Tax digitalisation programme delivery

#32 —

Public Accounts Committee

Recommendation: We were concerned about the impact of Making Tax Digital on the smaller taxpayer, such as a retired person with rental income from one property. We noted that other administrative tax changes, such as on-line self-assessment, have not provided expected …

Gov response: 7: PAC conclusion: The benefits of Making Tax Digital to those with simple tax affairs are not clear. 7: PAC recommendation: HMRC should, in its Treasury Minute response, explain how the introduction of Making Tax …

Not Addressed

#31 —

Public Accounts Committee

Recommendation: We asked HMRC what Making Tax Digital was for. HMRC told us Making Tax Digital was about making tax easier, keeping tax in line with the digital age and making business more productive.56 HMRC also told us that, by providing …

Gov response: 7: PAC conclusion: The benefits of Making Tax Digital to those with simple tax affairs are not clear. 7: PAC recommendation: HMRC should, in its Treasury Minute response, explain how the introduction of Making Tax …

Not Addressed

#7 —

Public Accounts Committee

Recommendation: The benefits of Making Tax Digital to those with simple tax affairs are not clear. The requirement for taxpayers to keep tax records and submit quarterly returns to HMRC digitally is a key part of its 10-year modernisation strategy. From …

Gov response: 7.1 The government agrees with the Committee’s recommendation. Recommendation implemented 7.2 Research conducted by HMRC and peer reviewed by independent academics indicates that Making Tax Digital (MTD) for VAT is likely to have generated Additional …

Not Addressed

#32 — HMRC expects MTD to increase taxpayer burdens to enhance compliance and productivity, generating revenue.

Public Accounts Committee

Recommendation: We asked HMRC why MTD will increase the burdens on self assessment business taxpayers. It told us the costs MTD will impose on a business will vary depending on the degree to which they already used business accounting software. Those …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative …

Accepted

#30 — Extending Making Tax Digital to Income Tax Self Assessment will impose significant costs exceeding benefits.

Public Accounts Committee

Recommendation: In February 2024, HMRC estimated that extending MTD to Income Tax Self Assessment from 2026–27 would impose transitional costs of around £561 million on sole traders and landlords with incomes above £30,000, and the continuing annual costs of MTD to …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative …

Accepted

#29 — Making Tax Digital imposes significant burdens and costs, risking further system complications for taxpayers.

Public Accounts Committee

Recommendation: The previous Public Accounts Committee found in 2023 that rather than reducing the overall burden on customers as HMRC had initially expected, MTD was imposing significant additional burdens and costs at a time when many of its customers could least …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative …

Accepted

#28 — Making Tax Digital increased VAT trader costs without demonstrating clear productivity improvements.

Public Accounts Committee

Recommendation: HMRC launched its flagship transformation programme Making Tax Digital (MTD) in 2015–16. MTD requires business taxpayers to use third–party software to keep and submit quarterly digital tax records with the aim of: reducing the amount of tax lost from taxpayers …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative …

Accepted

#12 — Publish baseline assessment of SME tax compliance costs and aim to reduce by 25%.

Business and Trade Committee

Recommendation: The Government should publish a baseline assessment of SME administrative costs of complying with the tax system. The Government should aim to reduce the costs of complying with the tax system by 25% by the end of the Parliament, in …

Response Pending

#11 — Reduce administrative burden and complexity of the tax system for small businesses.

Business and Trade Committee

Recommendation: The tax system is becoming more complex. This is generating significant burdens for SMEs, distracting business owners from running their companies, and jeopardising collection of tax revenues. Initiatives such as Making Tax Digital suggest such costs are not adequately appreciated …

Response Pending

#15 —

Public Accounts Committee

Recommendation: HMRC is implementing an ambitious initiative, Making Tax Digital, to help tackle error and failure to take reasonable care, particularly in the small business population. Small businesses accounted for the largest share of the tax gap (£13.4 billion; 43%) in …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Ta rget implementation date: Summer 2021 5.2 In July 2020, the government published Building a trusted, modern tax administration system, a vision for the future of tax …

Not Addressed

#15 —

Public Accounts Committee

Recommendation: The Treasury has acknowledged the need for more timely, transparent financial information on cross-government areas of work, including both EU Exit and the Covid-19 response.39 In the past, it has said that this is particularly difficult because these areas of …

Gov response: 6.1 The government agrees with this recommendation. Re commendation implemented 6.1 HM Treasury has established a dedicated central team tracking COVID-19 and EU Exit funding decisions. This team centrally records all funding decisions and works …

Not Addressed

#35 —

Treasury Committee

Recommendation: We support the plans announced by HMRC in July 2020 to digitise and improve tax administration. If tax reform is to be successful, it is important that HMRC has the capacity and funding to carry out reform and is not …

No Published Response

#33 —

Public Accounts Committee

Recommendation: We asked about the support and software that would be available to small taxpayers. HMRC said it was gearing up to support customers but that it would not be delivering software itself. Nevertheless it had received pledges from industry that …

Gov response: 7: PAC conclusion: The benefits of Making Tax Digital to those with simple tax affairs are not clear. 7: PAC recommendation: HMRC should, in its Treasury Minute response, explain how the introduction of Making Tax …

Not Addressed

#15 —

Public Accounts Committee

Recommendation: Given the uncertainties in HMRC’s current estimates of error and fraud in R&D relief claims, we asked HMRC what it was doing to improve its estimates. It told us that it was planning a random enquiry programme for R&D claims …

Gov response: 2.4 The government agrees with the Committee’s recommendation. 9 Target implementation date: Winter 2023 2.5 Activities are currently underway to address key error & fraud issues, including designing and implementing: • the package of R&D …

Not Addressed

#14 —

Public Accounts Committee

Recommendation: We asked HMRC how much of the increase in the cost of R&D tax reliefs was down to abuse. HMRC said monitoring was difficult because over time R&D tax reliefs had become increasingly generous and thus an increase in claims …

Gov response: 2.4 The government agrees with the Committee’s recommendation. 9 Target implementation date: Winter 2023 2.5 Activities are currently underway to address key error & fraud issues, including designing and implementing: • the package of R&D …

Not Addressed

#13 —

Public Accounts Committee

Recommendation: HMRC estimates that error and fraud in R&D tax reliefs was £336 million in 2020– 21, or 3.6% of related expenditure (2019–20 – £311 million or 3.6% of related expenditure). The C&AG considers the level of error and fraud estimated …

Gov response: 2.4 The government agrees with the Committee’s recommendation. 9 Target implementation date: Winter 2023 2.5 Activities are currently underway to address key error & fraud issues, including designing and implementing: • the package of R&D …

Not Addressed

#11 —

Public Accounts Committee

Recommendation: The cost of R&D tax reliefs has grown by 241% over the last four years to reach £9.3 billion in 2020–21 (Figure 1). In 2019, UK companies claimed tax relief on £47.5 billion of R&D spending; 83% more than the …

Gov response: 2.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2023 2.2 HMRC is carrying out further analysis to understand the reasons for the growing cost of Research & Development (R&D) tax relief, …

Not Addressed

#5 —

Public Accounts Committee

Recommendation: It is too easy for taxpayers to be unwittingly lured into tax avoidance schemes. HMRC introduced the loan charge in 2019 to recoup tax from people who used ‘disguised remuneration’ schemes to avoid tax. The imposition of the loan charge …

Gov response: 5: PAC conclusion: It is too easy for taxpayers to be unwittingly lured into tax avoidance schemes. 5: PAC recommendation: To reduce the risk of taxpayers getting involved in tax avoidance schemes, HMRC should, in …

Not Addressed

#2 —

Public Accounts Committee

Recommendation: HMRC does not understand the reasons for the growth in the cost of research and development tax reliefs including how much is due to abuse. The cost of research and development (R&D) tax reliefs has grown by 240% over the …

Gov response: 2.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2023 2.2 HMRC is carrying out further analysis to understand the reasons for the growing cost of Research & Development (R&D) tax relief, …

Not Addressed

#1 —

Public Accounts Committee

Recommendation: On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) on the issue of its management of tax debt.1

Gov response: Based on a report by the National Audit Office, the Committee took evidence on 17 January 2022 from HMRC. The Committee published its report on 26 March 2022. This is the government’s response to the …

Not Addressed

#36 —

Public Accounts Committee

Recommendation: The Department told us that its Transformation programme should reduce costs and improve payment compliance by digitalising processes and allowing its staff to move from case maintenance into enforcement activities.83 It expected CMS transformation to be complete by financial year …

Not Addressed

#20 —

Public Accounts Committee

Recommendation: HMRC said it is trying to improve the data it uses to understand the behaviour of its debtors. It is experimenting with data from credit reference agencies.29 It is also developing a comprehensive single customer account, using funding it received …

Gov response: 6: PAC conclusion: HMRC has further to go until it can differentiate between taxpayers who are genuinely struggling, and those who can afford to meet their liabilities but are choosing not to. 6a: PAC recommendation: …

Not Addressed

#16 —

Public Accounts Committee

Recommendation: We questioned the Department about the effectiveness of Making Tax Digital in closing the tax gap, particularly in tackling tax evasion. HMRC explained that the programme is not designed to tackle tax evasion by small businesses. Other solutions are required …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Ta rget implementation date: Summer 2021 5.2 In July 2020, the government published Building a trusted, modern tax administration system, a vision for the future of tax …

Not Addressed

#13 —

Public Accounts Committee

Recommendation: During the pandemic, HMRC told us that it had to redeploy its resources from frontline activities, such as collection of tax, to work supporting taxpayers through the COVID support schemes. HMRC expects a reduction on compliance yield in 2020–21 compared …

Gov response: 4.1 The government agrees with the Committee’s recommendation. Recommendation Implemented 4.2 The department regularly publishes how the compliance approach has changed in light of COVID 19 on GOV.UK. This was last updated on 11 November …

Not Addressed

#5 —

Public Accounts Committee

Recommendation: It is not clear that Making Tax Digital will help reduce the tax gap or taxpayer costs at a time when individual taxpayers and small businesses are under considerable pressure. HMRC’s primary objective for the ‘Making Tax Digital’ programme is …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Ta rget implementation date: Summer 2021 5.2 In July 2020, the government published Building a trusted, modern tax administration system, a vision for the future of tax …

Not Addressed

#25 —

Public Accounts Committee

Recommendation: Our recent report on fraud and error highlighted that the taxpayer is expected to lose billions of pounds from the increased risk of fraud and error in the government’s COVID-19 schemes. It found that the cost of fraud and error …

Not Addressed

#11 —

Housing, Communities and Local Government Committee

Recommendation: With hybrid working likely to become more common, co-working spaces may offer an opportunity to attract footfall to smaller high streets and town centres. The Government should consider how co-working office spaces can be taxed fairly so as to stimulate …

Gov response: The Government agrees it is important to consider the impacts of flexible working on high streets, and this has been built into policy development. The 2014 flexible working regulations provide employees with 26 weeks continuous …

Under Consideration

#8 —

Transport Committee

Recommendation: The Government must set out a range of options to replace fuel duty and vehicle excise duty. Those options should be revenue neutral and not cause drivers, as a whole, to pay more than they do currently. One of those …

Gov response: The Government is focused on delivering its core priorities, as set out in the 2019 manifesto. As such, the government does not currently have plans to consider road pricing.

Under Consideration

#6 —

Transport Committee

Recommendation: In designing a replacement for fuel duty and vehicle excise duty, the Government must examine how an alternative road pricing mechanism can use price as a lever for change while subjecting motorists to fair levels of taxation. To that end, …

Gov response: Given this, the Government does not have further views on the Committee’s recommendations for the ways in which road pricing should be considered.

Under Consideration

#5 —

Transport Committee

Recommendation: In signalling a shift to any alternative road charging mechanism, the Government must make it clear to motorists who purchase electric vehicles that they will be required to pay for road usage, as is currently the case for petrol and …

Gov response: As the Government’s Net Zero Strategy set out, as we transition to net zero, the government will need to ensure that the tax system encourages the uptake of EVs, and revenue from motoring taxes will …

Under Consideration

#4 —

Transport Committee

Recommendation: Zero fuel duty and vehicle excise duty help motorists to offset the higher purchase price of electric vehicles compared with petrol and diesel alternatives. Those prices are predicted to decrease as sales of new and second-hand electric vehicles increase. As …

Gov response: As the Government’s Net Zero Strategy set out, as we transition to net zero, the government will need to ensure that the tax system encourages the uptake of EVs, and revenue from motoring taxes will …

Under Consideration

#3 —

Transport Committee

Recommendation: To promote fairness and public acceptance, any alternative road charging mechanism must (a) entirely replace fuel duty and vehicle excise duty rather than being added alongside those taxes; and (b) be revenue neutral with most motorists paying the same or …

Gov response: Given this, the Government does not have further views on the Committee’s recommendations for the ways in which road pricing should be considered.

Under Consideration

#30 —

Public Accounts Committee

Recommendation: HMRC’s Making Tax Digital initiative is central to its 10-year modernisation strategy. It requires taxpayers to keep tax records and submit returns digitally. HMRC introduced Making Tax Digital for VAT first. The largest VAT traders provided digital returns in 2019, …

Gov response: 7: PAC conclusion: The benefits of Making Tax Digital to those with simple tax affairs are not clear. 7: PAC recommendation: HMRC should, in its Treasury Minute response, explain how the introduction of Making Tax …

Not Addressed

#29 —

Public Accounts Committee

Recommendation: For 2021–22, HMRC has replaced most of its response time measures with metrics of whether it is easy for customers to access and deal with HMRC.52 Rather than call handling times, it now publicly reports the percentage of callers wishing …

Gov response: 6.1 The government agrees with the Committee’s recommendation. Target implementation date: June 2022 6.2 HMRC have been working through the stocks of correspondence that built up while the department’s resources were deployed on the COVID …

Not Addressed

#28 —

Public Accounts Committee

Recommendation: We asked HMRC why call handling performance had been declining before COVID-19. HMRC told us that it was resourced to give a “decent” rather than “brilliant” service and it had efficiencies that it had to deliver. It said that although …

Gov response: 6: PAC conclusion: Yet again customer service has collapsed and HMRC’s recovery plans are not clear. 6a: PAC recommendation: HMRC should, in its Treasury Minute response, explain: • the service levels it is aiming to …

Not Addressed

#27 —

Public Accounts Committee

Recommendation: HMRC told us that its performance was improving in 2021–22. It said it had got helpline performance up to what it regarded as a “decent service”, and had thus diverted resources to handling post, as this was the area with …

Gov response: 6: PAC conclusion: Yet again customer service has collapsed and HMRC’s recovery plans are not clear. 6a: PAC recommendation: HMRC should, in its Treasury Minute response, explain: • the service levels it is aiming to …

Not Addressed

#26 —

Public Accounts Committee

Recommendation: We asked HMRC why response times were very poor at the end of 2020–21. HMRC said in the first half of 2020–21 it had diverted 5,000 customer service staff to work on COVID-19 support schemes. HMRC also said that during …

Gov response: 6: PAC conclusion: Yet again customer service has collapsed and HMRC’s recovery plans are not clear. 6a: PAC recommendation: HMRC should, in its Treasury Minute response, explain: • the service levels it is aiming to …

Not Addressed

#25 —

Public Accounts Committee

Recommendation: This Committee has regularly examined HMRC’s customer service performance. In 2010, this Committee concluded HMRC’s performance in responding to calls had been poor.43 In 2016, the Committee found that customer service levels had collapsed as a result of HMRC assuming …

Gov response: 6: PAC conclusion: Yet again customer service has collapsed and HMRC’s recovery plans are not clear. 6a: PAC recommendation: HMRC should, in its Treasury Minute response, explain: • the service levels it is aiming to …

Not Addressed

#24 —

Public Accounts Committee

Recommendation: We asked HMRC whether it could do more to publicise its successes, including the naming and shaming promoters of avoidance schemes. HMRC explained how it was seeking to reduce demand through transparency. It said it published annual reviews of the …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC continues to build on the strategy outlined in ‘Tackling promoters of mass- marketed tax avoidance schemes’ published in March 2020. This includes raising …

Not Addressed

#23 —

Public Accounts Committee

Recommendation: We are concerned about how taxpayers are protected from those who promote avoidance schemes, and the financial damage that can follow if taxpayers unknowingly enter unlawful schemes. We therefore asked HMRC what progress it had made in pursuing the promoters …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC continues to build on the strategy outlined in ‘Tackling promoters of mass- marketed tax avoidance schemes’ published in March 2020. This includes raising …

Not Addressed

#22 —

Public Accounts Committee

Recommendation: HMRC told us the nature of tax avoidance has changed. It said the bulk of avoidance schemes now relate to employment taxes and are not targeted at affluent people but middle-income earners, some of whom knowingly enter avoidance schemes and …

Gov response: 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC continues to build on the strategy outlined in ‘Tackling promoters of mass- marketed tax avoidance schemes’ published in March 2020. This includes raising …

Not Addressed

#20 —

Public Accounts Committee

Recommendation: We asked HMRC whether it would generate more revenue if it concentrated more of its compliance activities on large companies and less on small businesses and individuals. It told us that payback was a key factor when deciding how to …

Gov response: 4.1 The government agrees with the Committee’s recommendation. Recommendation implemented 4.2 HMRC are funded to reduce the tax gap through core ‘business as usual’ funding and additional “spend to raise

Not Addressed

#19 —

Public Accounts Committee

Recommendation: HMRC’s annual report shows that it spent over £1.5 billion on compliance activities in 2020–21.31 The rate of return from those activities varied across HMRC’s five customer groups in 2020–21 (Figure 2). Returns were highest from large businesses, with average …

Gov response: 4.1 The government agrees with the Committee’s recommendation. Recommendation implemented 4.2 HMRC are funded to reduce the tax gap through core ‘business as usual’ funding and additional “spend to raise

Not Addressed

#17 —

Public Accounts Committee

Recommendation: We asked HMRC whether it was going to return to the cases it had not taken forward during 2020–21. It told us that, by and large, the action it took in 2020–21 would defer its ability to correct any non-compliance …

Gov response: 3.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2022 3.2 HMRC took on significant additional responsibilities during the pandemic, providing essential COVID-19 economic support whilst continuing their core compliance activities. The …

Not Addressed

#16 —

Public Accounts Committee

Recommendation: HMRC estimated that compliance yield from its tax compliance activities in 2020– 21 was £30.4 billion. Yield was down 18% from the £36.9 billion HMRC generated in 2019–20. HMRC has reported the reduction reflected higher than usual performance in 2019–20 …

Not Addressed

#10 —

Public Accounts Committee

Recommendation: HMRC is responsible for administering Corporation Tax research and development (R&D) reliefs, which support companies that work on innovative projects. There is a scheme for small and medium-sized enterprises, and a research and development expenditure credit scheme, mainly for larger …

Gov response: 2.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2023 2.2 HMRC is carrying out further analysis to understand the reasons for the growing cost of Research & Development (R&D) tax relief, …

Not Addressed

#6 —

Public Accounts Committee

Recommendation: Yet again customer service has collapsed and HMRC’s recovery plans are not clear. For over a decade this Committee has repeatedly reported on HMRC’s inadequate levels of customer service. Following an examination by this Committee in 2016, HMRC’s customer service …

Gov response: 6: PAC conclusion: Yet again customer service has collapsed and HMRC’s recovery plans are not clear. 6a: PAC recommendation: HMRC should, in its Treasury Minute response, explain: • the service levels it is aiming to …

Not Addressed

#3 —

Public Accounts Committee

Recommendation: HMRC does not have a convincing plan for restoring compliance activity back to pre-pandemic levels. In response to the pandemic, HMRC suspended some of its compliance work in 2020–21 where taxpayers could not cope with inquiries, and because it needed …

Gov response: 4. PAC conclusion: While we wait for the much-delayed SEND review, the support system continues to fail many children and remains financially unsustainable.

Under Consideration

#22 —

Public Accounts Committee

Recommendation: HMRC does not have estimates for the costs incurred by organisations other than hiring bodies. The government introduced the reforms because it considered it too costly for HMRC to oversee an effective compliance regime with each individual PSC.49 It is …

Gov response: 5: PAC conclusion: HMRC has not made a robust assessment of the additional costs of implementing the reforms. 5: PAC recommendation: In light of actual experience, HMRC should produce and present to Parliament a cost-benefit …

Partially Accepted

#17 —

Public Accounts Committee

Recommendation: HMRC has not carried out research into these types of wider impacts from the perspective of workers, and is not convinced by evidence provided by others even where this indicates there may be significant issues.33 In its own research, HMRC …

Gov response: 3. PAC conclusion: HMRC is not doing enough to understand the impact of the reforms on workers and labour markets. 3: PAC recommendation: HMRC should conduct and publish specific research into the impacts of the …

Accepted