps in the world, and this Government is determined to continue fighting evasion and avoidance wherever it occurs,” said David Gauke, financial secretary to the Treasury, when the latest tax gap figures were released last year.

“There is understandable anger when individuals or companies are perceived not to be contributing their fair share, but we can reassure the public that the proportion going unpaid is low and this government is dedicated to bringing it down further.”

While there have been high profile campaigns to clampdown on Corporate Tax avoidance and this month HMRC announced it was going after people who hide foreign earnings, there has yet to be a major push to shrink the VAT gap.

Announcing the push on tax evasion from foreign investments Jane Ellision, financial secretary to the Treasury said: “Every penny of tax that people evade deprives our public services of essential funding and we are focused on collecting all tax that is due.”