UK Small Firms Entering Formal Economy Vulnerable to Tax Errors

Small businesses transitioning into the formal economy are more prone to under-reporting taxes due to errors, a UK tax authority official said Thursday.

The tax gap—the difference between expected tax and actual tax collected—attributed to business carelessness in filing returns requires further scrutiny, as it remains a gray area for the UK tax authority, said Ronan McDonald, deputy director at His Majesty’s Revenue and Customs.

“We’re struggling to pin down exactly what this behavior is and there’s kind of a fuzzy gray area along this spectrum,” McDonald said at the Closing the Tax Gap conference organized by the Centre for ...