Official Statistics

3. Tax gaps: Excise (including alcohol, tobacco and oils)

Updated 22 June 2023

Summary

The excise duty gap estimate is the sum of 5 components:

• the beer duty gap, based on an established top-down and an established bottom-up methodology, using survey data and HMRC management information

• the spirits duty gap, based on an established top-down methodology which uses survey data to estimate the total market size and takes away the amount actually cleared (the amount of duty received by HMRC)

• the tobacco duty gap, which includes cigarettes and hand-rolling tobacco, both based on a top-down methodology which estimates the total market size for each tobacco product and then takes away the amount actually cleared

• the hydrocarbon oils (fuel duty) gap, based on an established top-down methodology using fuel consumption data between tax years 2005 to 2006 and 2015 to 2016, and an established bottom-up methodology using a random enquiry programme for the use of illicit diesel from 2016 to 2017 onwards

• other excise duties, including betting and gaming, cider and perry, spirits-based ready-to-drinks and wine, based on an experimental method using a weighted average from similar taxes

To evaluate the uncertainty of our excise duty gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The estimates for beer, spirits, cigarettes and hand rolling tobacco have ‘high’ uncertainty. Hydrocarbon oils (fuel duty) has ‘medium’ uncertainty and other excise have ‘very high’ uncertainty.

Main findings

Figure 3.1 shows the excise duty gap time-series in absolute terms and relative to excise duty theoretical liabilities.

The excise duty gap is 6.1% of the overall excise duty theoretical liability, or £3.4 billion in absolute terms, in the 2021 to 2022 tax year.

There has been a gradual reduction in the excise duty gap from 8.3% in 2005 to 2006 to 6.1% in 2021 to 2022. Between 2005 to 2006 and 2011 to 2012 the excise duty gap followed a downward trend, declining from 8.3% to 5.0%. Since then, the duty gap has shown a small positive trend, increasing from 5.0% in 2011 to 2012 to 6.1% in 2021 to 2022.

Figure 3.1: Excise duty gap by value and as a percentage of theoretical liabilities, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.1

1. The full data series can be seen in the online tables.

Figure 3.2 shows the time-series for the excise duty gap components: beer, spirits, tobacco, hydrocarbon oils and other excise duty gaps.

The estimate for the tobacco duty gap as a proportion of theoretical liabilities is broadly the highest compared to the other components across the time series, at 21.7% in 2005 to 2006, falling to 17.7% in 2021 to 2022.

The second largest excise duty gap is the beer duty gap, which has generally been increasing from 9.6% in 2007 to 2008 to 15.9% in 2013 to 2014. The beer duty gap, whilst showing some year-on-year volatility, has shown a broadly stable trend since 2013 to 2014 when it was 15.9%.

The hydrocarbon oils duty gap is the lowest amongst the excise duty gap components. Falling from 2.8% in 2005 to 2006, the estimate for the hydrocarbon oils duty gap has been relatively low since 2011 to 2012 at below 1.0%. Since 2016 to 2017, it has remained stable at 0.5%.

The estimate for the spirits duty gap has generally been declining from 6.4% in 2005 to 2006 to 1.5% in 2021 to 2022. There was a peak in the spirits duty gap at 10.6% in 2013 to 2014.

The estimate for the other excise duties gap has gradually declined from 8.0% in 2005 to 2006 to 6.0% in 2021 to 2022 although there is volatility across the time series. There was a peak in the other excise duties gap in 2013 to 2014 at 11.8%.

Figure 3.2 Excise duty gap as a percentage of theoretical liabilities by component

Notes for Figure 3.2

1. The full data series can be seen in the online tables.

Beer

Main findings

The beer duty gap is estimated using both an established top-down and bottom-up methodology which form an upper and lower bound estimate. The implied central estimate is an average of these 2 estimates and is intended to be an indicator of the long-term trend.

Figure 3.3 shows the beer duty gap time-series in absolute terms and relative to beer duty theoretical liabilities.

The beer duty gap is 11.3% of the theoretical beer duty liability, or £0.5 billion in absolute terms, in the 2021 to 2022 tax year.

The beer duty gap estimate as a proportion of total theoretical beer duty liability has increased gradually over time, from 9.6% in 2007 to 2008 to 11.3% in 2021 to 2022. It reached a high of 19.2% in 2020 to 2021, followed by a large decline in 2021 to 2022.

The beer duty gap is projected from 2016 to 2017 to 2021 to 2022 where the gross tax gap estimate for the lower bound has remained constant.

Figure 3.3: Beer duty gap by value and as a percentage of theoretical liability, 2007 to 2008 up to 2021 to 2022

Notes for Figure 3.3

1. The full data series can be seen in the online tables.

Figure 3.4 shows the beer duty gap, liability, and the theoretical liability, which is the sum of the duty gap and liability, since 2017 to 2018.

The beer duty gap has varied between £0.5 and £0.7 billion in the last 5 years. Beer duty liability declined to £3.1 billion in 2020 to 2021, followed by an increase to £3.7 billion in 2021 to 2022. Total theoretical beer liability has generally been increasing over the last 5 years from £3.9 billion in 2017 to 2018 to £4.2 billion in 2021 to 2022.

Figure 3.4: Beer duty gap, liability and theoretical liability, since 2017 to 2018 (£ billion)

Year	Net duty gap	Duty liability	Total theoretical duty liability
2017-18	0.5	3.5	3.9
2018-19	0.7	3.7	4.4
2019-20	0.7	3.4	4.1
2020-21	0.7	3.1	3.8
2021-22	0.5	3.7	4.2

Notes for Figure 3.4

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the beer duty gap is the beer VAT gap. The VAT gap arising from undeclared beer is captured within the overall VAT gap covered in chapter 2. Figure 3.5 shows the VAT gap arising from undeclared beer duty since 2017 to 2018.

The beer VAT gap has varied between £0.2 and £0.4 billion per year in the last 5 years.

Figure 3.5: VAT gap arising from undeclared beer since 2017 to 2018 (£ billion)

Year	VAT gap
2017-18	0.2
2018-19	0.4
2019-20	0.3
2020-21	0.4
2021-22	0.2

Notes for Figure 3.5

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion.
3. Figures are included in the VAT gap estimate

Revisions

Figure 3.6 shows the revisions to the beer duty gap since the publication of the ‘Measuring tax gaps 2022 edition’.

There is a small revision to the top-down duty gap estimate in 2020 to 2021. Draught beer consumption data is supplied in calendar years. The draught beer consumption is converted from calendar years to tax years and an adjustment was made to the conversion to tax years for the years 2021 and 2022 to account for the impact of COVID-19 lockdowns.

There are very small revisions due to updated data on alcohol prices. Alcohol price data is supplied by the Office for National Statistics and is used to convert the illicit market estimate from litres to a monetary figure.

Figure 3.6: Revisions to beer duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 3.6

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Spirits

Main findings

Figure 3.7 shows the spirits duty gap time-series in absolute terms and as a percentage of spirits duty theoretical liability.

The spirits duty gap is 1.5% of the theoretical spirits duty liability, or £0.1 billion in absolute terms, in the 2021 to 2022 tax year.

There is high year-on-year volatility in the estimated spirits duty gap. The spirits duty gap estimate as a proportion of theoretical spirits duty liabilities has decreased from 6.4% in 2005 to 2006 to 1.5% in 2021 to 2022. The spirits duty gap peaked at 10.6% in 2013 to 2014 and after which it has followed a steady downward trend.

The spirits duty gap estimate is projected from 2020 to 2021 to 2021 to 2022 based on a constant illicit market percentage estimate.

Figure 3.7 Spirits duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.7

1. The full data series can be seen in the online tables.

Figure 3.8 shows the spirits duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2017 to 2018.

The spirits duty gap has been broadly stable between £0.1 billion and £0.2 billion in the last 5 years, whilst spirits liabilities have increased from £3.4 billion to £4.4 billion.

Figure 3.8: Spirits duty gap, liability and theoretical liability, since 2017 to 2018 (£ billion)

Year	Net duty gap	Duty liability	Total theoretical duty liability
2017-18	0.2	3.4	3.6
2018-19	0.1	3.8	3.9
2019-20	0.1	3.8	3.9
2020-21	0.1	4.1	4.2
2021-22	0.1	4.4	4.5

Notes for Figure 3.8

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the spirits duty gap is the spirits VAT gap. The VAT gap arising from undeclared spirits is captured within the overall VAT gap covered in chapter 2. Figure 3.9 shows the VAT gap arising from undeclared spirits since 2017 to 2018.

The spirits VAT gap has generally been decreasing in the last 5 years, from £110 million in 2017 to 2018 to £40 million in 2021 to 2022.

Figure 3.9: VAT gap arising from undeclared spirits, since 2017 to 2018 (£ million)

Year	VAT gap
2017-18	110
2018-19	70
2019-20	40
2020-21	30
2021-22	40

Notes for Figure 3.9

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £10 million.
3. Figures are included in the VAT gap estimate

Revisions

Figure 3.10 shows the revisions to the spirits duty gap since the publication of the ‘Measuring tax gaps 2022 edition’.

There are very small revisions due to updated data on alcohol prices. Alcohol price data is supplied by the ONS and is used to convert the illicit market estimate from litres to a monetary figure.

Figure 3.10: Revisions to spirits duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 3.10

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Tobacco

Main findings

The tobacco duty gap is calculated by summing the duty gap for cigarettes and hand-rolling tobacco.

Both the cigarettes and hand-rolling tobacco duty gaps are each estimated using an established top-down methodology to estimate upper and lower duty gaps, which are then averaged to obtain a central estimate for each.

To evaluate the uncertainty of the tobacco duty gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The cigarette and hand–rolling tobacco duty gap estimates both have ‘high’ uncertainty.

Figure 3.11 shows the tobacco duty gap time-series in absolute terms and as a percentage of theoretical tobacco duty liability.

The duty gap for tobacco duty is 17.7% of the theoretical tobacco duty liability, or £2.2 billion in absolute terms, in tax year 2021 to 2022.

There has been a reduction in the tobacco duty gap estimate as a proportion of total theoretical tobacco duty liabilities, from 21.7% in the 2005 to 2006 to 17.7% in the 2021 to 2022 tax year. Between 2005 to 2006 and 2014 to 2015, the tobacco duty gap declined reaching a low of 12.1% in 2014 to 2015. Since 2014 to 2015 the tobacco duty gap series has broadly increased.

Both the cigarette and hand-rolling tobacco duty gap have been projected for years 2020 to 2021 and 2021 to 2022. Tax years 2020 to 2021 and 2021 to 2022 have been projected based on the estimate in tax year 2019 to 2020, due to the removal of tobacco consumption questions from the Office for National Statistics’ Opinion and Lifestyle Survey during COVID-19 affected years.

Figure 3.11: Tobacco duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.11

1. The full data series can be seen in the online tables.

Figure 3.12 shows the tobacco duty gap, duty liability, and the theoretical tobacco duty liability, which is the sum of the duty gap and duty liability, since 2017 to 2018.

The tobacco duty gap has increased from £1.3 billion to £2.2 billion in the last 5 years, whilst liability has broadly increased except a year-on-year decline in 2019 to 2020.

Figure 3.12: Tobacco duty gap, tax liability and theoretical tax liability (£ billion), since 2017 to 2018

Year	Net duty gap	Duty liability	Total theoretical duty liability
2017-18	1.3	8.8	10.2
2018-19	1.6	9.3	10.8
2019-20	2.0	8.8	10.8
2020-21	2.2	10.0	12.1
2021-22	2.2	10.3	12.5

Notes for Figure 3.12

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the tobacco duty gap is the tobacco VAT gap. The VAT gap arising from undeclared tobacco duty is captured within the overall VAT gap covered in chapter 2. Figure 3.13 shows the VAT gap arising from undeclared tobacco since 2017 to 2018.

The tobacco VAT gap has increased from £0.4 billion in both 2017 to 2018 and 2018 to 2019 to £0.6 billion in the last 3 years.

Figure 3.13: VAT gap arising from undeclared tobacco (£ billion), since 2017 to 2018

Year	VAT gap
2017-18	0.4
2018-19	0.4
2019-20	0.6
2020-21	0.6
2021-22	0.6

Notes for Figure 3.13

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion
3. Figures are included in the VAT gap estimate

Figure 3.14 shows the time-series for the tobacco duty gap and its 2 components. The trend in the tobacco gap is largely driven by the trend in the cigarette duty gap, which makes up most of the tobacco consumption and tax receipts. The hand-rolling tobacco duty gap has decreased from 65.2% in 2005 to 2006 to 33.5% in 2021 to 2022 and is higher than the cigarettes duty gap over the time-series.

Figure 3.14: Tobacco duty gap as a percentage of total theoretical duty liability by component

Notes for Figure 3.14

1. The full data series can be seen in the online tables.

Revisions

Figure 3.15 shows the revisions to the tobacco duty gap since the publication of the ‘Measuring tax gaps 2022 edition’.

The estimate of the tobacco duty gap is revised upwards due to using adjusted Opinion and Lifestyle Survey data on average daily tobacco consumption for tax years 2018 to 2019 and 2019 to 2020, replacing a previous projection.

Figure 3.15: Revisions to tobacco duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 3.15

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Cigarettes

Main findings

Figure 3.16 shows the cigarettes duty gap time-series in absolute terms and relative to theoretical cigarettes duty liability.

The duty gap for cigarettes duty is 11.0% of the theoretical cigarettes duty liability, or £1.0 billion in absolute terms, in tax year 2021 to 2022.

There has been a reduction in the cigarettes duty gap estimate as a proportion of theoretical cigarettes duty liability, from 16.9% in tax year 2005 to 2006 to 11.0% in tax year 2021 to 2022.

Figure 3.16: Cigarettes duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.16

1. The full data series can be seen in the online tables.

Figure 3.17 shows the cigarettes duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2017 to 2018.

The cigarette duty gap and cigarette duty liability have been broadly stable at around £1 billion and around £8 billion respectively in years 2020 to 2021 and 2021 to 2022 as shown in Figure 3.17 below.

Figure 3.17: Cigarette duty gap, tax liability and theoretical tax liability (£ billion), since 2017 to 2018

Year	Duty gap	Duty liability	Total theoretical duty liability
2017-18	0.7	7.5	8.1
2018-19	1.1	7.8	8.9
2019-20	1.0	7.3	8.3
2020-21	0.9	7.7	8.6
2021-22	1.0	7.8	8.8

Notes for Figure 3.17

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the cigarettes duty gap is the cigarettes VAT gap. The VAT gap arising from undeclared cigarettes duty is captured within the overall VAT gap covered in chapter 2. Figure 3.18 shows the VAT gap arising from undeclared cigarettes since 2017 to 2018.

There is a £0.2 billion to £0.3 billion VAT gap from cigarettes in each of the last 5 years.

Figure 3.18: VAT gap arising from undeclared cigarettes (£ billion), since 2017 to 2018

Year	VAT gap
2017-18	0.2
2018-19	0.3
2019-20	0.3
2020-21	0.2
2021-22	0.2

Notes for Figure 3.18

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion
3. Figures are included in the VAT gap estimate

Revisions

Figure 3.19 shows the revisions to the cigarette duty gap since the publication of the ‘Measuring tax gaps 2022 edition’. As noted above, the cigarette duty gap is revised upwards for years 2018 to 2019, 2019 to 2020 and 2020 to 2021.

Figure 3.19: Revisions to cigarette duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 3.19

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Hand-rolling tobacco (HRT)

Main findings

Figure 3.20 shows the hand-rolling tobacco duty gap time-series in absolute terms and relative to theoretical hand-rolling tobacco duty liability.

The hand-rolling tobacco duty gap is 33.5% of the theoretical hand-rolling tobacco duty liability, or £1.2 billion in absolute terms, in the 2021 to 2022 tax year.

There has been a reduction in the hand-rolling tobacco duty gap estimate as a proportion of theoretical tobacco duty liability, from 65.2% in 2005 to 2006 to 33.5% in 2021 to 2022.

Figure 3.20: Hand-rolling tobacco duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.20

1. The full data series can be seen in the online tables.

Figure 3.21 shows the hand-rolling tobacco duty gap, duty liability and theoretical duty liability since 2017 to 2018. The duty gap has increased from £0.7 billion in 2017 to 2018 to £1.2 billion in 2021 to 2022. The hand-rolling tobacco duty liability has increased from £1.3 billion to £2.5 billion, and the theoretical duty from £2.0 billion to £3.7 billion in the last 5 years.

Figure 3.21: Hand-rolling tobacco duty gap, duty liability and theoretical duty liability (£ billion), since 2017 to 2018

Year	Net duty gap	Duty liability	Total theoretical duty liability
2017-18	0.7	1.3	2.0
2018-19	0.5	1.5	1.9
2019-20	1.0	1.5	2.5
2020-21	1.3	2.2	3.5
2021-22	1.2	2.5	3.7

Notes for Figure 3.21

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the hand-rolling tobacco duty gap is the hand-rolling tobacco VAT gap. The VAT gap arising from hand-rolling tobacco is captured within the overall VAT gap covered in chapter 2. Figure 3.22 shows the VAT gap arising from undeclared hand-rolling tobacco since 2017 to 2018.

There is a £0.4 billion VAT gap from hand-rolling tobacco in 2021 to 2022, an increase from the £0.2 billion gap in 2017 to 2018 and 2018 to 2019.

Figure 3.22: VAT gap arising from undeclared hand-rolling tobacco (£ billion), since 2017 to 2018

Year	VAT gap
2017-18	0.2
2018-19	0.2
2019-20	0.3
2020-21	0.4
2021-22	0.4

Notes for Figure 3.22

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion
3. Figures are included in the VAT gap estimate

Revisions

Figure 3.23 shows the revisions to the hand-rolling tobacco duty gap since the publication of the ‘Measuring tax gaps 2022 edition’. As noted above, the hand-rolling tobacco duty gap is revised upwards for years 2018 to 2019, 2019 to 2020 and 2020 to 2021.

Figure 3.23: Revisions to hand-rolling tobacco duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 3.23

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Hydrocarbon oils (fuel duty)

Main findings

The hydrocarbon oils duty gap is estimated using an established top-down methodology based on fuel consumption data between tax years 2005 to 2006 and 2015 to 2016, and an established bottom-up methodology based on a random enquiry programme for the use of illicit diesel from 2016 to 2017 onwards. Therefore, figures from 2016 to 2017 are not directly comparable to previous years.

The misuse of other fuels (for example, petrol) has been excluded on the basis that this is believed to be negligible, the scale of which is not currently quantifiable.

Other fuel duties do however form a part of theoretical hydrocarbon oils duty liability.

To evaluate the uncertainty of the hydrocarbon oils duty gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’. The hydrocarbon oils duty gap estimate has ‘medium’ uncertainty.

Figure 3.24 shows the hydrocarbon oils duty gap time-series in absolute terms and relative to theoretical hydrocarbon oils duty liability.

The hydrocarbon oils duty gap is 0.5% of the theoretical hydrocarbon oils duty liability, or £140 million in absolute terms, in the 2021 to 2022 tax year.

There has been a reduction in the hydrocarbon oils duty gap from 2.8% in 2005 to 2006 to 0.5% in 2021 to 2022. There was a large year-on-year decline in both 2010 to 2011 and 2011 to 2012 from 2.7% in 2009 to 2010 to 1.3% and 0.6% respectively. It was stable at 0.2% between 2013 to 2014 and 2015 to 2016. It has remained broadly stable at 0.5% since 2016 to 2017.

Figure 3.24: Hydrocarbon oils duty gap (£ million) by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.24

1. The full data series can be seen in the online tables.

Figure 3.25 shows the hydrocarbon oils duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2017 to 2018.

The net duty gap has been broadly stable across the time series. There was year-on year decrease from £150 million in 2019 to 2020 to £120 million in 2020 to 2021. Hydrocarbon oils duty liability decreased to £20,900 million in 2020 to 2021, followed by an increase to £25,900 million in the latest year.

Figure 3.25: Hydrocarbon oils duty gap, tax liability and theoretical tax liability (£ million), since 2017 to 2018

Year	Net duty gap	Duty liability	Total theoretical duty liability
2017-18	140	27,900	28,000
2018-19	140	28,000	28,100
2019-20	150	27,600	27,700
2020-21	120	20,900	21,000
2021-22	140	25,900	26,100

Notes for Figure 3.25

1. The full data series can be seen in the online tables.
2. Figures for the net tax gap are rounded to the nearest £10 million while the liability is rounded to the nearest £100 million. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the hydrocarbon oils duty gap is the hydrocarbon oils VAT gap. The VAT gap arising from undeclared hydrocarbon oils duty is captured within the overall VAT gap covered in chapter 2. Figure 3.26 shows the VAT gap arising from undeclared hydrocarbon oils since 2017 to 2018.

The VAT gap arising from undeclared hydrocarbon oils has remained broadly stable across the time series, varying between £30 million to £40 million.

Figure 3.26: VAT gap arising from undeclared hydrocarbon oils (£ million), since 2017 to 2018

Year	VAT gap
2017-18	40
2018-19	40
2019-20	40
2020-21	30
2021-22	40

Notes for Figure 3.26

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £10 million.
3. Figures are included in the VAT gap estimate

Diesel

Main findings

The diesel duty gap is estimated using an established top-down methodology based on fuel consumption data between tax years 2005 to 2006 and 2015 to 2016, and an established bottom-up methodology based on a random enquiry programme for the use of illicit diesel from 2016 to 2017 onwards. Therefore, figures from 2016 to 2017 are not directly comparable to previous years.

Figure 3.27 shows the diesel duty gap time-series in absolute terms and relative to theoretical diesel liabilities.

The diesel duty gap is 0.8% of the theoretical diesel duty liability, or £140 million in absolute terms, in the 2021 to 2022 tax year.

There has been a reduction in the diesel duty gap from 5.7% in 2005 to 2006 to 0.8% in 2021 to 2022.

There has been a small increase in the diesel duty gap in 2016 to 2017 due to a step change from the top-down to bottom-up methodology, where it has remained broadly stable at 0.8% of theoretical duty liability.

Figure 3.27: Diesel duty gap by value (£ million) and as a percentage of total theoretical duty liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.27

1. The full data series can be seen in the online tables.

Figure 3.28 shows the diesel duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2017 to 2018.

The net diesel duty gap has been broadly stable since 2017 to 2018 with the exception of the 2020 to 2021 tax year where there is a year-on year decrease from £150 million to £120 million. Diesel duty liabilities decreased from around £17,000 million between 2017 to 2018 and 2019 to 2020 to £13,600 million in 2020 to 2021, followed by an increase to £16,200 million in the latest year.

Figure 3.28: Diesel duty gap, tax liability and theoretical tax liability (£ million), since 2017 to 2018

Year	Net duty gap	Duty liability	Total theoretical duty liability
2017-18	140	17,600	17,800
2018-19	140	17,700	17,800
2019-20	150	17,300	17,400
2020-21	120	13,600	13,700
2021-22	140	16,200	16,300

Notes for Figure 3.28

1. The full data series can be seen in the online tables.
2. Figures for the net tax gap are rounded to the nearest £10 million while the liability is rounded to the nearest £100 million. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Additional to the diesel duty gap is the diesel VAT gap. The VAT gap arising from undeclared diesel is captured within the overall VAT gap covered in chapter 2. Figure 3.28 shows the VAT gap arising from undeclared diesel since 2017 to 2018.

The VAT gap arising from undeclared diesel has remained broadly stable since 2017 to 2018, varying between £30 million to £40 million.

Figure 3.29: VAT gap arising from undeclared diesel (£ million), since 2017 to 2018

Year	VAT gap
2017-18	40
2018-19	40
2019-20	40
2020-21	30
2021-22	40

Notes for Figure 3.29

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £10 million.
3. Figures are included in the VAT gap estimate.

Revisions

Figure 3.30 shows the revisions to the diesel duty gap since the publication of the ‘Measuring tax gaps 2022 edition’.

Small revisions have been made to average diesel retail prices, which has a minimal downward impact on the diesel duty gap time series.

Figure 3.30: Revisions to diesel duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 3.30

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Petrol

The petrol duty gap is assumed to be zero due to low demand from commercial sectors and the flammable nature of the product.

Other excise duties

Main findings

The other excise duties gap captures the duty gap of excise duties that do not currently have standalone models in the ‘Measuring tax gaps’ publication; namely betting and gaming, cider and perry, spirits-based ready-to-drink beverages and wine duties gaps.

Limitations in data or methods available means it is difficult to estimate these components individually, which is why an aggregated estimate is produced under ‘other excise duties’.

The other excise duties gap is based on an experimental method, whereby a proxy indicator for the scale of revenue losses across other excise duties has been produced by estimating the weighted average percentage of tax gaps for similar taxes each year and multiplying this by theoretical tax liabilities.

The average percentage revenue losses should not be considered estimates of the true percentage loss across betting and gaming, cider and perry, spirits-based ready-to-drink beverages and wine duties, as this is unknown. Many of these taxes are very different from one another in nature and are therefore subject to different rules. The true percentage duty gaps are therefore likely to vary across the taxes.

To evaluate the uncertainty of our other excise duties gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’. The other excise duties gap estimate has ‘very high’ uncertainty.

Figure 3.31 shows the other excise duties gap time-series in absolute terms and relative to other excise duties theoretical liabilities.

The other excise duties gap is 6.0% of the theoretical other excise duties liabilities, or £0.5 billion in absolute terms, in the 2021 to 2022 tax year.

There has been a reduction in the other excise duties gap between the tax years 2005 to 2006 and 2021 to 2022 from 8.0% to 6.0% of theoretical liabilities.

Figure 3.31: Other excise duties gap by value (£ billion) and as a percentage of theoretical duty liabilities, 2005 to 2006 up to 2021 to 2022

Notes for Figure 3.31

1. The full data series can be seen in the online tables.

Figure 3.32 shows the other excise duties gap, tax liability, and the total theoretical liability, which is the sum of the tax gap and tax liability, since 2017 to 2018.

Figure 3.32: Other excise duties gap, duties liabilities and total theoretical duties liabilities (£ billion), since 2017 to 2018

Year	Net duty gap	Duties liabilities	Total theoretical duties liabilities
2017-18	0.6	7.4	8.0
2018-19	0.7	7.7	8.4
2019-20	0.7	7.6	8.2
2020-21	0.7	7.7	8.5
2021-22	0.5	8.0	8.6

Notes for Figure 3.32

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.