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UK VAT Gap shrinks to 7% of revenues as COVID aid ends

The UK 2020/21 VAT Gap was £9billion, down from £12.5 billion as COVID-19 deferred VAT scheme unwinds

The difference between the UK expected and actual VAT reveipts has shrunk according to the UK’s HMRC from 8.6% to 7% – which equates to £9 billion. This was driven by the unwinding of the COVID VAT payments deferral, offset by the cut in hospitality VAT rate.

The VAT gap shows a downward trend between tax years 2005 to 2006 and 2020 to 2021, falling from 14.1% to 7.0%.

However, given the lack of certainty around being able to estimate numbers over the continuing COVID-19 lockdowns, HMRC has warned that these numbers may need to be revised in the future.

The EU VAT Gap is currently running at 10.3% across 28 member states (the latest numbers included the UK).

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