Recommendation 18

The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC and what was actually paid. HMRC estimates the tax gap in 2021–22, the latest year available, has remained at 4.8% of all liabilities. This is despite the tax revenue HMRC generated from its compliance work declining as a percentage of theoretical tax liabilities in that year.63 HMRC said that the relationship between the tax gap and compliance yield is not straightforward and that there are a variety of other factors that can affect the tax gap.64