Hidden Economy In Great Britain Second Wave

HMRC are interested in updating research into the HE, having formed the basis of HMRC's HE tax gap estimates since 2017 in turn guiding compliance work. Since the last wave there have been two major economical and societal events (EU exit and Covid-19) meaning prior estimates may no longer be reliable. To be able to make accurate tax gap estimates and reduce tax losses to the HE, a re-evaluation of the scale and nature of the HE is required.

In 2018-2019 HMRC estimated £2.6bn of tax revenue was forgone due to HE activity. The HE deprives the government of funding and places an unfair burden on the compliant majority, addressing the HE is therefore key to HMRC's role of supporting compliant businesses.

HE is a stubborn area of risk and within the context of Covid-19 underlying problems that drive the HE may have been exacerbated. Prior reports have concluded ("Tackling the tax gap") that the pandemic may increase the risk of non-payment of taxes as more people deliberately engage with the HE. Yet the full impact of Covid-19 and the related recession is unknown, increasing the urgency of this work.