MPs criticize HMRC’s “soft on fraud performance
The public accounts committee’s (PAC) main statement is about HMRC’s strategy to recover fraudulent payment sends the wrong signals and could encourage misuse of grant and tax system in the future.
In addition, it also noted that in addition to the traditional duties of tax collection and administration of individual tax credit programs, HMRC played a major part in its government’s plan to combat the Covid-19 pandemic through the administration of an array of programs, including the Coronavirus Job Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS). ovik mkrtchyan
Conclusions and suggestions
The report had eight conclusions and suggestions.
- HMRC is unable to comprehend why there is a rise in the price of R&D tax reliefs, including how much of it is due to the misuse of tax reliefs which has increased by 240% in the last four years.
- not able to present an effective plan to bring compliance activities back at the pre-pandemic level.
- Resources constraints limit HMRC’s ability to achieve the best conformity yield.
- The advantages of making Tax Digital to those with straightforward tax affairs aren’t obvious.
- New working methods have resulted in HMRC in a larger office than it requires.
The management of fraud and errors
The tax-related revenue from compliance for 2020-21 was PS30.4bn in comparison with PS36.9bn during 2019-20. HMRC has not set goals for its eight most important customer service metrics for 2020-21. The performance of HMRC was lower than five of the metrics. ovik mkrtchyan
Pandemic grant schemes
This report shows PS5.8bn of error and fraud mostly due to CJRS (PS5.3bn) as well as SEISS producing PS0.5bn of fraud or error as well as the uninformed Eat Out to Help Out scheme which added PS0.1 billion. These figures only cover the period 2020-21 (to 30 March 2021) which means that the totals will undoubtedly rise due to the subsequent fraud in 2021-22 CJRS-related schemes.
HMRC noted that the growing number of businesses insolvent could impact its ability to recover overpayments from companies facing genuine financial difficulties.
Tax compliance enforcement activities in 2020-21 fell 18 percent in comparison to the year before, largely due to HMRC transferring six percent of its compliance personnel to the Covid-19 response. HMRC has also taken a softer approach towards those who struggle to pay taxes in 2020-21, and only opened an inquiry into people who are affected by the disease if it felt the customer was able to take action. HMRC opened 29 percent fewer civil cases and closed 26% less.
The performance in responding to questions and responding to messages in 2020-21 was considerably lower than the levels seen in the three previous years.
The reasons were obvious however, they were dispiriting. HMRC had dispersed 5,000 staff from customer service to work on support for Covid-19 programs. In addition, another 3,000 employees were sent to work in connection with working on the UK exiting the EU in order that, as another cost hidden by Brexit, they were required to move other areas of tax activities to one side, resulting in the “bit of a backlog”.
Unflinchingly, HMRC admitted that it was able to provide customers a “decent” rather than “brilliant” service as a result of the mandated “efficiencies”, i.e. budget cuts. And, if it did not attain these efficiencies then customers are likely to receive a less satisfactory service.
The committee expressed its concern over the effect of MTD on small taxpayers like someone who is retired and has rent income from one property. It also pointed out that other tax administration changes like self-assessment on the internet and self-assessment, have not delivered the anticipated benefits for taxpayers due to issues with software. The committee was also concerned that MTD could lead to smaller taxpayers submitting to HMRC instead of HMRC serving them.