IHT gap grows by 50% in last five years
New statistics reveal that the inheritance tax gap has grown by 50% in the last five years.
Measuring the difference between what the Treasury has actually received in tax and what it thinks it should be paid, the gap has increased significantly according to figures published today by HM Revenue & Customs.
These show that since 2012/13, when the gap stood at £400 million, it has since seen a rise of 50%, growing to £600 million in the 2016/17 financial year.
Commenting on the statistics, HMRC attributed the increase to a number of potential causes, stating: ‘Some taxpayers make simple errors in calculating the tax that they owe, despite their best efforts, while others don’t take enough care when they submit their returns. Legal interpretation, evasion, avoidance and criminal attacks on the tax system also result in a tax gap. It is impossible to collect every penny of tax that is owed.’
2016/17 also saw the amount received by the Government hit a record high of £4.84 billion, having grown by 4% since the previous year.
Also sharing his thoughts on the figures was Steve Webb. The director of policy at Royal London also highlighted that the current review on Inheritance Tax could lead to a greater share of the total tax owed would be collected.
‘Inheritance tax is one of the most complex taxes in the system and there is considerable scope for individuals to organise their affairs in a way which reduces the amount of tax which they pay.
‘As IHT revenues have grown, mainly because of the increase in house prices, so the absolute amount of the IHT “tax gap” has also grown. It is very welcome that the Office for Tax Simplification is looking into ways of simplifying IHT, as this should make life easier for taxpayers and also make sure that a higher proportion of the tax due is actually collected.’