HMRC’s tax take falls by billions due to pandemic

HMRC saw a drop of almost £30 billion in tax revenues in the latest financial year because of the pandemic, according to its annual accounts.

In its 2020/21 annual report, HMRC reported that it had collected £608.8 billion in tax revenues, which is down from £636.7 billion collected in 2019/20.

HMRC said the drop was due to by the ‘unprecedented economic circumstances caused by COVID-19, and because pandemic restrictions meant HMRC had to reduce its compliance activity’.

The reduction in compliance activity resulted in a drop of 18% in the additional tax generated by HMRC’s work tackling avoidance, evasion, and other non-compliance. This fell from £36.9 billion to £30.4 billion.

The tax authority has estimated that the tax gap has increased to 5.3% up from 4.7% last year.

HMRC reported that it delivered £60.7 billion in grants through the Coronavirus Job Retention Scheme (CJRS). HMRC’s current estimate of error and fraud in the COVID-19 support scheme payments is £5.8 billion, of which £5.3 billion relates to the CJRS scheme.