Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the finding by HMRC that small businesses are now responsible for 56 per cent of the UK’s 'tax gap'.

There has been a long-term downward trend in the tax gap as a proportion of total theoretical liabilities, reaching a record low of 4.8 per cent in 2021-2022. This is the result of the Government’s action to proactively tackle the tax gap.

Small businesses play a vital role in the UK economy and the majority want to meet their obligations and pay their fair share of tax.

As one would expect from such a large and diverse population, the small business tax gap derives from a wide range of different forms of non-compliant behaviours, from simple errors at one end of the spectrum to more deliberate behaviours at the other – this range requires a variety of responses to address.

HMRC supports the compliant majority who try to get their tax affairs right and performs compliance checks on those who don’t comply with the rules. For those who deliberately evade their obligations, we have at our disposal a significant set of sanctions that can be imposed, from penalties based on the amount of tax not paid, through to criminal prosecutions for the most serious cases.

HMRC remains committed to administering the tax system in a simple, customer focussed and efficient way, making it easy to get tax right and hard to bend or break the rules.