Tax Avoidance and Tax Evasion

Annual estimates of the tax gap, which is the difference between the amount of tax that is collected and the amount that is "theoretically due," are published by HM Revenue and Customs. The revised figures that were provided by HMRC in September 2021 indicated that the tax shortfall would amount to £35 billion for the 2019/20 fiscal year. This would be equivalent to 5.3% of total tax liabilities. It is projected that the monetary loss that resulted from tax avoidance in the 2019/20 fiscal year was £1.5 billion, while the cost of tax evasion was £5.5 billion.

In recent years, worries about the size of mass-marketed tax avoidance techniques have led to the development of three key projects with the goals of undermining this market and encouraging a paradigm shift in attitudes:

the Disclosure of Tax Avoidance Schemes regime (DOTAS) in 2004, the General Anti-Abuse Rule (GAAR) in 2013, and the system of follower notifications and expedited payments notices in 2014. all of these initiatives were carried out in the year 2014.

The federal government has made it a priority to combat tax avoidance and tax evasion by continuously introducing new provisions, including new measures in each subsequent budget.

This briefing from the Commons Library examines the prevalence of tax avoidance and evasion, before delving deeper on the evolution of follower notices, accelerated payment notices, and other attempts to close the tax gap.

A second briefing from the Commons Library examines the impending implementation of the 2019 Debt Charge. This piece of legislation, which was proposed in the 2016 Budget as a means to combat "loan schemes" that are mass promoted, has proven to be highly contentious. In two additional briefings, the Commons Library examines the decisions made by the Labour Government and the Coalition Government regarding the implementation of a general anti-avoidance rule and the Department of Tax Avoidance and Avoidance Strategies, respectively.