Analysis by the National Audit Office (NAO) shows that small firms are responsible for more than 80% of tax evasion. The report cites HMRC estimates that £5.5bn was lost to deliberate tax evasion in the 2022/23 financial year, with small businesses responsible for 81% of the total. Despite a reduction in the overall tax gap from 7.4% in 2006 to 4.8% last year, the share attributed to small businesses has risen from 44% to 60% over the past five years. The report criticises HMRC for lacking a specific strategy to address widespread tax evasion, particularly in retail, where practices like electronic sales suppression and misuse of the insolvency process are prevalent. Gareth Davies, head of the NAO, said HMRC lacked an "effective strategic response" to growing forms of tax evasion. He added: "Tackling tax evasion is not a straightforward task. But real opportunities exist for HMRC to work more systematically across government to reduce it." The NAO report also warns that there are "significant gaps" in checks and that overseas companies are still falsely presenting themselves as British-based to evade VAT. A spokesman for HMRC said: "We generated a record £843.4bn in tax revenues last year. The UK has one of the lowest tax gaps in the world, but the Government is committed to reducing it further."