UK Inquiry Tracker

The cost of the tax system

Public Accounts Committee Closed Inquiry

Opened: 15 Jan 2025 Closed: 17 Jul 2025 Parliament page

HM Revenue and Customs’ (HMRC) stated aim is to run the tax system in the simplest, most customer-focused and efficient way. In 2020, the Government published its 10-year strategy to build a trusted, modern tax administration system. The long-term goal is to create a system which prevents non-compliance, and allows … Read more HM Revenue and Customs’ (HMRC) stated aim is to run the tax system in the simplest, most customer-focused and efficient way. In 2020, the Government published its 10-year strategy to build a trusted, modern tax administration system. The long-term goal is to create a system which prevents non-compliance, and allows both businesses and individuals to get their tax right the first time. The PAC has recently scrutinised HMRC’s customer service , underpinned by National Audit Office (NAO) findings in 2024 that delivering responsive customer service continued to be one of HMRC’s biggest challenges. The Committee has also examined tax evasion in the retail sector , challenging HMRC on evident gaps in controls. Overall evasion costs represent an annual £5.5bn hit in lost revenue to the public purse every year. The NAO undertook a 2025 report on drivers of cost in the tax system, which costs HMRC billions of pounds a year to administer while placing administrative and financial burdens on taxpayers, in addition to the taxes they owe. The study sought to help understand how elements of the tax system drive these costs, while establishing what progress HMRC has made in reducing costs and improving efficiency. Based on the NAO report, the PAC will hear from senior HMRC officials on topics including: What costs the UK tax system imposes on HMRC taxpayers and their intermediaries; Challenges in tackling the costliest parts of the system; and How HMRC is using opportunities to reduce costs. Please look at the requirements for written evidence submissions and note that the Committee cannot accept material as evidence that is published elsewhere. Please note that the Committee is unable to consider or assist with individual cases. If you need help with an individual problem you are having, you may wish to read the information on Parliament’s website about who you can contact with different issues . The deadline for submitting written evidence is Wednesday February 19 at 23:59pm. Show less

4 Recommendations

35 Conclusions

1 Report

1 Oral session

3 Letters

1 Event

Activity timeline 7 events

18 Sep
2025

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Twenty-third report from Session 2024-26

15 Sep
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the 23rd Report of Session 2024-25, The…

4 Sep
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the 23rd Report of Session 2024-25, The…

30 Apr
2025

Report published

23rd Report - The cost of the tax system

27 Mar
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary for HM Revenue and Customs relating to providing further information requeste…

6 Mar
2025

Oral evidence

Oral evidence session

6 Mar
2025

Formal meeting (oral evidence session) · The Thatcher Room, Portcullis House

Committee event

Oral evidence sessions 1 session

6 Mar 2025

View on parliament.uk

Justin Holliday · HMRC Lucy Pink · HMRC Sir Jim Harra KCB · HMRC

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
23rd Report - The cost of the tax system	HC 645	30 Apr 2025	39	Responded

Recommendations & Conclusions

6 results

9 Conclusion

23rd Report - The cost of the tax …

HMRC bears minimal additional costs for Scottish Income Tax administration, funded by the Scottish Government.

We asked HMRC about the cost implications of running the Scottish Income Tax system. HMRC said the way it administers Scottish Income Tax is same as for UK Income Tax. The Scottish Government pays for the “bit more money” HMRC … Read more

HM Treasury

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17 Conclusion

23rd Report - The cost of the tax …

HMRC prioritises additional support to large businesses for managing significant tax revenue risks.

We asked HMRC why it provided additional support to large business. HMRC told us customer compliance managers were there to manage the risks large business pose to tax revenue and not to give them a better 25 HMRC has reported … Read more

HM Treasury

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19 Conclusion Not Addressed

23rd Report - The cost of the tax …

HMRC lacks sufficient analysis on upstream and downstream compliance costs.

HMRC explained that its strategy is to promote good compliance and prevent non–compliance (collectively known as ‘upstream’ compliance), and this is “bearing fruit,” with upstream yield increasing to about a third of all yield in 2023–24. HMRC considers that upstream … Read more

Government Response

The government claims the recommendation is implemented but does not address the committee's observation that HMRC lacks sufficient analysis of costs and marginal returns between upstream and downstream compliance work, instead providing updates on compliance yield and staff recruitment.

HM Treasury

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31 Conclusion

23rd Report - The cost of the tax …

HMRC acknowledges security concerns with third-party Making Tax Digital software, setting strict specifications.

We asked HMRC whether there were potential security concerns that could be posed by the third–party MTD software taxpayers use to submit their tax returns, including whether there were risks to HMRC’s own systems.63 In written evidence provided after our … Read more

HM Treasury

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38 Conclusion

23rd Report - The cost of the tax …

HMRC demonstrates limited use of technology in promoting e-invoicing

The written evidence received from Dr Edidiong Offiong Bassey also suggests that HMRC is not making the best use of technology. In particular, he indicated there has been limited promotion in the UK of electronic invoicing and electronic fiscal devices … Read more

HM Treasury

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39 Conclusion Not Addressed

23rd Report - The cost of the tax …

HMRC's e-invoicing consultation explores information reporting requirements for businesses

We asked HMRC about its joint consultation with the Department for Business & Trade on e–invoicing which it launched in February 2025. HMRC said e–invoicing has the potential to help businesses and build tax compliance into the way they run … Read more

Government Response

The government's response focuses entirely on HMRC's use of AI and its initiatives in this area, without addressing the committee's observation or implicit query about e-invoicing.

HM Treasury

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Government Response AI assessment · 35 of 4 classified

Accepted 31

Acknowledged 2

Not Addressed 2

Total 4 recs + 35 conclusions

Correspondence 3 letters

15 Sep 2025 To committee Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the 23rd Report of Session 2024-25, The cost of the tax system, recommendation 4a, 08 September 2025

Parliament page

4 Sep 2025 To committee Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the 23rd Report of Session 2024-25, The cost of the tax system, Recommendation 3, 4b, and 6, 17 July 2025

Parliament page

27 Mar 2025 To committee Letter from the Chief Executive and First Permanent Secretary for HM Revenue and Customs relating to providing further information requested in the oral evidence session held on 06 March 2025 on The cost of the tax system, 18 March 2025

Parliament page