Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Not Addressed
Specify a contingency plan for increasing compliance capacity to tackle growing non-compliance risks.
Conclusion
There are signs that the tax gap may grow, and that HMRC does not have the operational resilience needed to deal with this. 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. 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 was stable in 2020–21, but HMRC says that this has a much larger range of uncertainty than normal and may need to be revised as it gets more data. There is a significant risk that the tax gap will grow, in light of compliance yield dropping and levels of debt and non-payment rising. HMRC’s own planning estimates indicate that it is unlikely to generate enough compliance yield to stop the tax gap from growing in the next few years. However, it does not have a contingency plan if this happens. Since it takes four years to get compliance staff fully trained and up to speed, there could be a long lag if HMRC waits to determine whether it needs more resources. HMRC has up to 20 years to pursue cases of suspected non- compliance, but this only applies to fraud cases. For errors the period is less, and in some cases HMRC cannot go back more than four years. Recommendation 6: a) HMRC needs to build in more resilience to the tax system, with the tax gap at risk of growing and high returns available from compliance work there is a strong value for money case for increasing resources. b) At a minimum, HMRC should specify a contingency plan for bringing in additional compliance capacity to ensure increased levels of non- compliance can be tackled quickly, and before the window closes for investigating cases it did not pursue during the pandemic. 8 Managing tax compliance following the pandemic 1 Impact of the pandemic on tax compliance
Government Response Summary
The government response provided addresses a recommendation to the Cabinet Office regarding contingency plans for the Shared Services Strategy, which is entirely unrelated to the committee's recommendation concerning HMRC's operational resilience and tax gap capacity.
Government Response
Not Addressed
HM Government
Not Addressed
1. PAC conclusion: The Cabinet Office does not have any contingency plans should the current strategy encounter problems. 1. PAC recommendation: The Cabinet Office should develop a set of contingency plans for implementation should the current strategy encounter problems. It should report back to us in six months setting out what these plans are. 1.1 The government agrees with the Committee’s recommendation. Target implementation date: November 2023 1.2 Existing contingency planning has been undertaken through the intensive cluster shortlisting of options and counterfactuals. 1.3 As part of this recommendation central teams will assess the feasibility of delivering the Shared Services Strategy for Government (SSfG) within a number of different funding or political scenarios. 1.4 This work will then be used as a tool to assess the feasibility of the future business cases submitted by the Clusters. 1.5 Regarding ageing systems becoming unsupported, in April 2023, an extension with Shared Services Connected Ltd (SSCL) was negotiated on the Integrated Shared Service Centre 2 (ISSC2) contract which will ensure service continuity. 1.6 Integrated Shared Service Centre 2 (ISSC2) customer departments (covering around 200,000 full-time equivalents) require an extension with SSCL to bridge the gap between the current contract end date and the date they have new service arrangements in place. 1.7 The extension negotiated is limited to two years that is business as is, with no significant changes. This will see affected departments - the Department for Work and Pensions (DWP), the Department for Environment Food and Rural Affairs (DEFRA), Environment Agency (EA), the Cabinet Office (CO), the Office for Nuclear Regulation (ONR), the Health and Safety Executive (HSE), Home Office (HO) and the Ministry of Justice (MOJ) having their service extended to October 2025. 2. PAC conclusion: The Cabinet Office did not produce an overarching business case for the Shared Services Strategy, which has hindered progress. 2. PAC recommendation: The Cabinet Office should revisit its “Case for Change” and revise it in line with HM Treasury’s Guide to developing the project business case, reporting progress to us in its six-month update. In future, the Cabinet Office should always complete a business case for projects, programmes and strategies of this scale. 2.1 The government agrees with the Committee’s recommendation. Target implementation date: May 2024 (following Full Business Cases from Clusters) 2.2 Upon Strategy launch, pace of delivery was prioritised, therefore business case d