Source · Select Committees · Public Accounts Committee
Recommendation 24
24
Deferred
HMRC has not formally assessed transaction-based reporting, despite its acknowledged compliance benefits.
Recommendation
HMRC has not pursued some controls used in other countries, including ‘transaction–based reporting’ where businesses are required to regularly report all sales and purchases to the tax authority, giving up to date information on the VAT owed.71 We asked HMRC why it had not pursued 63 C&AG’s Report, para 2.15 64 Q 37 65 C&AG’s Report, para 2.5 66 Q 43 67 Q 43 68 C&AG’s Report, para 2.16 69 Oral evidence taken on 19 June 2023, Qq 11–14, Committee of Public Accounts, HMRC Performance in 2022–23, Sixteenth Report of Session 2023–24, HC 76, February 2024 70 Qq 1–3 71 C&AG’s Report, para 2.20 16 this, and it told us that it keeps this under review. HMRC also explained that it could look to build on the record keeping requirements introduced under Making Tax Digital for VAT, and that the government is consulting on e–invoicing in the spring. HMRC acknowledged that transaction–based reporting would give it access to more data to manage compliance risks.72 HMRC told us that it has not undertaken a formal assessment into the costs and benefits of introducing transaction–based reporting in the UK.73 Responding to tax evasion
Government Response Summary
HMRC will explore the viability and effectiveness of additional controls which could reduce the risk posed by tax evasion and they are consulting on e-invoicing, with further development contingent on the outcome of this consultation which closes on 7 May.
Government Response
Deferred
HM Government
Deferred
5.6 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2025 5.7 HMRC has an active exchange with international counterparts, sharing approaches and evidence through bilateral and multilateral relationships. Through this, HMRC will explore the viability and effectiveness of additional controls which could reduce the risk posed by tax evasion, recognising the unique context of different countries, which means others’ solutions aren’t always relevant or transferable to the UK. 5.8 In line with the OECD’s Tax Administration 3.0 vision, HMRC will explore how existing and emerging technologies could support more effortless and compliant models of taxation, where reporting and collection happen in real time through customer and third-party systems. 5.9 On 13 February 2025, a joint consultation with HMRC and DBT was published: Promoting e-invoicing across UK businesses and the public sector. The consultation will be live for 12 weeks. The evidence gathered will form the basis of future policy design and support ministerial decision-making. It includes examining a range of models, including options for real-time transaction reporting. This consultation closes on 7 May and further development of this work is contingent on this consultation.