Thirty-Third Report - HMRC performance in 2021–22

Research and development tax reliefs are costly, prone to abuse and provide questionable benefit to the UK economy. The government has a target of 2.4% of GDP to be invested in research and development. In 2021–22, HMRC spent £9.5 billion … Read more Research and development tax reliefs are costly, prone to abuse and provide questionable benefit to the UK economy. The government has a target of 2.4% of GDP to be invested in research and development. In 2021–22, HMRC spent £9.5 billion on research and development reliefs, with expenditure having continued to grow year-on-year. HMRC told us that analysis it has undertaken demonstrates that these reliefs increase research and development investment, albeit marginally for small and medium-sized enterprises, but the benefit to the UK economy of that investment is not clear. Based on HMRC’s latest estimates, abuse of the reliefs cost the taxpayer £469 million in 2021–22, though work to establish the true scale of the problem remains ongoing. Abuse of the small and medium-sized scheme is particularly worrying, with 7.3% of claims for relief estimated to be fraudulent or erroneous. HMRC has undertaken work to reconcile the £21.6 billion gap 8 HMRC performance in 2021–22 between HM Treasury and Office for National Statistics estimates of research and development expenditure, but discrepancies remain. HMRC is introducing new measures from April 2023 to strengthen its compliance approach and bear down on abuse of the schemes. Recommendation: HMRC should develop its analysis of the additional research and development expenditure its relief schemes result in, to consider what impact that expenditure has on the UK economy. HMRC should report to the Committee on its findings within 12 months. HMRC performance in 2021–22 9 1 Managing error and fraud, compliance and tax avoidance Show less

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On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) on its performance in 2021–22.1 HMRC published its annual report and accounts for 2021–22 on 18 July 2022, shortly before Parliament’s summer recess. It had published its annual report …

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HMRC estimates that total fraud and error across the lifetime of the COVID-support schemes was £4.5 billion, representing 4.6% of the total support provided. This is lower than the estimate HMRC included in its 2020–21 accounts. HMRC has drawn on new data to improve its estimate, from a random enquiry …

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HMRC has been given £100 million to fund a temporary taskforce to investigate fraud and error on the schemes and has opened about 40,000 investigations so far. HMRC forecasts that by the time the taskforce winds down, it will have recovered around £1.1 billion, around a quarter of the fraud …

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HMRC said that it limits the number of callers that can join the call queue, which can have an impact on its call waiting time measure. Anyone not able to join the call queue is played a “busy message” and is forced to end the call. HMRC told us that …

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The total tax debt owed to HMRC in August 2022 was £46 billion. This is less than at the height of the pandemic in March 2021 but significantly higher than before the pandemic. HMRC told us that while the size of the debt fluctuates throughout the year, the trend continues …

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