Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Accepted
HMRC’s compliance productivity has fallen despite increased staffing investments.
Conclusion
HMRC’s main measure of the performance of its compliance work is through tracking compliance yield arising from its interventions.38 In December 2022, the NAO reported that HMRC’s compliance work offers good value for money.39 In the five years prior to the COVID–19 pandemic (2015–16 to 2019–20), CCG’s average yield per compliance worker was £1.48 million (in 2023–24 prices), or £1.41 million if two exceptionally large cases were excluded. Compliance productivity has fallen since, with average returns in 2023–24 of £1.27 million per compliance worker. In Autumn Budget 2024, the government gave HMRC funding to recruit 5,000 additional staff to generate £2.7 billion of additional tax revenue by 2029–30. This will require a productivity level of around £0.55 million per each new compliance worker.40
Government Response Summary
The government agrees, detailing record compliance yield, recruitment of an additional 5,500 staff by 2030 to generate £7.5 billion in additional tax revenue, and an aim to increase productivity over the Spending Review 2025 period.
Government Response
Accepted
HM Government
Accepted
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 HMRC has written to the Committee alongside this Treasury Minute response. 3.3 In 2023-24, HMRC secured record compliance yield of £41.8 billion compared to £34 billion in the previous financial year. This exceeded the annual target of £40.5 billion and was higher than pre-pandemic levels of compliance yield performance. Pre-pandemic productivity in 2019-20 was impacted by two specific very large cases, which resulted in an uplift to performance. HMRC are on track to achieve the 2024-25 end of year compliance yield target of £45.4 billion, a further improvement in performance and productivity. Final figures for 2024-25 will be released within the Annual Report and Accounts. 3.4 HMRC set stretching annual compliance yield targets in accordance with a methodology agreed by HMRC, HM Treasury and the Office for Budget Responsibility (OBR). 3.5 As announced at Autumn Budget 2024 and Spring Statement 2025, HMRC will recruit an additional 5,500 compliance staff by March 2030. This investment, alongside other measures to close the tax gap (such as investing in modernising systems, delivering policy reforms and tackling tax debt) will deliver £7.5 billion of additional tax revenue per year by 2029-30. 3.6 This commitment alongside investing in improvements in HMRC’s systems risking capabilities is expected to increase productivity over the Spending Review 2025 period. 3.7 The average rate of return of compliance activity to yield is just one factor HMRC considers when deciding how best to deploy its resources. HMRC will aim to increase productivity, while optimising deployment across compliance priorities.