In late April, around 100 delegates met at the University of Warwick for the CenTax Residential Conference, “Closing the Tax Gap”. Over two days, senior government officials, professional bodies, practitioners, academics and think tanks considered the UK tax gap from various angles, and debated what might shift it.
Our full conference report is now available on our dedicated conference page. Drawing on notes taken by the CenTax team across both days, it runs through each plenary panel, the keynote addresses from Professor Annette Alstadsæter (founding Director, Skatteforsk) and Dr Simon Price (AI Advisor, HMRC), and each of the twelve breakout sessions.
The report is published as an indicative readout rather than a verbatim record and has not been endorsed by individual speakers or panellists. Its purpose is to give delegates a reference they can come back to, and to open the substance of the conference, particularly the breakouts, to those who couldn’t make it.
As set out in our reflections piece in May:
- The annual tax gap publication could be better targeted at generating actionable insights. HMRC’s headline estimate – £46.8bn or 5.3% of theoretical liabilities in 2023-24 – is more comprehensive and more transparent than most international comparators, but falls short in delivering deep insights into how the tax gap breaks down by specific taxes, behaviours and customer groups. Discussion noted that the analysis is limited by sample sizes, which need to grow if we are to understand the underlying causes behind persistent gaps and recent trends. There was discussion about whether the annual publication of a single headline figure is the best use of HMRC’s analytical resource, or whether deeper, more targeted work on the areas where measurement is weakest would be more valuable. The publication ought to play an important role in informing public debate and correcting misperceptions about tax loss from non-compliance. It should also help HMRC develop strategies for reducing the gap.
- The small business tax gap is many issues, not one. 60% of the tax gap is attributed to small businesses, and the small business corporation tax gap has risen sharply, from 9% of theoretical liabilities in 2011-12 to 40% in 2023-24. But the discussion returned repeatedly to how varied this group is: sole traders, nanobusinesses, microbusinesses, growing companies, the cash economy, and the organised crime element within the segment each have different drivers and need different responses. The behavioural breakdown matters too. Failure to take reasonable care is much larger in the published figures than deliberate evasion, but the line between the two is hard to draw, and combining them when looking at the small business gap has consequences for both compliance strategy and public trust. Simplification of the system itself came up alongside enforcement and digitalisation as part of the answer.
- The constraint on data and AI in tax compliance is data foundations, not AI capability. This was a consistent message across the sessions. The constraint on using HMRC’s data effectively in compliance sits in identification, linking, cleaning, legacy IT, lead times for acquiring new data, and the skills needed to use the outputs. The Universal Customer Record demonstration gave a useful example: the largest gains came from connecting records that already existed across separate operational systems. There was real appetite for HMRC drawing on more third-party data to supplement its compliance work. A recurring concern was the risk of using AI to smooth over complexity rather than address it, alongside the gap between a state constrained by governance in how it uses new technology and those seeking to attack the system, who face no equivalent constraints.
- Tax compliance is a coordination across government challenge, not just an HMRC problem. Responsibility for tax compliance extends well beyond HMRC. Digital business ID, controls on phoenixism, and Companies House reform all sit outside HMRC’s remit but bear directly on the tax gap, and definitional inconsistencies in how fraud is treated across government complicate cross-departmental comparisons. The wider ecosystem of intermediaries, software providers, tax agents and the professional bodies, came up repeatedly in discussion, including whether HMRC should take a more active role as Making Tax Digital rolls out.
Josh Flew, Policy Fellow at CenTax, said:
“I’m pleased we are able to publish such a comprehensive report following our conference, and my thanks go to the team for pulling it together.
“The summary serves to highlight the breadth and depth of the debate across the two days. The CenTax team and I hope it proves a useful resource for delegates and others with an interest in tax compliance in the UK.
“We hope it will be widely shared.”
