UK: Finance bill progress continues; “tax gap” update

UK: Finance bill progress continues; “tax gap” update

Parliamentary progress on Finance Bill 2015-16 continues. The bill completed its Committee Stage, and the next steps—the Report Stage and Third Reading—are currently expected to take place on 26 October 2015. Changes are still allowed to be made to the bill, and a number of amendments have already been proposed including measures concerning the tax treatment of carried interest and disguised investment management fees.

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Separately, draft clauses for next year’s Finance Bill will be published on Wednesday 9 December 2015—two weeks after the Autumn Statement on 25 November 2015. 

Tax gap

HM Revenue & Customs (HMRC) published latest estimates of the UK “tax gap” (difference between the actual amount of tax collected and the amount that HMRC believed was to have been collected in theory). The latest estimate covers the 2013/14 tax year and shows that although the overall estimate of £34 billion remains unchanged from 2012/13, the gap has fallen as a percentage of total tax due (from 6.6% in 2012/13 to 6.4% in 2013/14). This is part of a longer-term trend, with the gap as a percentage of overall liability having gradually come down from 8.4% in 2005/6 (the earliest year for which estimates are available). 

The figures provide an indication of trends over time—for example, corporate tax avoidance now accounts for £1 billion of a total of £2.7 billion of overall avoidance, which is down by almost half from a total of £5 billion in 2010/11. Some view this as a clear reflection of the broader change in corporate attitudes over the past few years. 

What the statistics do not reveal is how more recent changes, and changes that may be coming (for example, as a result of the OECD’s base erosion and profit shifting (BEPS) project) might affect taxpayer attitudes and behaviours and, ultimately, government receipts. 


Read an October 2015 report [PDF 671 KB] prepared by the KPMG member firm in the UK: Weekly Tax Matters (23 October 2015)

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