Recommendations & Conclusions
9 items
7
Conclusion
Forty-Ninth Report - Managing tax compl…
Rejected
During the two pandemic years of 2020–21 and 2021–22, ‘compliance yield’ (the additional revenues protected as a result of HMRC’s interventions) per staff member fell from £1.3 million a year to £1.1 million (in 2021 prices).10 HMRC told us this was due to several factors, including the fact that staff …
Government response. The government disagrees with the committee's observation, stating that HMRC sets compliance yield targets to maintain a stable tax gap, deploys resources effectively, and that the tax compliance gap remained low during the pandemic years.
HM Treasury
8
Conclusion
Forty-Ninth Report - Managing tax compl…
Rejected
HMRC did not initially recruit at scale but has more recently recruited 4,800 new compliance staff, leading to 2,500 more FTE than in 2021–22. HMRC expects staff productivity to increase over the next few years, but told us that new staff take up to four years to be fully productive. …
Government response. The government explicitly disagrees with the committee's observation (interpreted as a recommendation), explaining that reduced yield during the pandemic was due to staff deployment to the Taxpayer Protection Taskforce. They assert that compliance performance should be viewed on a multi-year …
HM Treasury
12
Conclusion
Forty-Ninth Report - Managing tax compl…
Rejected
HMRC defines compliance yield as the additional revenue collected and protected that would have otherwise been lost to the Exchequer if not for HMRC’s interventions. It is the most direct measure of the impact of HMRC’s compliance work, and it covers both the broad effect of its measures to prevent …
Government response. The government disagrees with the recommendation, stating that HMRC sets compliance yield targets based on an agreed methodology with HM Treasury and the OBR, aimed at maintaining a stable tax gap and delivering revenues from fiscal event measures.
HM Treasury
13
Conclusion
Forty-Ninth Report - Managing tax compl…
Rejected
In the five years before the pandemic, HMRC collected or protected an average of 5.2% of tax revenues through its compliance work. In 2020–21, total tax revenues fell as a result of the pandemic, but compliance yield fell slightly further, dropping to 5.0% of total revenues. In 2021–22, total revenues …
Government response. The government disagrees with the committee's observation, stating that HMRC sets compliance yield targets to maintain a stable tax gap, deploys resources effectively, and that the tax compliance gap remained low in the pandemic years in line with pre-pandemic levels.
HM Treasury
14
Recommendation
Forty-Ninth Report - Managing tax compl…
Rejected
We asked HMRC whether, to catch up on compliance yield lost during the pandemic, it should expect to generate higher levels of yield than before the pandemic over the next few years. HMRC acknowledged that this should happen over time and suggested that no tax should go uncollected as a …
Government response. The government explicitly rejects the recommendation to target higher compliance yield, explaining that HMRC sets targets based on an agreed methodology with the Treasury and OBR to maintain a stable tax gap. HMRC prioritizes compliance risks, ensuring identified risks can …
HM Treasury
23
Conclusion
Forty-Ninth Report - Managing tax compl…
Rejected
HMRC is funded to stop the tax gap from growing. The tax gap is an important measure of how much revenue may be missed—due to evasion, avoidance or non-payment —that could otherwise fund vital public services.38 32 C&AG’s Report, para 2.2, 2.14 33 Qq 57–58, 64–65; C&AG’s Report, para 2.12 …
Government response. The government disagrees with the committee's observation, asserting that HMRC's funding is sufficient to maintain compliance performance and a stable tax gap, with investments already made to tackle serious tax fraud and compliance risks.
HM Treasury
24
Conclusion
Forty-Ninth Report - Managing tax compl…
Rejected
Due to the way it is estimated, the tax gap does not yet reflect the full impact of the pandemic and will not do so for some time. HMRC’s latest estimate is that the tax gap remained stable in 2020–21, at 5.1% of taxes theoretically owed. However, HMRC’s tax gap …
Government response. The government disagrees with the committee's observation, stating that HMRC's funding levels are adequate, with a track record of investment in compliance to generate revenue and maintain a stable tax gap, as shown in the 2023 Measuring Tax Gaps publication.
HM Treasury
25
Recommendation
Forty-Ninth Report - Managing tax compl…
Rejected
Some measures that affect the tax gap have weakened since the start of the pandemic, indicating that the tax gap may grow in the coming years. Non-payment of taxes owed is one such component of the tax gap that HMRC expects will grow. Levels of debt and non-payment rose considerably …
Government response. The government rejects the committee's implication, asserting its commitment to ensure HMRC has sufficient funding to maintain compliance performance and tackle the tax gap. It highlights a £79 million investment in Autumn Statement 2022 for staff to combat tax fraud …
HM Treasury
26
Recommendation
Forty-Ninth Report - Managing tax compl…
Rejected
We asked whether HMRC needed more resources to catch up on the impact of the pandemic and to keep the tax gap from growing, and whether it was looking to recruit more. HMRC acknowledged that it will be more challenging to maintain the tax gap than it has been in …
Government response. The government rejects the committee's suggestion regarding resource sufficiency, affirming its commitment to provide HMRC with adequate funding. It cites a £79 million investment from Autumn Statement 2022 to hire staff targeting serious tax fraud and wealthy taxpayers, emphasizing its …
HM Treasury