Assessment: HMRC Tax Gaps

  • The tax gap is the amount of Tobacco Duty that in theory should have been collected had all tobacco consumed in the UK been UK duty paid. Due to the high tax policies of the Government there are large incentives to purchase illicit tobacco or to buy abroad and this creates the tax gap which is estimated annually by HMRC.


  • TMA members work alongside HMRC to reduce the illicit trade in tobacco products. For more information see here .


  • The Tax Gap report is available to view here. Figures for the past four years are below – note the significant fall in 2014-15.


 Lost revenue, HMRC central estimates2012-132013-142014-152015-162016-17
Illicit Cigarettes (£’m)1300140090016001800
Illicit Cigarettes (%)10%11%7%13%15%
Illicit HRT (£’m)9001100900800700
Illicit HRT (%)37%40%35%32%28%
Cross-border Cigarettes (£’m)400400400500500
Cross-border Cigarettes (%)3%3%3%4%4%
Cross-border HRT (£’m)200100100100100
Cross-border HRT (%)6%5%5%5%5%
Total cost of illicit tobacco (£’m)22002500180024002500
Total cost of cross-border shopping (£’m)600500500600600
Total (£’m)28003000230030003100