By Steve Conley
Founder, Academy of Life Planning
Introduction: A Hidden Cost to Us All
The UK’s tax gap — officially measured at £36 billion by HMRC — is not just a dry economic statistic. It is the mirror to a deeper dysfunction in our regulatory and financial systems. Beneath the numbers lies a worrying reality: public money is being lost not simply to evasion or error, but to structural abuses, regulatory blind spots, and an alarming lack of transparency.
Recent correspondence between constituents and MPs sheds light on a quiet but growing threat. From diverted pensions and furlough fraud to government-backed job losses shrouded in secrecy, the tax gap tells a story of systemic leakage that demands urgent Parliamentary scrutiny.
1. The Tax Gap Is Growing — and So Are the Causes
The official tax gap includes:
- Evasion (illegal underreporting of income),
- Avoidance (exploitation of legal loopholes),
- Non-payment, errors, and criminal attacks on the system.
However, as one consttuent rightly points out to his MP, this narrow definition conceals more insidious contributors, including:
a) Workplace Pensions Diverted from PAYE
Some pension arrangements, particularly involving offshore or “liberated” schemes, are deliberately routed outside the UK’s PAYE system. These often use tax incentives intended to promote retirement saving but are exploited to shelter wealth from UK income tax. In such cases, HMRC is not just losing revenue — it’s enabling financial abuse under the guise of tax efficiency.
b) Fraudulent Use of HMRC Tax Relief
Schemes falsely marketed as HMRC-recognised pensions have taken in billions, claiming tax reliefs while offering no genuine retirement provision. Despite industry warnings and public exposure, HMRC’s reactive stance has allowed this abuse to proliferate unchecked, resulting in both tax loss and personal financial ruin.
c) Furlough Schemes and Redundancy Payments
During the COVID-19 pandemic, billions were distributed to businesses under the furlough (CJRS) scheme. While vital for economic stability, the lack of thorough auditing has allowed opportunistic claims and undisclosed liabilities to pass without penalty.
d) Job Losses Funded Without Oversight
Public funding or tax incentives used to support business restructuring have, in some cases, underwritten job losses where the real abuse mechanisms — such as mis-selling, insolvency engineering, or fraudulent acquisition — were never revealed to HMRC or Parliament.
2. What’s Missing? Transparency and Parliamentary Accountability
The thread that ties these issues together is a lack of transparency and joined-up oversight. Departments such as HMRC, the FCA, and FOS often operate in silos, each pointing to the other when things go wrong (see the Blame Game). Regulatory obligations are evaded. Public interest is sidelined.
Constituents are now calling for MPs to demand direct access to the intelligence behind tax loss events, not just aggregate figures. Without understanding the why and how, Parliament cannot legislate effectively to prevent recurrence.
3. A Public Duty, Not a Private Debate
This is not a niche issue. Every taxpayer is affected. Whether it’s through reduced public services, higher taxes to plug fiscal holes, or the injustice of seeing fraudsters go unpunished while victims suffer, the real cost of the tax gap is social and moral.
It is unacceptable that:
- Public funds can subsidise fraudulent or exploitative practices;
- Pension savers are left to navigate opaque, high-risk schemes;
- MPs are denied full disclosure from agencies accountable to them.
Conclusion: Close the Gap, Confront the Truth
Growing the tax gap, knowingly or not, is a failure of governance. It’s time Parliament asserted its right to the full picture — not partial disclosures. The call from constituents is not one of partisan politics, but of principle.
Only through transparency, inter-agency collaboration, and courageous parliamentary inquiry can we begin to restore public trust and financial justice.
Steve Conley is the founder of the Academy of Life Planning, campaigning for transparency, financial empowerment, and systemic reform across the UK financial landscape.
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