HMRC Standard Report 2022-23

Public Accounts Committee Closed Inquiry
Opened: 27 Jul 2023 Closed: 3 May 2024 Parliament page
The Committee will examine the performance of HM Revenue & Customs in 2022-23, how it is being affected by the current economic conditions, and the progress it is making in tackling error and fraud. In January 2023, the Committee concluded that taxpayers and their agents were still not receiving an … Read more
20 Conclusions
1 Report
1 Oral session
1 Letter
1 Event
Activity timeline 5 events
3 May
2024
Report published
28 Feb
2024
Report published
22 Jan
2024
Correspondence
14 Dec
2023
Oral evidence
14 Dec
2023
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 1 session
14 Dec 2023
View on parliament.uk
HMRC Standard Report 2022-23
Angela MacDonald · HMRC Jim Harra · HMRC Justin Holliday · HMRC
Title HC No. Published Items Response
Sixteenth Report - HMRC performance in 2022–23 HC 76 28 Feb 2024 20 Responded
Recommendations & Conclusions
20 results
2 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Establish clear, accessible route for taxpayers to report issues with HMRC debt collection agencies.
While we recognise the progress HMRC is making to tackle tax debt, we are concerned that it should have sufficient checks to protect taxpayers from being pursued too forcefully. HMRC says it has now worked through the debts created during … Read more
Government Response
The government agrees and will update GOV.UK guidance to clarify how taxpayers can raise complaints about debt collection agencies. HMRC also commits to writing separately to the Committee with a summary of issues raised by these complaints.
HM Treasury
View details
3 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Take serious action against companies registering with wrong addresses and report on protective plans.
HMRC is not taking seriously enough the distress caused to innocent citizens when companies use the wrong address to register their business. One particular case involved a taxpayer receiving more than 10,000 letters due to an agent registering companies for … Read more
Government Response
The government agrees and states HMRC already takes immediate action to correct misdirected letters, acts to de-register/prevent registration for fraud, and prevents correspondence to incorrect addresses. HMRC may also notify true owners of addresses.
HM Treasury
View details
4 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Provide data on criminal prosecution tax at stake and IR35 litigation; assess IR35 reforms' impact.
We are concerned that HMRC’s approach to serious abuse is not deterring criminal activity sufficiently, while at the same time its approach to tackling IR35 is deterring legitimate economic activity. HMRC says that it is increasingly focusing its criminal prosecutions … Read more
Government Response
The government agrees. HMRC added an optional question to its Check Employment Status for Tax (CEST) tool on 27 March 2024, asking customers for their sector, to better understand usage and identify specific sectoral challenges related to IR35 reforms.
HM Treasury
View details
5 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Ensure rigorous review of previous years' R&D tax relief claims to tackle fraud and errors.
HMRC has been too slow to identify the scale of error and fraud in research and development tax reliefs and its approach to tackling offenders does not sufficiently target those committing serious fraud over those making honest mistakes. We have … Read more
Government Response
The government agrees. HMRC states it can look back up to 20 years for deliberate non-compliance in R&D tax reliefs. Additionally, an R&D Disclosure Facility will go live on GOV.UK in spring 2024 to allow businesses to correct overclaimed or erroneous returns.
HM Treasury
View details
6 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Demonstrate that compliance yield targets are sufficiently ambitious and account for inflation.
HMRC’s reliance on the tax gap measure is not providing a sufficiently stretching target for its compliance performance. The tax gap is subject to a variety of factors, not just HMRC’s compliance performance, and its relationship to compliance yield is … Read more
Government Response
The government agrees, stating the recommendation is implemented as HMRC's compliance yield target is already set using an agreed methodology with HM Treasury and OBR, ensuring it's ambitious, aligns with maintaining a stable tax gap, and increases with tax receipts and inflation.
HM Treasury
View details
1 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Committee reviews HMRC's 2022-23 performance based on Comptroller and Auditor General's report.
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) on its performance in 2022–23.1 HMRC published its annual report and accounts for 2022–23 in July 2023.
Government Response
The government states it agrees HMRC should be sufficiently resourced and highlights a £0.9 billion cash increase for HMRC from the 2021 Spending Review, including over £130 million for enhancing digital services.
HM Treasury
View details
7 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Increased external agency use for debt recovery highlights serious issues with HMRC complaints procedures.
HMRC has recently increased its use of external agencies.18 In 2022–23 it spent £34.0 million on agencies to recover tax debt, up from £20.6 million in 2021–22.19 A new contract 9 Q 31 10 Q 83 11 Qq 84–85 12 … Read more
Government Response
The government agrees with the observation and will update GOV.UK guidance by September 2024 to provide clearer information on how taxpayers can complain to HMRC about Debt Collection Agencies. HMRC will also provide the Committee with a separate summary of complaint issues.
HM Treasury
View details
8 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC's pursuit of small debts coexists with rising revenue losses from uncollectible liabilities.
We have received written evidence that HMRC repeatedly pursues small debts over a number of years.24 We asked HMRC whether this was disproportionate to the size of the debt. HMRC told us it takes a risk-based approach to debt management … Read more
Government Response
The government agrees and will update GOV.UK by September 2024 to provide clearer guidance on how taxpayers can raise complaints to HMRC regarding the handling of their cases by Debt Collection Agencies.
HM Treasury
View details
9 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Taxpayer suffers extensive distress from thousands of letters due to incorrect company address registrations.
We asked HMRC about a taxpayer who has received more than 10,000 letters from HMRC in relation to companies registered incorrectly at his address. HMRC told us it has investigated and found a foreign agent acting on behalf of overseas … Read more
Government Response
The government agrees with the committee's observation and states the recommendation is implemented. HMRC commits to immediate action on misdirected letters and preventing fraudulent registrations, and is working closely with Companies House to implement the Economic Crime and Corporate Transparency Act 2023, which will strengthen controls for company registration and improve data accuracy.
HM Treasury
View details
10 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC's internal system failures perpetuate incorrect letter delivery to affected taxpayer despite interventions.
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, … Read more
Government Response
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.
HM Treasury
View details
11 Conclusion Accepted
Sixteenth Report - HMRC performanc…
Widespread bogus company registrations for fraud demand attention; new Companies House powers may improve protection.
HMRC highlighted a more widespread problem with bogus registrations, where companies hijack taxpayers’ identities in an attempt to defraud HMRC.35 We have received written evidence on the time it takes for HMRC to resolve these cases and the distress this … Read more
Government Response
The government agrees with the committee's observation and states the recommendation is implemented. HMRC commits to immediate action on misdirected letters and preventing fraudulent registrations, and is working closely with Companies House to implement the Economic Crime and Corporate Transparency Act 2023, which will strengthen controls for company registration and improve data accuracy.
HM Treasury
View details
12 Conclusion Accepted
Sixteenth Report - HMRC performanc…
IR35 reforms have shifted employment status burden to employers, moving many to payroll.
We asked HMRC about how it is addressing issues created by the implementation of reforms to the IR35 rules on off-payroll working. HMRC said that the reforms to IR35 shift the burden of determining employment status from workers to employers. … Read more
Government Response
The government agrees and states the recommendation is implemented. HMRC remains committed to understanding the impacts of off-payroll working reforms, having published relevant research and analysis which it will update. From March 2024, HMRC has also added an optional sector question to its CEST tool to gather further customer insight.
HM Treasury
View details
13 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC considers its IR35 litigation approach fair, with most pre-reform cases favouring HMRC.
We asked whether HMRC’s pursuit of some IR35 cases through the courts was fair and proportionate. HMRC said it will always try to resolve disputes by agreement but that some litigation is inevitable. HMRC said it does not underestimate the … Read more
Government Response
The government agrees and states the recommendation is implemented, explaining that HMRC already makes litigation decisions in line with its published Litigation and Settlement Strategy. HMRC aims to resolve disputes by agreement and only persists with litigation where it expects success and a strong return for the Exchequer.
HM Treasury
View details
14 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC has significantly reduced criminal prosecutions, now favouring civil powers for deliberate tax errors.
HMRC’s approach to civil litigation contrasts with its approach to criminal prosecutions. HMRC said it is increasingly selective about when it uses its criminal investigation powers and when it seeks prosecution.48 HMRC’s criminal investigations resulted in 240 prosecutions in 2022–23. … Read more
Government Response
The government agrees and will provide further explanation by Summer 2024. HMRC is already working on a previous recommendation to review the deterrent effect of criminal investigations and prosecutions, collecting data for analysis to provide a refreshed view of the impact of tax crime prosecutions.
HM Treasury
View details
15 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC significantly underestimated R&D tax relief error and fraud, now estimated at £1.13 billion.
HMRC administers two research and development relief schemes to support companies that work on innovative projects in science and technology, one for large companies and one for small- and medium-sized enterprises (SMEs). In 2022–23, businesses claimed research and development tax … Read more
Government Response
The government agrees with the committee's observation and is implementing several measures by Summer 2024, including new electronic claim requirements, increased R&D compliance staff to over 500, establishment of an Anti-Abuse Unit, and the launch of an R&D Disclosure Facility in Spring 2024 to tackle non-compliance.
HM Treasury
View details
16 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC introduced new measures and significantly increased compliance checks to combat R&D tax relief abuse.
HMRC has introduced a number of changes in response to the high levels of abuse. Since August 2023 HMRC requires companies to make all claims digitally, with more detail and endorsed by a named senior officer.57 It told us it … Read more
Government Response
The government agrees with the committee's observation and has a target implementation date of Summer 2024 for various measures to combat R&D tax relief abuse, including new electronic claim requirements, increased compliance staffing, an Anti-Abuse Unit, and an R&D Disclosure Facility launching in Spring 2024.
HM Treasury
View details
17 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC's volume compliance approach for R&D tax relief raises concerns about discouraging investment.
Organisations representing accountants and tax professionals wrote to us with concerns about the impact of HMRC’s volume compliance approach on companies.60 50 Qq 33, 34 51 C&AG’s Report, paras 2.2, 2.4 52 Committee of Public Accounts, HMRC performance in 2021–22, … Read more
Government Response
The government agrees with the committee's observation and intends to implement measures by Summer 2024, including new electronic claim requirements to better risk assess R&D claims, increased compliance staff to over 500, a new Anti-Abuse Unit, and an R&D Disclosure Facility launching in Spring 2024.
HM Treasury
View details
18 Conclusion Accepted
Sixteenth Report - HMRC performanc…
The UK tax gap for 2021-22 remained at 4.8%, despite declining compliance revenue.
The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC and what was actually paid. HMRC estimates the tax gap in 2021–22, the latest year available, has remained at 4.8% of … Read more
Government Response
The government agrees with the conclusion, stating the recommendation has been implemented through an agreed methodology with HMRC, HM Treasury, and the OBR, which sets annual compliance yield targets to maintain a stable tax gap and secure additional revenues.
HM Treasury
View details
19 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC estimates the tax gap using best practice, best viewed over several years.
HMRC said that it estimates the tax gap in accordance with best practice, and pointed to a review by the Office for Statistics Regulation in 2019 as evidence of rigorous external scrutiny. It said it was always keen to improve … Read more
Government Response
The government agrees, stating the recommendation is implemented via an existing methodology, agreed with HM Treasury and OBR, which sets annual compliance yield targets to align with maintaining a stable tax gap and secure revenues.
HM Treasury
View details
20 Conclusion Accepted
Sixteenth Report - HMRC performanc…
HMRC missed its 2022-23 compliance yield target and expects to miss future targets.
HMRC agrees a compliance yield target each year with HM Treasury and ministers, set at a level to maintain the tax gap at its current level.68 HMRC told us that this target is derived from a model endorsed by the … Read more
Government Response
The government agrees, stating the recommendation has been implemented through an agreed methodology with HMRC, HM Treasury, and the OBR, which sets annual compliance yield targets to align with maintaining a stable tax gap and securing additional revenues.
HM Treasury
View details
Government Response AI assessment · 20 of 0 classified
Accepted 20
Total 0 recs + 20 conclusions
Correspondence 1 letter
22 Jan 2024 Correspondence from Angela MacDonald, Deputy Chief Executive and Second Permanent Secretary, HM Revenue & Customs, re HMRC’s Annual Report and Accounts 2022-23, dated 11 January 2024
Parliament page