Latest news with #taxgap
Yahoo
22-07-2025
- Business
- Yahoo
HMRC sets out long-term vision in new Transformation Roadmap
His Majesty's Revenue and Customs (HMRC) published its plan to become a digital-first tax and customs authority by 2030. The Transformation Roadmap outlines how it aims to achieve its objectives, with increased automation, and new and improved digital services designed to ensure a 'right first time' level in its service offerings. As per the Departmental Efficiency Plans, the Government has invested around £7bn ($9.45bn) per year over the SR25 period that will establish critical foundations for HMRC digitisation. HMRC also has aims to become more productive by delivering a further £773m of efficiencies by 2028-29 through actioning three priorities: to improve day to day performance; close the tax gap; and drive reform and digital modernisation of the tax and customs system. HMRC priorities To elaborate, HMRC is to deliver a more digital 'self-serve' option with a minimum of 90% of interactions undertaken digitally by 2029-30, an increase from its current 76% benchmark, to expand the range and type of online services it provides – mainly through the HMRC app, to automate tax where possible and provide targeted support for those who need it. The second priority is to close the tax gap. According to the official statistics from the Measuring Tax Gaps 2025 report, it is estimated that 5.3% of total theoretical tax liabilities, or £46.8bn in absolute terms, was unpaid in 2023-24. HMRC collected £829bn in 2023-24, representing 94.7% of all tax due, and closing this tax gap is a key strategic priority for HMRC to increase this percentage. Finally, HMRC plans to drive reform and digitisation by 2030 through modernising its IT infrastructure, replacing the long outdated legacy systems with innovative technology and AI, simplifying the legislative and administrative framework, and sharing data and collaborating cross-government. The department also seeks to upskill employees to use AI effectively; evidently with more than 80,000 digital, data and technology courses completed, of which more than 11,000 were AI-focused. VOA to be merged There is also a structural integration objective which will see the Valuation Office Agency (VOA) merged into HMRC. This integration seeks to strengthen the ministerial accountability and is expected to deliver between 5 to 10% of additional savings in VOA administrative costs by 2028-29. The plan is an ambitious one to say the least. However, we are confident the above vision can be achieved with robust governance. This, though, must be driven primarily through creating great working relationships with suppliers to ensure a smooth and streamlined digital transformation process takes place. This should also be backed up with intentional requirements gathering and mapping of the department's enterprise architecture to further increase the probability of the department implementing the right technologies that connect seamlessly and efficiently, thereby reducing the risk of paying twice for the 'same but different'. "HMRC sets out long-term vision in new Transformation Roadmap" was originally created and published by Verdict, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Wall Street Journal
11-07-2025
- Business
- Wall Street Journal
Want to Repair Social Security? Enlist the IRS
Trustees estimate that the Social Security Trust Fund will run dry by 2032 ('Fears for Social Security Stir Search for a Fix,' U.S. News, July 7). When this happens, the $1.6 trillion paid out each year will decrease by an estimated 23%, or $368 billion. The Trump administration could head off this problem by providing sufficient resources to the Internal Revenue Service to enable it to close the estimated $118 billion employment-tax gap, the amount of employment taxes the IRS fails to collect every year. If the administration decided to close the entire tax gap of $606 billion and dedicate the additional funding to the trust fund, benefit cuts may be avoided. Yet after the rescission of much of the $80 billion Inflation Reduction Act funding for the IRS, an indefinite hiring freeze, the firing of approximately 7,000 probationary employees and the deployment of special agents to arrest foreign nationals in the country without proper authorization instead of working tax cases, the chances of this happening are infinitesimally small.
News.com.au
30-06-2025
- Business
- News.com.au
If you do this at tax time, you're definitly on the ATO's radar
Tax time is upon us, which means many Aussies are scrambling to get their finances sorted. At-home money managers should note however that the Australian Tax Office (ATO) is unhappy with a $9 billion tax gap and will be zeroing in on some trouble spots. Below are four key areas you need to keep an eye on, or risk an audit from the ATO. Work related expenses Director of tax communications at H&R Block, Mark Chapman says most of the tax gap is people incorrectly claiming work related expenses. 'It's important for tax payers to remember the golden rules – only claim something actually incurred for work purposes, have full substantiation (or evidence), and don't claim anything you were reimbursed for by your employer. 'If you can tick off all of those boxes then you can claim it.' Working from home deductions have also become a minefield because many people don't keep full records or timesheets. 'The ATO is looking at these claims very closely,' Chapman said. 'Unfortunately many don't have substantiation and get their claims knocked down.' Rental property risks After work related expenses, property is seen as the largest contributor to the tax gap. 'The ATO has looked at tax returns from property investors and noted that up to 90 per cent of them are wrong,' Chapman said. 'We don't know if it's a dollar or two incorrect or thousands of dollars. But it does indicate that the ATO is looking closely at people who have a rental property.' Chapman says the pitfall here is people simply not knowing that rental income is taxable and not declaring it. Tax partner at Pitcher Partners in Melbourne, Daniel Burt agrees that rental properties are on the ATO's radar as the risks have increased. The issue of the ATO focusing on holiday homes is not new,' Burt said. 'But what has changed is the prevalence of airbnb and being able to use an online platform to make a second home available for a short period of time. 'The risk may be higher with a less formal arrangement that has less documentation.' To keep things in order, Burt says records need to be kept for the period of rent, income received and for all expenses. 'If the property is not genuinely available to rent for the entire year, the ATO expects some sort of apportionment (division). They're looking to see if it's reasonable based on property use.' Sharing economy and crypto Those moonlighting with Uber, Airtasker or similar should take note – the sharing economy is also setting off alarm bells at the ATO. Chapman says if you work in these areas and don't properly declare your income, you're lining yourself up for an ATO audit. 'The ATO knows who is working in the shared economy and expects to see that disclosed,' he said. Cryptocurrency investors better stay sharp too. 'Similarly, the ATO does have information about who invests through crypto currency exchanges,' Chapman said. Don't disclose and you'll typically get a 'please explain letter' from the ATO, he warns. Another area to check is general investing to see if any of your shares have gone down, which is called an unrealised loss, Burt says. Such a loss can be used to reduce your capital gains. This matters because your net capital gain is added to your taxable income, which is then taxed at the appropriate marginal tax rate. 'So there's an opportunity to sell those shares and generate the loss before the end of the financial year,' Burt said. In short, this means you can offset your gains and losses in the same income year to come to a net amount. Super contributions Burt also recommends people look at their super more closely ahead of tax time. Under current tax rules you can claim up to $30,000 of deductions during the financial year for concessional contributions. This means if an employer puts in $18,000, you can add $12,000 of concessional contributions and claim a tax deduction, says Burt. 'If you have surplus cash from selling some assets or an inheritance, for example, you can reduce your tax liability by making these additional voluntary super contributions,' Burt said. 'But act quickly because we've only got a week before the end of financial year.'
Telegraph
19-06-2025
- Business
- Telegraph
Wealthy taxpayers underpay £2.1bn despite HMRC crackdown
Wealthy individuals underpaid more than £2bn in taxes last year despite a crackdown on hidden earnings. HMRC estimates the amount of uncollected tax from the richest people rose from £1.9bn to £2.1bn in the financial year ending April 2024. The so-called 'tax gap' – the difference between taxes the taxman expects to be paid and the amount actually collected – is estimated to be worth £46.8bn. Wealthy people avoided approximately £200m more in taxes in the previous financial year, figures released by HMRC suggest. In the last three years, the amount individuals are underpaying in tax has increased by around 17pc per year on average, according to analysis by UHY Hacker Young. The figure stood at £1.4bn in 2020-21, increasing to £2.1bn in 2023-24 – or 50pc over those three years. The taxman suspects the uncollected taxes are the result of loopholes in the law and illegal tax evasion. It comes after the Government set out plans to raise billions of pounds in extra revenues by clamping down on unpaid taxes. James Murray, the Exchequer Secretary, said: 'We are determined to go further and faster to make sure everyone pays their fair share. 'In our first year in office, we have set out plans to raise an extra £7.5bn through the most ambitious ever package to close the tax gap.' It comes as Rachel Reeves, the Chancellor, is also poised to water down Labour's tax raid on non-domiciled UK residents by reversing a decision to charge inheritance tax on their worldwide assets. Neela Chauhan, partner at accountants UHY Hacker Young, said: 'These numbers tell you where we can expect HMRC to launch its crackdown – against wealthy people, where unpaid tax is rising. 'Rachel Reeves has allocated substantial new resources to HMRC to step up tax investigations, we expect that to translate into unannounced visits by the taxman and more aggressive mailshots from HMRC to individuals it suspects of underpaying tax.' Small businesses were blamed for making up the largest share of unpaid taxes, at 60pc. Wealthy individuals were responsible for just 10pc by comparison. HMRC has zeroed in on high net-worth individuals it suspects of underpaying tax in recent years. It defines a wealthy individual as someone earning more than £200,000 a year or with assets over £2m in any of the last three years. There were 850,000 wealthy individuals in 2023-24 who together paid £119bn in personal taxes – a quarter of the nation's personal tax bill. Since 2019-20, the amount of revenue HMRC has collected from wealthy individuals through investigations and other compliance work has shot up from £2.2bn to £5.2bn.
Yahoo
19-06-2025
- Business
- Yahoo
HMRC reveals surge in corporation tax gap and small business non-compliance
Corporation tax accounts for nearly half of Britain's £46.8 billion tax gap amid a rise in non-compliance from small businesses, according to the latest figures from HM Revenue & Customs. HMRC revealed the corporation tax gap – the difference between the amount of tax expected to be due and what was actually paid – made up 40% of the total UK gap in 2023-24. The corporation tax gap jumped to 15.8% – its highest for more than a decade – in the year to April 2024. The data shows that by customer group, small businesses are the largest component of the tax gap, at a 60% share, up from 48% five years ago. HMRC said small business non-compliance is driving the rise. The overall UK tax gap eased back from an upwardly revised 5.6%, or £46.4 billion in 2022-23, to 5.3% in 2023-24. This means £46.8 billion was unpaid in the 2023-24 tax year, with HMRC collecting £829.2 billion, representing 94.7% of all tax due. Rachael Griffin, tax and financial planning expert at Quilter, said the rise in the corporation tax gap is the 'standout concern' in the data. 'That's a red flag for policymakers, especially as economic uncertainty and global tax competition continue to put pressure on business revenues,' she said. She added the rise is 'likely driven by a mix of economic strain, increased complexity in the global tax system, and perhaps a lag in HMRC enforcement capacity'. She added: 'Another persistent pressure point is the UK's small business sector… this underscores the ongoing challenge of ensuring compliance in a large, diverse and often under-supported part of the economy.' But the figures show progress in personal tax collection, with the VAT gap falling to 5% from 13.8% in 2005-06, and the income tax, national insurance and capital gains tax gap dropping to 3% from a high of 5.3% in 2013-14. HMRC said the combined share of the tax gap attributed to individuals and the wealthiest now accounts for just 10% of the overall. Ms Griffin cautioned: 'However, with frozen thresholds and lower allowances, for dividends and capital gains in particular, more people are being pulled into the tax system for the first time, often without realising it. 'That raises the risk of accidental non-compliance, especially where income is irregular or reporting requirements are poorly understood.' The figures come amid a storm of controversy surrounding HMRC amid worries over its customer service and falling public confidence in the tax system. HMRC was also recently victim to a phishing scam, which saw £49 million lost and tens of thousands of tax accounts breached. James Murray, Exchequer Secretary to the Treasury, said: 'Every pound of tax uncollected puts a greater burden on honest taxpayers and deprives our public services of vital funding. 'In our first year in office, we have set out plans to raise an extra £7.5 billion through the most ambitious ever package to close the tax gap. 'We are determined to go further and faster to make sure everyone pays their fair share.'
