£1.7bn recouped as UK 'VAT gap' decreases by 3%

The annual report from HM Customs and Excise has revealed that VAT losses have fallen from 15.8% to 12.9% in 2003/04.

This has closed the "VAT gap", the theoretical difference between the possible yield from VAT and the actual receipts received, by nearly 3% and provided an additional £1.7bn of revenue to the exchequer.

The report also highlighted that during the first year of the Customs VAT Compliance Strategy, net VAT receipts had grown by £5.5bn to more than £69bn.

Announcing the publication of the report, Chairman of Customs and Excise David Varney said: "HM Customs and Excise staff have produced impressive results during a time of significant change within the organisation, and with the planned merger with the Inland Revenue and the creation of the Serious Organised Crime Agency (SOCA) on the horizon".

Welcoming the report, Customs Minister Dawn Primarolo said that the reduction in the VAT gap was a "clear sign" that the customs' strategy was helping to reduce losses.

The Minister said: "I am confident that the creation of the HM Revenue and Customs department will help us to build on this success in tackling tax losses and increasing compliance."

The 95th HM Customs and Excise annual report showed:
  • Customs collected net revenue of over £115bn, an increase of nearly £7bn on 2002/03;
  • In 2003/04 the Customs Tobacco Strategy helped cut the illicit tobacco market share to 15%, helping protect more than £2bn of revenue;
  • Missing Trader Intra-Community (MTIC) VAT fraud fell for the second year running to between £1.06bn and £1.73bn, a fall of over 25% since 2002/03;
  • Over 5,000 dealers in red diesel and kerosene have been authorised by Customs - tightened controls saw more than 50 applications rejected or approved with conditions;
  • Customs intercepted over 23 tonnes of Class A drugs destined for the UK market;
  • Customs seized over £36m of suspected criminal cash and obtained confiscation orders to the value of £42m under Proceeds of Crime powers in 2003/04
The annual report of the Commissioners of Her Majesty's Customs and Excise was laid before Parliament today.

The report brings together in a single volume the formal accounts, the National Audit Office's report and details on the progress made against targets during the year.


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