Tax underpaying 'costs £2.8bn a year'

Tax misreporting could be costing HM Revenue & Customs up to £2.8 billion a year, with the difficulty of filling in tax returns responsible for some of that underpayment, MPs told the government.

Of the money not being collected, the Committee on Public Accounts reported that £330 million was down to innocent mistakes made by people filling out their "tricky" tax returns.

Edward Leigh MP, chairman of the Committee of Public Accounts, said: "Completing a tax form should be made much simpler. Too many people are unintentionally making mistakes, resulting in an estimated underpayment of tax each year of some £330 million."

"It is puzzling, to say the least, that no similar estimate has been attempted of the amount overpaid to the taxman as a result of such mistakes."

The total figure of tax revenue that goes uncollected because it would not be cost effective to collect it is higher than the figure Alistair Darling said the government would have to borrow to compensate those hit by the 10p tax ban.