Recommendation 19

HM Government Accepted

4: PAC conclusion: 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. 4a: PAC recommendation: 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. 4.1 The government agrees with the Committee’s recommendation. Target implementation date: April 2024 4.2 Following an investment at Budget 2021, the Taxpayer Protection Taskforce (TPT) was formed to further combat error and fraud in the COVID-19 schemes. The taskforce prioritised tackling the riskiest cases. Up to February 2023, the TPT recovered over £490 million of overpaid COVID-19 employment scheme grants, in addition to the £534 million recovered prior to the taskforce being established. With the schemes closed, as action has already been taken on the riskiest claims, HMRC expects to start seeing diminishing returns, with cases of lower value and risk in the pipeline. 4.3 Therefore, HMRC has assessed that it is more cost effective to deploy TPT resource to business-as-usual tax compliance, and for COVID-19 scheme risks to be worked alongside other tax compliance activity. For 2021-22, the TPT outturn yield was around £0.20 million per full time equivalent (FTE) officer and for 2022-23 the TPT yield is forecast to be £0.28 million per FTE. This is lower than business-as-usual tax compliance work, where HMRC has delivered around £1.15 million yield per FTE in recent years. 4.4 HMRC will continue to monitor performance metrics on COVID-19 scheme compliance activity to ensure that it continues to pursue this risk whilst it remains cost effective to do so. 4.5 HM Treasury will assess the effectiveness of future counter-fraud spending proposals through both appraisal before funding is committed, and evaluation after funding is committed, using the approaches set out in the Green and Magenta books. The spending review process allows HM Treasury to compare the relative cost effectiveness of interventions in different areas. 4.6 The mandate of the Public Sector Fraud Authority (PSFA) commits them to work closely with HM Treasury to review business cases and investment bids for funding on initiatives for countering fraud to consider their effectiveness and deliverability. This means HM Treasury’s appraisal and evaluation will be supported by the analysis of the PSFA’s counter-fraud experts. 4b: PAC recommendation: 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. 4.7 The government agrees with the Committee’s recommendation. Target implementation date: July 2024 4.8 As planned, HMRC has started the transition of the COVID-19 scheme compliance activity undertaken by the Taxpayer Protection Taskforce into business-as-usual tax compliance activity. Therefore, from September 2023, all COVID-19 scheme risks will be reviewed alongside business-as-usual tax risks. HMRC will continue to collect performance metrics, including yield, for the duration of the compliance activity in the COVID-19 schemes. 19 4.9 For 2022-23, HMRC will publish COVID-19 compliance outcomes in the upcoming HMRC Annual Report and Accounts alongside the final estimates of error and fraud within the schemes. 4.10 For future years, reporting will be in line with HM Treasury reporting requirements. Reporting COVID-19 scheme compliance outcomes will be subject to the level of on-going compliance activity and decisions on cost effectiveness. 4.11 HMRC will, however, continue to pursue compliance work on the COVID-19 schemes and maintain internal management information.