‘Failure to take reasonable care’ accounts for the largest proportion of the tax gap at 19% (£6.7bn), whereas avoidance was blamed on only 4% (£1.5bn).

Nearly £6bn was attributable to losses arising from legal interpretation where the taxpayer’s and HMRC’s interpretation of the law and how it applies to the facts in a particular case result in a different tax outcome, and there is no avoidance.

Specifically, this includes the interpretation of legislation, case law, or guidelines relating to the application of legislation or case law. Examples include categorisation such as an asset for allowances or VAT liability of a supply, the accounting treatment of a transaction, or the methodology used to calculate the amount of tax due as in transfer pricing, or VAT partial exemption.