Companies: VAT
The question
To ask the Chancellor of the Exchequer, what estimate she has made of the loss of tax revenue from non-VAT registered companies with turnover above the VAT threshold in the next five years.
Answered by Dan Tomlinson
HM Revenue and Customs (HMRC) estimates the size of the tax gap, which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The tax gap statistics and details of the estimate methodologies are published annually and are available at: Measuring tax gaps 2025 edition: tax gap estimates for 2023 to 2024 - GOV.UK.
The latest estimate of the tax gap for VAT is 5.0% of theoretical VAT liability, or £8.9 billion in absolute terms, for tax year 2023 to 2024. This figure implicitly captures, alongside other sources of non-compliance, companies failing to register for VAT, however a separate breakdown is not separately published due to the methodological approach used to calculate it and the associated uncertainties.
HMRC does not make projections of the future loss of tax revenue due to companies failing to register for VAT. ‘Measuring tax gaps 2026 edition: tax gaps estimates for 2024 to 2025’ is scheduled for June 2026.
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