HMRC tax compliance budget drops 3%

HM Revenue & Customs’ budget for tax compliance and enforcement has dropped by 3% over the past 12 months despite the need to claw back the dramatic decline in tax receipts.

A Freedom of Information request has revealed the budget for the enforcement and compliance line of the business for the financial year 2009/10 is £1,047m, and the spend allocated for 2008/09 was £1,080m ­ a drop of 3% year on year.

A response from HMRC to the FOI request said: ‘…there is no expansion in enforcement and compliance budgets and there are therefore no transfers from elsewhere. New ways of working and improved targeting have, however, that we have been able to reduce tax losses by significantly more in 2008/09 compared to previous years and our targets for 2009/10 involve further reductions in tax losses.’

Chris Chadburn, tax investigations specialist at venntax, madethe FOI request and said press reports that the department was pouring unprecedented funds into tax compliance and enforcement were inaccurate.

‘It went against the thrust of staff cuts across the departments. It’s the first time they’ve broken down their spending so it was difficult to tell what had happened to the enforcement and compliance resource,’ he said.

Chadburn said despite the pressure for HMRC to increase yield from enforcement and compliance measures, he is ‘surprised they’re not throwing more money at it’.

Peter Luff, chairman of the Commons business and enterprise committee, said he was surprised that the government ‘makes a lot of play about cutting down on tax loopholes publicly but doesn’t pour the means into this rhetoric’.

He said enforcing the law around tax evasion should be a high priority. ‘There’s no point talking the talk if you don’t walk the walk…you can sound tough but you’ve got to be tough as well,’ he said.

According to a spokeswoman for HMRC, despite staff headcount reductions last year and future reduction targets of 5% per annum, the department has been able to justify the 3% drop in spend through improved yields.

She confirmed this has largely been delivered through the extension of risk-based tools which ‘ensure we focus our efforts on the deliberately non-compliant.’