Recommendation 13

During the pandemic, HMRC told us that it had to redeploy its resources from frontline activities, such as collection of tax, to work supporting taxpayers through the COVID support schemes. HMRC expects a reduction on compliance yield in 2020–21 compared with previous years.30 HMRC’s compliance yield dropped by 51% in the first quarter of 2020–21 compared to the same period in 2019–20 as it opened fewer inquiries and was more responsive to taxpayers’ needs. HMRC told us that it does not expect to make up for the loss of six months of normal activity by increasing the number of its investigations in the coming year.31 We asked the Department about the level of fraud and error in the COVID-19 support schemes, such as the furlough scheme. HMRC told us that to date it had received 8,000 notifications from employees highlighting potential non- compliance of employers with the terms of the Job Retention Scheme. HMRC is reviewing 27,000 “high-risk claims” and, after providing employers with the opportunity to correct their claims, it expects to investigate 10,000 of those 27,000 cases. Since the end of July, HMRC has had the powers to reclaim any grants that employers are not entitled to keep. HMRC told us that the error and fraud rate in the Job Retention Scheme claims could be between 5% and 10%. HMRC estimates up to £3.5 billion of furlough payments made by 16 August 2020 (£35.4 billion in total) may have been fraudulent or paid in error.32