This is the new figure released by HMRC which has increased from the previous £12 billion from 2016/2017 to £13.3 billion 2017/2018.
Last year the UK collected £125 Billion in VAT which is accountable for 20% of all tax revenues.
The gap in VAT is measured by the difference of expected revenues from the sales of goods, plus services against the actual payments made to HMRC. It’s a combination of insolvencies, Fraud, administrative errors, bankruptcies and legal tax optimisation.
HMRC have attributed £3.5 billion of the VAT gap to avoidable taxpayer mistakes in their VAT returns.
Once the plans for digital filings commencing April 2019 (Making Tax Digital) should take £0.5 billion off the VAT gap by removing some basic manual errors. Potential extensions for VAT data required in 2020 could help take this number down more.