CenTax has today published a new blog by Professor Arun Advani (Warwick) and Professor Andy Summers (LSE) responding to HMRC’s 2026 Measuring Tax Gaps publication. The piece looks at two areas where the underlying evidence is surprisingly thin: small business Corporation Tax, the largest single component of the headline figure, and the offshore tax gap, which is excluded from the publication.
Key points:
- The small business Corporation Tax gap, at £17.3 billion, is the largest single component of the £59.2 billion headline figure. It rests on a random audit programme of around 330 cases a year, or 17 per 100,000 businesses. Comparable jurisdictions operate at closer to 100.
- HMRC have moved the uncertainty rating for this gap from medium to high this year.
- The offshore tax gap is excluded from the annual publication. HMRC’s separate £300 million estimate captures only undeclared interest on directly-held bank accounts and a narrow slice of dividends. Trust and company structures, property held offshore, foreign earnings and pension income are all excluded.
- The authors argue that an expansion of HMRC’s random audit programme is needed to put the small business estimate on a firmer footing, and that the data and HMRC should deliver on their commitment to a fuller assessment of the offshore tax gap as soon as possible.
Full piece: https://www.linkedin.com/pulse/closing-tax-gap-starts-better-measurement-zfvke/
Notes to editors:
- The Centre for the Analysis of Taxation (CenTax) is an independent research centre dedicated to improving public understanding of tax policy and helping to design a better tax system.
- Professor Arun Advani is Director of CenTax and Professor of Economics at the University of Warwick.
- Professor Andy Summers is Director of CenTax and Professor of Law at the LSE.
