Recommendations & Conclusions
14 items
2
Recommendation
Fortieth Report - COVID employment supp…
Accepted
Gaps and lags in HMRC’s data contributed to the schemes providing excessive support to some, while others in need were ineligible. We have previously reported that data limitations contributed to some people being excluded from the schemes, including the newly self-employed and employed, and limited company directors who took their …
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Gaps and lags in HMRC’s data contributed to the schemes providing excessive support to some, while others in need were ineligible. We have previously reported that data limitations contributed to some people being excluded from the schemes, including the newly self-employed and employed, and limited company directors who took their income as dividends. Data weaknesses also contributed to the first three of the five SEISS grants providing £3.5 billion to people whose self-employed incomes had increased during 2020–21. By October 2020, the Departments had also made CJRS payments of around £6.5 billion to employers whose turnover stayed the same or increased during the pandemic, with £1.5 billion of this going to employers who reported that they would not have made redundancies or closed permanently even without the scheme. Making Tax Digital is intended to provide more frequent and timely data on the income and expenses of self-employed people, but HMRC cannot say when this will be delivered. HMRC has also conducted a public consultation about collecting additional data, such as dividends paid to limited company directors, which could help it target support. HMRC acknowledges, however, that this could impose added burdens on customers. 6 COVID employment support schemes Recommendation 2: The Departments should set out, by July 2023, their priorities for obtaining data which would enable the better targeting of economic support. In doing so, they should consider how they can keep burdens on customers proportionate.
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Government response AI summary
The government agrees with the committee's recommendation and has consulted on options for improving the range of data HMRC collects, uses and shares, including collecting data on employee hours worked, dividends received, and start and end dates of self-employment, with implementation planned from April 2024.
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HM Treasury
3
Recommendation
Fortieth Report - COVID employment supp…
Accepted
HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work has been woeful. When it introduced CJRS in spring 2020, HMRC recognised that there was a high risk that employers would exploit the scheme by claiming furlough for employees that continued …
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HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work has been woeful. When it introduced CJRS in spring 2020, HMRC recognised that there was a high risk that employers would exploit the scheme by claiming furlough for employees that continued to work. HMRC accepted that it could not prevent such claims and it intended to recover sums through post-payment compliance activity. But two years on, HMRC’s compliance activity has had little success. HMRC estimates that it paid out £2.3 billion of furlough for employees who were in fact still working. By March 2022, HMRC’s main compliance intervention targeting employers claiming furlough for working employees had yielded only £640,000, equivalent to just 0.03% of the money claimed incorrectly. HMRC now reports it is hard for its compliance teams to prove after the event that employers were claiming furlough for employees still working, particularly if they were only furloughed part-time. HMRC could have done more to collect evidence on risky claims through visits and interviews. Given the amount of furlough claimed for working employees, HMRC needs to look again at how it collects such evidence. Recommendation 3: HMRC should set out, in its Treasury Minute response, how it will improve its ability to recover furlough claimed for employees who continued to work.
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Government response AI summary
HMRC will transition COVID-19 scheme compliance activity to be worked alongside business-as-usual tax compliance by September 2023 as the most cost-effective approach and has developed a unit of expertise to support wider teams with knowledge gained. Target implementation date is April 2024.
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HM Treasury
4
Recommendation
Fortieth Report - COVID employment supp…
Accepted
HMRC’s decision to close the Taxpayer Protection Taskforce in 2023–24 puts at risk the recovery of taxpayers’ money paid out as a result of error and fraud. In April 2021, HMRC set up the Taxpayer Protection Taskforce as a dedicated team of over 1,000 staff to increase its recovery of …
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HMRC’s decision to close the Taxpayer Protection Taskforce in 2023–24 puts at risk the recovery of taxpayers’ money paid out as a result of error and fraud. In April 2021, HMRC set up the Taxpayer Protection Taskforce as a dedicated team of over 1,000 staff to increase its recovery of overpayments on the COVID-19 employment support schemes and the Eat Out to Help Out scheme. HMRC received an additional £100 million of funding for the Taxpayer Protection Taskforce, and it currently expects the Taskforce to recover between £525 million and £625 million. Despite these returns, HMRC plans to close the Taxpayer Protection Taskforce in September 2023 and will instead address non-compliance on the employment support schemes as part of its wider tax compliance work. We are concerned this change could lead to HMRC giving too little attention to the large sums of money outstanding on the employment support schemes. HMRC estimates indicate that between £2.0 billion and £5.1 billion of error and fraud within the schemes is likely to remain unrecovered by 2023–24. It would be unacceptable for HMRC to write-off such a large amount of taxpayer’s money. It must continue to tackle non-compliance on the schemes while it evidently remains cost-effective to do so. Recommendation 4a: HMRC should continue compliance work on the COVID-19 employment support schemes while it remains cost-effective to do so. It should set out, in its Treasury Minute response, how it will assess the cost-effectiveness of continuing compliance work after September 2023, and how it would compare to addressing fraud on other government spending. COVID employment support schemes 7 Recommendation 4b: HMRC should report annually in its Report and Accounts the yield it obtains from COVID-19 employment support schemes and the levels of unrecovered error and fraud until it stops its COVID19 grants compliance activity all together.
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Government response AI summary
HMRC will continue compliance work on the COVID-19 employment support schemes while it remains cost-effective, assessing cost-effectiveness by reviewing COVID-19 scheme risks alongside business-as-usual tax risks from September 2023. HMRC will publish COVID-19 compliance outcomes in the HMRC Annual Report and Accounts for 2022-23 and …
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HM Treasury
9
Recommendation
Fortieth Report - COVID employment supp…
Accepted
The Departments told us that in the longer-term they were interested in comparing outcomes from the schemes in the UK with other countries, as many other developed countries ran similar schemes but designed them in slightly different ways. For example, the Departments explained that they would like to look at …
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The Departments told us that in the longer-term they were interested in comparing outcomes from the schemes in the UK with other countries, as many other developed countries ran similar schemes but designed them in slightly different ways. For example, the Departments explained that they would like to look at whether they should have been more prepared to tolerate error and fraud by accepting self-certification of claims as some countries did. But the Departments told us that they had no way of comparing outcomes, yet as other countries had not published details about their schemes such as evaluations or measurements of error and fraud. They also told us the absence of published material did not mean that other countries did not have insights, but that they were not currently accessible and they could not guarantee that they would have been able to undertake international comparisons by the time of the final evaluations in 2023.13 The Departments’ data to assess need and verify claims
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Government response AI summary
HM Treasury and HM Revenue and Customs will continue their engagements with other relevant countries, to understand their experiences and the impacts of implementing similar employment support schemes, and comparative evidence will be included in the CJRS and SEISS final evaluations by December 2023.
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HM Treasury
10
Conclusion
Fortieth Report - COVID employment supp…
Accepted
In December 2020 we reported that an estimated 1.1 million people were excluded from the initial phases of CJRS because HMRC did not have sufficient data to verify claims. These people comprised 0.7 million limited company directors who took their income as dividends and 0.4 million short-term or freelancer workers …
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In December 2020 we reported that an estimated 1.1 million people were excluded from the initial phases of CJRS because HMRC did not have sufficient data to verify claims. These people comprised 0.7 million limited company directors who took their income as dividends and 0.4 million short-term or freelancer workers missing payroll. Limited company directors qualified for the furlough scheme to the extent that they paid themselves through their PAYE system. However, as HMRC acknowledged in 2020, many limited company directors opted to pay themselves a small amount in this way, and rely predominantly on dividend income.14 We received written evidence from the Association of Independent Professionals and the Self-Employed, which told us that it had presented to HM Treasury alternative proposals for how limited company directors could have been supported, but the schemes were not extended to this group.15 In December 2020 we also reported that 0.2 million newly self-employed people missed out on the first three SEISS grants because HMRC did not hold enough data about their self-employment. We recommended that the Departments should investigate whether more data within and outside of the tax system could be used to determine eligibility for currently excluded groups. The Departments responded by saying they had to balance the desire to provide support to as many people as possible, as quickly as possible, with the need to protect public funds from error and fraud. To strike this balance, they said both schemes were 12 Qq 5, 8: Office of National Statistics, Movements out of work for those aged over 50 years since the start of the coronavirus pandemic, March 2022, https://www.ons.gov.uk/ employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/ movementsoutofworkforthoseagedover50yearssincethestartofthecoronaviruspandemic/2022–03–14, (accessed 1 December 2022) 13 Qq 49, 112–114 14 Committee of Public Accounts, Covid-19: Support for jobs, paras 13, 15; C&
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Government response AI summary
The government agrees with the committee's recommendation and has consulted on options for improving the range of data HMRC collects, uses and shares, including collecting data on employee hours worked, dividends received, and start and end dates of self-employment, with implementation planned from April 2024.
Read full response →
HM Treasury
11
Conclusion
Fortieth Report - COVID employment supp…
Accepted
Weaknesses in the Departments’ data also contributed to the schemes providing support to taxpayers whose incomes were not significantly affected by the COVID-19 pandemic. Eighteen percent of the value of the first three SEISS grants—around £3.5 billon—was paid to people who saw their turnover increase in 2020–21 even without the …
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Weaknesses in the Departments’ data also contributed to the schemes providing support to taxpayers whose incomes were not significantly affected by the COVID-19 pandemic. Eighteen percent of the value of the first three SEISS grants—around £3.5 billon—was paid to people who saw their turnover increase in 2020–21 even without the grant. While around £6.5 billion of furlough paid between March 2020 and October 2020 went to employers who saw their turnover increase or stay the same, of which £1.5 billion was paid to employers who said they would not have made redundancies or closed permanently without CJRS.17
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Government response AI summary
The government agrees with the committee's recommendation and has consulted on options for improving the range of data HMRC collects, uses and shares, including collecting data on employee hours worked, dividends received, and start and end dates of self-employment, with implementation planned from April 2024.
Read full response →
HM Treasury
12
Recommendation
Fortieth Report - COVID employment supp…
Accepted
We asked the Departments whether they now knew what data they were missing and what they needed to collect to allow them to be better prepared in future. HMRC told us that since the schemes had closed it had run a public consultation on whether to collect additional data from …
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We asked the Departments whether they now knew what data they were missing and what they needed to collect to allow them to be better prepared in future. HMRC told us that since the schemes had closed it had run a public consultation on whether to collect additional data from taxpayers that are not essential to administer tax but might be useful in the future for the Departments to provide and target support. The consultation asked whether data on dividends should identify how much had been earned from a director’s own company and how much from other sources. It also asked whether employers should provide data on where in the country their employees work and whether businesses should provide data on the sector of the economy they work in. HMRC said the advantages of the additional data would need to be weighed against the burdens placed on those who would supply the data. The consultation is now closed and HMRC said it was for Ministers to decide on changes.18
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Government response AI summary
The government consulted on options for improving the range of data HMRC collects and following consideration of the views of respondents to the consultation, the government will prioritise three options to be taken forward in a future Finance Bill with the intention to collect this …
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HM Treasury
13
Recommendation
Fortieth Report - COVID employment supp…
Accepted
In December 2020 we reported that the age of HMRC’s Self Assessment system made it more difficult for HMRC to provide financial support for the self-employed. HMRC has an existing programme, Making Tax Digital, which will lead to self-employed people providing quarterly information on their expenses and income rather than …
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In December 2020 we reported that the age of HMRC’s Self Assessment system made it more difficult for HMRC to provide financial support for the self-employed. HMRC has an existing programme, Making Tax Digital, which will lead to self-employed people providing quarterly information on their expenses and income rather than a single annual tax return. HMRC recognised that it was taking longer than it would like to implement Making Tax Digital, but stressed that this was a key reform that would give it access to more real-time data on self-employment and would make it easier to include the self-employed in future schemes.19 In September 2021, HMRC announced that the introduction of Making Tax Digital for self-employed people would go back a year to 2024–45. We pressed HMRC on whether Making Tax Digital would be in place by 2024–25. It did not commit to 2024–25, saying it would be quite pressured for both it and software houses and small businesses to be ready in time and it would keep the delivery date under review.20 16 Committee of Public Accounts, Covid-19: Support for jobs, para 13 and page 6; C&AG’s Report, Implementing employment support schemes in response to the COVID-19 pandemic, Session 2019–2021, HC 862, October 2020, Figure 6; and HM Treasury, Treasury Minutes: Government responses to the Committee of Public Accounts on the Thirtieth to the Thirty-Fourth reports from Session 2019–21, CP 389, February 2021 17 C&AG’s Report, paras 11, 2.13 18 Qq 2, 72–73; HMRC, Improving the data HMRC collects from its customers, 20 July 2022, https://www.gov.uk/ government/consultations/improving-the-data-hmrc-collects-from-its-customers/improving-the-data-hmrc- collects-from-its-customers (accessed 2 December 2022) 19 Qq 35, 72; Committee of Public Accounts, Covid-19: Support for jobs, page 5 20 Qq 78–80; HMRC, Businesses get more time to prepare for digital tax changes, September 2021, https://www. gov.uk/government/news/businesses-get-more-time-to-prepare-for-digital-tax-
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Government response AI summary
The government agrees with the recommendation and will prioritise collection of data on employee hours worked, dividends received from owner-managed businesses, and start/end dates of self-employment, with intentions to collect this data from April 2024. It also mentioned making Tax Digital for Income Tax, which …
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HM Treasury
16
Conclusion
Fortieth Report - COVID employment supp…
Accepted
We also received written evidence from the Chartered Institute of Taxation. It told us the SEISS application process was likely to have contributed to ineligible claims. It said that, because taxpayers rather than agents had to apply for SEISS, HMRC made the application process simple and straight forward, but in …
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We also received written evidence from the Chartered Institute of Taxation. It told us the SEISS application process was likely to have contributed to ineligible claims. It said that, because taxpayers rather than agents had to apply for SEISS, HMRC made the application process simple and straight forward, but in doing so this had the unintended effect of encouraging ineligible claims.26
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Government response AI summary
The government agrees with the Committee and commits to publishing the final evaluations of the CJRS and SEISS by December 2023, which will assess the entire impact of the schemes, including the ineligible self-employed population for SEISS.
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HM Treasury
17
Recommendation
Fortieth Report - COVID employment supp…
Accepted
The main cause of error and fraud on CJRS was furlough paid to employers for employees who were still working. HMRC recognised at the start of CJRS in spring 2020 that there was a high risk that employers would exploit the scheme by claiming furlough for employees that continued to …
Read more
The main cause of error and fraud on CJRS was furlough paid to employers for employees who were still working. HMRC recognised at the start of CJRS in spring 2020 that there was a high risk that employers would exploit the scheme by claiming furlough for employees that continued to work. HMRC accepted that it could not prevent such claims and it intended to recover sums through post-payment compliance activity. HMRC’s estimates indicated that £2.3 billion was paid to employers for periods when employees were working. HMRC began deploying significant numbers of staff to its post- payment compliance activities to recover overpayments from October 2020. By March 2022, HMRC’s compliance work targeting employers who claimed furlough for working 21 Q 50; HMRC, Annual Report and Accounts 2021 to 2022, HC 494, 18 July 2022 22 HMRC, Error and fraud in the COVID-19 schemes: methodology and approach (an update for 2022), 18 July 2022, Table A1 and Table A2, https://www.gov.uk/government/publications/measuring-error-and-fraud-in-the-covid- 19-schemes/error-and-fraud-in-the-covid-19-schemes-methodology-and-approach-an-update-for-2022 (accessed 2 December 2022) 23 Public Accounts Committee, Fraud and Error, Ninth Report of Session 2021–22, HC 253, 30 June 2021 24 Qq 58–59, 81 25 CES0002, Cifas, paras 4, 6–8, published 17 November 2022 26 CES0001, Chartered Institute of Taxation, paras 5.20 to 5.22, published 17 November 2022 COVID employment support schemes 13 employees had closed 254 cases and had yielded only £640,000.27 We asked HMRC why it had found so few cases. It told us that it could identify working while furlough at the ‘extremes’, for example, where it could find evidence of economic activity by an employer that claimed to have furloughed 100% of their staff for 100% of the time. However, for most stages of CJRS, when furloughed employees could legitimately work part time, HMRC said it was difficult for its staff to determine whether people were working at times when t
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Government response AI summary
HMRC will transition COVID-19 scheme compliance activity to be worked alongside business-as-usual tax compliance by September 2023 and has developed a unit of expertise to ensure that knowledge gained in tackling COVID-19 scheme risks can be used to support the wider business- as-usual teams going …
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HM Treasury
18
Recommendation
Fortieth Report - COVID employment supp…
Accepted
HMRC established the Taxpayer Protection Taskforce in April 2021 to increase its compliance activities on the two employment support schemes and Eat Out to Help Out.29 HMRC told us it had received £100 million to fund the cost of moving over 1,000 compliance staff from its tax compliance teams to …
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HMRC established the Taxpayer Protection Taskforce in April 2021 to increase its compliance activities on the two employment support schemes and Eat Out to Help Out.29 HMRC told us it had received £100 million to fund the cost of moving over 1,000 compliance staff from its tax compliance teams to the Taskforce so that over the medium term it would not lose yield from tax compliance. We asked whether the Taxpayer Protection Taskforce had been a success. HMRC told us that the Taskforce had allowed it to pull in staff with different expertise to work together to address non-compliance on the schemes in a coherent, focused way. HMRC said that the Taskforce was on track to recover somewhere between £525 million and £625 million from investigating error and fraud. However, this is less than HMRC’s original expectation that the Taskforce would recover £800 million to £1 billion.30 Recoveries by the Taskforce are in addition to the £536 million HMRC recovered before it established the Taskforce in April 2021.31 But as we reported in January 2023, recoveries of around £1.1 billion would only account for a quarter of HMRC’s estimate of the most likely level of error and fraud on the schemes.32
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Government response AI summary
HMRC will continue compliance work on the COVID-19 employment support schemes as part of business-as-usual tax compliance activity, reviewing all COVID-19 scheme risks alongside business-as-usual tax risks from September 2023, and will continue to collect performance metrics. The target implementation date is April 2024.
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HM Treasury
19
Recommendation
Fortieth Report - COVID employment supp…
Accepted
HMRC plans to wind up the Taxpayer Protection Taskforce between April and September 2023, returning its staff to business-as-usual tax compliance activities. It said it would continue to look at non-compliance on the COVID-19 schemes as part of a customer’s general tax compliance. There is a risk that the closure …
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HMRC plans to wind up the Taxpayer Protection Taskforce between April and September 2023, returning its staff to business-as-usual tax compliance activities. It said it would continue to look at non-compliance on the COVID-19 schemes as part of a customer’s general tax compliance. There is a risk that the closure of the Taskforce could reduce the focus on COVID-19 error and fraud. HMRC’s own figures indicate that by 2022–23 between £2.0 billion and £5.1 billion of error and fraud on CJRS and SEISS is likely to remain unrecovered.33 Criminal and civil sanctions
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Government response AI summary
HMRC will continue compliance work on the COVID-19 employment support schemes as part of business-as-usual tax compliance activity, reviewing all COVID-19 scheme risks alongside business-as-usual tax risks from September 2023, and will continue to collect performance metrics. The target implementation date is April 2024.
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HM Treasury
25
Recommendation
Fortieth Report - COVID employment supp…
Accepted
We asked HM Treasury and HMRC what lessons they had learned that could be used in the event of the next emergency, and what they would do differently in future. They identified successes they would like to preserve, in particular, they said there had been effective close working between policy …
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We asked HM Treasury and HMRC what lessons they had learned that could be used in the event of the next emergency, and what they would do differently in future. They identified successes they would like to preserve, in particular, they said there had been effective close working between policy and operational staff and they had put in place a coherent end-to-end compliance approach. They also identified the need for better data to facilitate targeting of support, learning from international experience and improving how they communicated with those taxpayers selected for compliance checks.48
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Government response AI summary
HM Treasury and HMRC will include lessons learned from the CJRS and the SEISS in the final evaluation reports to be published in 2023. They have also developed CJRS and SEISS playbooks that are kept updated and will be amended as necessary upon publication of …
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HM Treasury
26
Recommendation
Fortieth Report - COVID employment supp…
Accepted
We asked HM Treasury and HMRC whether they would establish a “how to” guide for responding to future crises. They told us that for the employment support schemes they had brought together material in a “playbooks” that people can use in the future. We also asked about whether lessons learned …
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We asked HM Treasury and HMRC whether they would establish a “how to” guide for responding to future crises. They told us that for the employment support schemes they had brought together material in a “playbooks” that people can use in the future. We also asked about whether lessons learned would be set out clearly in their final evaluation. They said this was not the purpose of the public evaluation. Instead, they referred to their 42 Qq 87, 94; C&AG’s Report, paras 3.39 43 Qq 87–88, 97–98, 103 44 Q 70 45 Committee of Public Accounts, Initial lessons from the government’s response to the COVID-19 pandemic, 13th Report of Session 2020–21, HC 175, July 2021, pages 3, 6 46 Committee of Public Accounts, Government preparedness for the COVID-19 pandemic: Lessons for government on risk, 46th Report of Session 2021–22, HC 952, March 2022, pages 3, 7 47 HM Treasury, Treasury Minutes: Government Response to the Committee of Public Accounts on the Forty-Third to the Forty-Eighth report from Session 2021–22, CP 678, May 2022 48 Qq 112–113 16 COVID employment support schemes “playbooks”, which they said they would keep up to date.49 On error and fraud, in October 2022 HMRC updated its published summary of its approach to managing the risks of error and fraud, but this did not capture what lessons it had learnt and what should be done differently in any future crisis intervention.50 However, HMRC had previously told us it would look at drawing together its lessons from the schemes to support other parts of government that are tasked with disbursing funds at pace, such as the Household Support Fund.51 49 Qq 25, 114 50 HMRC, Tackling error and fraud in the Covid-19 support schemes, updated 13 October 2022, https://www.gov. uk/government/publications/hmrc-issue-briefing-tackling-error-and-fraud-in-the-covid-19-support-schemes/ tackling-error-and-fraud-in-the-covid-19-support-schemes (accessed 2 December 2022) 51 Committee of Public Accounts, HMRC performance in 2021–22, Thirty-th
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Government response AI summary
HM Treasury and HM Revenue and Customs will include lessons learned, where appropriate, from the CJRS and the SEISS in the final evaluation reports to be published in 2023. They have developed CJRS and SEISS playbooks, allowing for the rapid deployment of new employment and …
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HM Treasury