The political parties have stated their plans to clamp down on taxing the wealth and setting in place extra regulations to stop tax avoidance. But why does this need to happen, how common is tax avoidance in the UK?


Tax Avoidance and Evasion Statistics

There is a £4.6 billion tax gap which is due to tax avoidance meaning that taxes are lower what they should be from people and corporations committing tax fraud and avoidance.

Around £70billion of revenue has been lost to tax evasion overall in the UK.

Income tax is one of the largest revenues for the UK economy so when this is not as high as it should be then the public suffer on sectors such as NHS, transport and others.


What is being done to stop tax avoidance?

HMRC investigation into offshore accounts and tax evasion have more than halved in the last 5 years and The Observer reports that they have not charged a single company under landmark legislation to crack down on the issue.

This lack of investigation undermines the HMRC and their own deterrents to use it’s criminal enforcement powers.

Fraud investigation service has fallen from 1,417 in 2018-19 to 627 in 2022-23.

Is this from a lack of funding, effort or just keeping the wealthy happy and not bothering to investigate.

Labour have pledged to place more funding in the HMRC so they can resume with pre pandemic level of fraud investigation cases and crack down on taxes.

The HMRC have estimated that they collect 95% of all UK owed taxes which is a stable figure. The remaining 5% accounts for around £36billion, a significant amount.


The result of being found guilty of Tax avoidance

In 2020, Dominic Chappel, the owner of BHS was found guilty and sentenced to 6 years in prison for evading tax by cheating the public revenue. He was found guilty of failing to pay almost £584,000 in tax on income he received after buying the BHS chain for £1m in 2015.

HMRC investigations found sales amounting to 2.3m over a 17 month period which resulted in a VAT payment of £351,944 of which Chappel only paid £8,433. On top of this he had failed to inform HMRC of a £330,000 dividend from Swiss Rock Ltd. He owed £164,063 in corporation tax of which he only paid £10,000.

Jimmy Carr was found in 2012 to have been committing tax avoidance from only paying 1% tax using the K2 scheme which channelled the salaries of beneficiaries in the UK through Jersey-based shell corporations. The scheme is a way to lower your tax threshold and even though it is morally wrong it was legal and Carr stated it was fully disclosed to the HMRC.