Source · Select Committees · Public Accounts Committee
Recommendation 10
10
Accepted
HMRC's internal system failures perpetuate incorrect letter delivery to affected taxpayer despite interventions.
Conclusion
We have raised this case with HMRC on several occasions in the past, but the taxpayer affected has continued to receive letters, including demands for payments.32 HMRC told us that addresses on its VAT system feed through into other systems, including for customs purposes. But the corrections it has made to addresses on the VAT system have not always fed through to these other systems and HMRC accepted its systems still need to catch up. It said until they do there was still a risk that the affected taxpayer will receive further letters in error.33 HMRC said it was not confident it will recover all of the outstanding debts it is pursuing in this particular case.34
Government Response Summary
The government agrees and states the recommendation is implemented. HMRC will take immediate action to correct misdirected letters, prevent registration with fraudulent addresses, and prevent automatic correspondence to incorrect addresses. HMRC is also working with Companies House to strengthen registration controls and improve data accuracy under the Economic Crime and Corporate Transparency Act 2023.
Government Response
Accepted
HM Government
Accepted
3.5 The government agrees with the Committee’s recommendation. Recommendation implemented 3.6 HMRC recognises the distress that misdirected letters can generate and will take immediate action to correct this when identified. The department would only use its enforcement powers against the taxpaying entity and would not pursue the true owner of the address in the case of a bogus registration. In addition, where the use of someone else’s address to register for VAT is identified, the department will act to de-register/prevent registration if there is a suspicion of fraud. 3.7 For Corporation Tax, registration automatically flows through from Companies House registration data. If HMRC is aware that an incorrect address has been used, it will take steps to prevent the automatic production of correspondence to that address. The department may also notify the true owner of the address where it is possible to do so. 3.8 In 2023, there were circa 67,000 new companies registered with Companies House each month. Most companies initially register with Companies House, where the Registrar will verify the application. Most Corporation Tax records are automatically set up using a data feed from that process. Companies which also register for VAT do so directly with the department and are subjected to further identity validation/eligibility checks. An average of 18,000 companies a month applied for VAT registration in 2023. 3.9 HMRC is working closely with Companies House to support implementation of the Economic Crime and Corporate Transparency Act 2023. This will consider ways of strengthening controls for registration of a new company and improving the processes through which company accounts are filed, as well as opportunities for greater intelligence sharing and reviewing accuracy of current data held on the Companies House Register.