Source · Select Committees · Public Accounts Committee
Recommendation 20
20
Accepted
HMRC's compliance yield overstated by £59.7 million (8%) due to errors in casework.
Conclusion
HMRC’s quality assurance arrangements involve testing 400 of its completed compliance cases each year. In 2021–22, 80 of these cases had errors in the compliance yield that HMRC had recorded. These errors included both overstated and understated figures, and occurred for a range of reasons including data input mistakes, incorrect calculations, or incorrect decisions on what should or should not be included. However, they were skewed towards overstating compliance yield. Out of £736 million of yield that was tested, the net effect of the errors was to overstate compliance yield by £59.7 million (8%).33
Government Response Summary
The government agrees and will design a new sampling approach by June 2024 to allow for extrapolation of errors from TSAP reviews to the annual estimate of compliance yield. This will help address issues identified in quality assurance and enable estimation of official error impact on taxpayers.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Target implementation date: June 2024 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.