Thirty-Sixth Report - HMRC performance 2019–20

Select Committee

Public Accounts Committee HC 690 20 January 2021

Report Status Government responded

Conclusions & Recommendations 26 items (6 recs)

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Government Response (AI assessment · 25 of 26 classified)

Accepted 14

Acknowledged 4

Deferred 1

Not Addressed 5

Rejected 1

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Thirty sixth report from Session 2019-21 · published 26 Mar 2021

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Recommendations & Conclusions

14 results

2 Recommendation Accepted

A lack of certainty about the COVID-19 support schemes has undermined businesses’ ability to plan...

Recommendation

A lack of certainty about the COVID-19 support schemes has undermined businesses’ ability to plan effectively. We recognise that it is not easy to provide support to everyone considering the unique circumstances of each individual and business. However, the uncertainties … Read more

Government Response Summary

The government accepts the recommendation, agreeing to write to the Committee by March 2021 to detail its communication approach for support schemes and outline lessons learned from timing and content, aiming to provide as much clarity and forewarning as possible.

HM Treasury

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3 Recommendation Accepted

HMRC’s estate strategy risks becoming woefully out of date.

Recommendation

HMRC’s estate strategy risks becoming woefully out of date. Our long-standing concerns about HMRC’s non-breakable long-term property leases have become all the more relevant, and prescient, given the COVID-19 pandemic. In April 2017, long before COVID-19, we raised our concerns … Read more

Government Response Summary

The government accepts the recommendation and aims for implementation by July 2021, stating it will review space requirements in light of the pandemic's impact. It asserts that its existing estate strategy already offers value for money with flexible lease terms, and commits to working with the Government Property Agency to make any freed-up space available to other departments.

HM Treasury

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4 Recommendation Accepted

The pandemic has significantly increased HMRC’s workload and made the organisation more complex.

Recommendation

The pandemic has significantly increased HMRC’s workload and made the organisation more complex. HMRC has had to reallocate a significant number of its staff to work in COVID-19-related roles. At its peak, in May 2020, HMRC reallocated more than 9,000 … Read more

Government Response Summary

The government accepted the recommendation, noting £5.4 billion funding from the 2020 Spending Review, and committed to reviewing HMRC's 2021-22 priorities and publishing an Outcome Delivery Plan following the start of the financial year.

HM Treasury

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5 Recommendation Accepted

HMRC has spent too much of its IT budget on patching up legacy systems rather...

Recommendation

HMRC has spent too much of its IT budget on patching up legacy systems rather than modernising them. The COVID-19 pandemic has shown the importance of an effective tax administration system. There is a strong case for investment in a … Read more

Government Response Summary

The government accepted the recommendation, stating it has been addressing legacy IT since 2019 with £268 million funding and detailed a four-point plan (Rationalise/Streamline, Remediate, Migrate, Transform) to refocus investment on modernisation, with plans detailed in the Outcome Delivery Plan.

HM Treasury

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6 Recommendation Accepted

HMRC too often struggles to provide reliable and timely financial estimates upon which good financial...

Recommendation

HMRC too often struggles to provide reliable and timely financial estimates upon which good financial and operational planning depends. HMRC is responsible for dealing with vast sums of public money, both revenue and expenditure. Reliable and timely financial estimates are … Read more

Government Response Summary

The government accepted the recommendation, detailing steps to ensure financial estimates are timely and rigorous, including validation and monthly reporting. For COVID-19 grant schemes, it provided timelines for actual error/fraud estimates and outlined a post-payment compliance approach for recovering losses.

HM Treasury

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9 Conclusion Accepted

We asked HMRC whether it had carried out any evaluation of the Eat Out to...

Conclusion

We asked HMRC whether it had carried out any evaluation of the Eat Out to Help Out scheme to inform its possible reintroduction.23 The scheme allowed customers, at participating establishments, to get a 50% discount on food or non-alcoholic drinks … Read more

Government Response Summary

The government agreed to the committee's observation and committed to writing to the Committee in March 2021 to detail their approach to evaluating the Eat Out to Help Out scheme and the lessons learned.

HM Treasury

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12 Conclusion Accepted

We questioned the Department on its policy of entering into non-breakable 25-year lease agreements, which...

Conclusion

We questioned the Department on its policy of entering into non-breakable 25-year lease agreements, which we had criticised in the past. We wanted to know whether the impact of the pandemic on the commercial property market, such as falling rents … Read more

Government Response Summary

The government states it is satisfied its current estate strategy offers value for money, citing independent advice and flexible lease terms that allow for subletting. It reiterates its expectation to remain an office-based organisation but will review future space requirements and work with the Government Property Agency to make any freed-up space available to other departments.

HM Treasury

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15 Recommendation Accepted

HMRC told us it still believed the most cost-effective way of getting good deals in...

Recommendation

HMRC told us it still believed the most cost-effective way of getting good deals in the property market is to enter into long-term leases. The Department explained to us that its regional centres are in “attractive locations” and if it … Read more

Government Response Summary

The government accepts the recommendation to take the impact of the pandemic on the commercial property market into account before taking on any more long-term leases, further stating its estates strategy continues to offer value for money and it will review space requirements.

HM Treasury

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20 Conclusion Accepted

We asked HMRC about it plans to tackle fraud and error in the COVID-19 support...

Conclusion

We asked HMRC about it plans to tackle fraud and error in the COVID-19 support schemes while ensuring the timely payments of support to those in need. HMRC explained that it has to strike a balance between helping as many … Read more We asked HMRC about it plans to tackle fraud and error in the COVID-19 support schemes while ensuring the timely payments of support to those in need. HMRC explained that it has to strike a balance between helping as many people as it could, as fast as possible, while also managing the risks of fraud and error. HMRC mitigated some of the risks at the design stage of the schemes by making any support contingent on the data it already held about employers, employees and the self-employed. It was also able to identify very high-risk claims in the period of approximately 72 hours between a claim being made and payments being processed. HMRC told us it had stopped about £63 million-worth of payments during that period. However, it will have to manage the remainder of any 47 Qq 59–60 48 Q 58; C&AG’s Report, para 13 49 Qq 102–103 50 Qq 20–21; C&AG’s Report, para 2.16 51 Qq 21, 57 52 Qq 21–23 53 Q 26 HMRC performance 2019–20 15 fraud and error after payments have been made, over a period of time.54 We asked the Department about what it considered was an acceptable level of fraud in the schemes it administers. HMRC told us that no fraud is tolerable. However, in the case of the CJRS it had made a planning assumption that the level of fraud and error in the scheme could be between 5% to 10%. The lower end of the estimated level of fraud and error would be in line with the estimated levels of fraud and error in tax credits and the tax system (HMRC’s latest available estimate of the tax gap in 2018–19 was 4.7%). The upper level of HMRC’s estimate of fraud and error in CJRS, however, was significantly higher than comparable estimates and it would be “very unwelcome” to HMRC.55 HMRC explained to us that it faces a “multi-dimensional” challenge, in terms of administering COVID-19 support schemes, dealing with the end of the UK’s EU Exit transition period and modernising the tax system whilst still maintaining business as usual performance.56 To help achieve its objectives HMRC has Show less

Government Response Summary

The government acknowledges the committee's conclusion on plans to tackle fraud and error in COVID-19 support schemes, confirming that a complete assessment of total fraud and error will be available by the end of 2021 and detailing its post-payment compliance approach for recovering funds from those who abused the schemes.

HM Treasury

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21 Conclusion Accepted

As HMRC moves towards a fully digital tax system, the capability of its IT systems,...

Conclusion

As HMRC moves towards a fully digital tax system, the capability of its IT systems, including in terms of cyber security, will become increasingly important to HMRC’s ability to operate effectively. HMRC has recognised that, due to the need in … Read more

Government Response Summary

The government agrees with the committee's observations and states it has been addressing legacy technical debt since 2019, receiving £268 million in 2020 to improve its IT estate. This includes rationalising services, remediating high-priority debt, migrating to the cloud, and transforming systems to reduce operating costs and enhance security.

HM Treasury

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22 Conclusion Accepted

HMRC told us that it spends too much of its IT budget on maintaining its...

Conclusion

HMRC told us that it spends too much of its IT budget on maintaining its legacy estate and not enough on investment for the future and modernisation. The Department will seek funding opportunities, such as Spending Reviews, to modernise its … Read more

Government Response Summary

The government agrees with the committee's observations and states it has been addressing its legacy IT debt since 2019, securing £268 million in 2020 to modernize its IT estate. This involves rationalizing, remediating, migrating systems to the cloud, and transforming its infrastructure to enhance agility, resilience, and security.

HM Treasury

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23 Conclusion Accepted

We asked about the success of the Department’s transformation plans following the ambition it set...

Conclusion

We asked about the success of the Department’s transformation plans following the ambition it set itself in 2015 to “become one of the most digitally advanced tax administrations in the world”. HMRC considers that, although it is not the most … Read more

Government Response Summary

The government agrees with the committee's observations, stating it has been implementing its IT modernization plan since 2019 with £268 million funding from the 2020 Spending Review. This plan involves rationalizing services, remediating technical debt, migrating to the cloud, and transforming systems to enhance agility, resilience, and security.

HM Treasury

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24 Conclusion Accepted

HMRC handles large sums of money, both collecting and paying out.68 It relies on financial...

Conclusion

HMRC handles large sums of money, both collecting and paying out.68 It relies on financial estimates in various different contexts to help achieve its objectives. Yet we have recently seen several examples where there have been mistakes in those estimates. … Read more

Government Response Summary

The government confirmed the implementation of additional validation exercises and strengthened sign-off processes to prevent future Net Cash Requirement breaches, and committed to improved controls and monthly forecasting to the Treasury for income control.

HM Treasury

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26 Conclusion Accepted

Regarding the COVID-19 support schemes, we asked HMRC whether it had estimated the level of...

Conclusion

Regarding the COVID-19 support schemes, we asked HMRC whether it had estimated the level of fraud and error in the Eat Out to Help Out scheme considering the scheme had ended at the end of August. HMRC confirmed to us … Read more

Government Response Summary

The government agrees with the committee's observations and explains it will have complete fraud and error assessments for CJRS by the end of 2021 and for SEISS after 2020-21 Self-Assessment returns are filed. It outlines its existing post-payment compliance approach, which identifies high-risk cases for investigation and recovery.

HM Treasury

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