VAT gap - formation of the Hidden Economy Advisory group
The measure
The creation of a new Hidden Economy Advisory Group and a proposed consultation on changes to the Postal Services Act 2000.
Who will be affected?
According to HMRC, the difference between the amount of VAT that should theoretically have been received by HMRC and the amount of VAT actually received (the VAT gap) increased to £14.4 billion in 2008/09. HMRC is considering ways to reduce this.
The Hidden Economy Advisory Group will examine the tax system and HMRC's administrative processes and consider whether they facilitate or prevent people from joining the formal economy. The Government is also looking to strengthen customs powers to tackle tobacco smuggling through the post through changes to the Postal Services Act 2000.
When?
No date has yet been set for publication of the findings of the Hidden Economy Advisory Group or the proposed consultation on changes to the Postal Services Act 2000.
Government figures for 2007/08 estimate that the 'hidden economy' makes up 7.5% of the overall tax gap, and that illicit cigarettes make up 10% of the entire market for cigarettes. PBR 2009 outlined a number of measures to close the tax gap; we expect further consultations and initiatives in this area.
