Recommendation 4

HM Government Accepted

The government agrees with the Committee’s recommendation. Recommendation implemented The department has a strong track record in providing flexible repayment practices to support people and businesses in temporary financial difficulty and will continue to do so. At the end of December 2022, around 731,000 taxpayers had around £4.8 billion worth of debt in Time to Pay (TTP) instalment arrangements. At Spring Budget 2023, the government announced funding for improvements to the department’s online TTP service. HMRC has already extended this service to PAYE and most recently VAT. The Spring Budget funding will allow for increased functionality to allow more taxpayers to arrange their own flexible repayment plans at a time convenient for them. The department constantly monitors whether it has sufficient resources for debt recovery work. The resource available for HMRC for its compliance work is agreed with ministers at spending reviews. The agreed level is shaped by economic factors and enables HMRC to carry out the compliance activity required to maintain a stable tax gap over the medium term. At the Spring Statement 2022, the government provided funding for an additional 500 staff over three years for debt management activity. The recruitment process is complete, and the staff are in place supporting people and businesses to pay their tax debts. In addition, the government provided £20 million for the years 2023-24 and 2024-25 to place additional debt with private sector debt collection agencies. This will further help to address the increase in debt levels and provide additional and flexible debt collection capacity. 5: PAC conclusion: We are concerned that HMRC may be overstating the impact of its compliance work, and that it is overcharging some taxpayers. 5a: PAC recommendation: HMRC should develop statistically robust estimates of the level of error in its compliance yield measure, and how far taxpayers are overcharged. 5.1 The government agrees with the Committee’s recommendation. 5.2 HMRC has robust processes in place to record yield. HMRC conducts an annual review which evaluates the quality of its compliance casework – the Tax Settlement Assurance Programme (TSAP) and which also provides assurance over yield recording. Where this identifies measurement issues on cases tested these are corrected. HMRC considers whether or not these errors might have a wider impact on the yield total, and adjust if needed. While HMRC considers the current approach provides an appropriate view of the impact of its compliance work, HMRC accepts it could do more to enhance our sample selection to further improve our measurement assurance. HMRC will design a sampling approach that allows for extrapolation of errors from cases reviewed as part of the TSAP to the annual estimate of compliance yield. HMRC will consider how best to do this, taking a proportionate approach, which will involve considering the merits of different options such as the following: • moving TSAP annual reporting to financial year reporting; • better aligning TSAP sampling to reflect the value profile of compliance yield; and/or • continue with the current approach to sample selection, and where a large compliance yield error is found, test further cases in that stratum to determine the extent of likely error. 5.3 TSAP is an annual review programme and it will take at least a transition year to fully incorporate any changes. Once an appropriate sampling framework has been established HMRC will develop a mechanism for estimating the impact of official error on taxpayers. 5b: PAC recommendation: HMRC should demonstrate it has taken all proportionate steps to identify and correct overcharges. It should make clear what compensation is available if taxpayers are overcharged. 5.4 The government agrees with the Committee’s recommendation. 5.5 HMRC carefully considers the relevant information available and will always aim to work with the customer to identify their correct tax position. Any changes in liability are calculated and quality assured. This quality assurance can include manager/technical specialist reviews and/or spot-checks to prevent and correct under/ overcharging. 5.6 Tax decisions can be appealed and when a compliance check is settled HMRC writes to taxpayers to explain any change in liability and the appeal process. When taxpayers appeal, they can also ask for a review of the case by HMRC before it proceeds to the Tax Tribunal. Reviews are undertaken by someone independent of the original decision maker. 5.7 Taxpayers can appoint a representative to act on their behalf. Where needed, HMRC will also provide extra support in helping them meet their compliance obligations. 5.8 Where taxpayers feel that HMRC has not met the standards of the HMRC Charter they can make a complaint. HMRC will reimburse reasonable costs directly caused by any departmental mistake/ delay. Costs can include postage, phone charges and professional fees. If taxpayers are