Compliance reforms help taxman boost tax yields by £4.3bn

CHANGES TO way HM Revenue and Customs (HMRC) investigates tax evasion have yielded £4.3bn of “additional” tax yield between 2006 and 2011, a review by the National Audit Office (NAO) has found.

Over the same period the taxman has cut thousands of jobs and introduced a range of improvements in its compliance work, including using technology to identify potential tax evasion, the public spending watchdog also found.

HMRC’s “compliance and enforcement programme” cost £387m to 2011-12 and comprised more than 40 projects, the NAO said. The proframme aimed to increase compliance yield – the measure of additional tax arising from compliance work – by £4.5bn between 2006-2011.

The programme reported an additional tax yield of £4.3bn over the five years to March 2011.

HMRC forecasts that it will generate an additional £8.87bn of yield between 2011-12 and 2014-15, although the NAO said that the taxman will not acheive this target because of changes to “scope or slippage in delivering projects, as well as over-oemployees redundanptimism in its forecasts.”

HMRC cut 3,374 jobs by the end of 2008-09 – two years ahead of schedule. It also generated an improvement in productivity (defined as the level of yield generated by each full time equivalent) of around 36% – below its forecast of a 42% improvement.

Amyas Morse, head of the NAO, said: “This major programme has helped HMRC to increase tax yield substantially and has introduced ways of working which will strengthen HMRC’s compliance work in future. The department could, though, achieve better value for money from its investment in compliance work by improved understanding of the impact of individual projects and ensuring that its staff have the capacity to exploit new systems to the full.”

However, HMRC did not routinely measure how job cuts and other changes to its anti-tax evasion strategy had affected  customer service, the NAO said. Tax experts have repeatedly complained about a decline in the service from HMRC over the past five years. They say that tens of thousands of job cuts has left HMRC short staffed and damaged morale.


Related reading