HM Revenue & Customs 2010-11 report and accounts
8 July 2011
Amyas Morse, the Comptroller and Auditor General, has today
issued his report on the 2010-11 accounts of HM Revenue &
Customs. In 2010-11 the Department received total revenues of
£468.9 billion, £33.1 billion (7.6 per cent) greater than in
2009-10.
The increase in tax revenue from the prior year reflects the
improving economic situation, as well as the impact of rate and
duty rate changes including: £5.1 billion (2 per cent) rise in
Income Tax and National Insurance contributions; £13.2 billion (17
per cent) increase in VAT; and £8.0 billion (21 per cent) increase
in Corporation Tax.
At 31 March 2011, the Department was investigating over 2,700
issues with the largest companies, with potential tax at stake of
£25.5 billion. The NAO has reviewed whether the Department’s
processes for settling tax disputes with large companies were
adequate to establish a sound position on the tax due. This did not
involve coming to an independent judgement on the tax liability in
individual cases. The NAO found that the Department had established
sound governance arrangements for settling tax disputes and, in a
substantial majority of cases, had complied with these. In three of
the largest settlements examined, one or both of the Commissioners
signing off the settlement had also participated in the
negotiations. This reduced the demonstrable assurance to taxpayers
and Parliament that the settlements reached were appropriate.
The Department made significant progress during 2010-11 in
stabilising the administration of PAYE. By the end of March it had
successfully reconciled the vast majority of records available for
automated reconciliation for 2008-09 and 2009-10 and processed the
associated overpayments or underpayments of tax. It also ensured
that over 99 per cent of annual codes for the 2011-12 tax year for
issue to taxpayers were dispatched on time.
The Department will now have to deliver on its plans to manually
clear the records relating to 2008-09 and 2009-10 which cannot be
processed automatically. The Department has committed itself to
clearing all cases relating to its legacy PAYE system by the end of
2012 and plans to stabilise its PAYE service by 2013. While the
Department has lost the opportunity to recover underpayments for
the 2006-07 tax year, it plans to complete the reconciliation and
process the repayment of tax overpaid in the 2003-04 to 2007-08 tax
years by the end of 2012.
In 2010-11, the Department spent around £28.1 billion on tax
credits. The latest estimate by the Department is that in 2009-10
it overpaid between £1.75 billion and £2.14 billion to claimants
arising from error and fraud, and underpaid between £0.25 billion
and £0.55 billion to claimants as a result of error. The overall
level of error and fraud has decreased from between 8.3 and 9.6 per
cent in 2008-09 to between 6.6 and 8.1 per cent in 2009-10 but, as
this expenditure has not been for the purposes intended by
Parliament, the Comptroller and Auditor General has qualified his
opinion on the regularity of tax credits expenditure.
The Department’s plan to develop a more active approach for
managing tax credits debt, including the use of a campaigns-based
approach, has so far met with limited success. At the end of March
2011, the overall level of tax credits debt stood at £4.7 billion,
compared with its target of £4.3 billion.
Amyas Morse, head of the National Audit Office, said
today:
"There is clear evidence that HMRC is beginning to
stabilise its administration of PAYE, following the disruption to
processing which flowed from the introduction of its new computer
system. However, stabilisation will not be fully complete until
2013, according to the Department, and it will need to deliver its
plan to improve PAYE data quality if it is to realise the benefits
of the new system and prepare for the move to real time
information.
"In a substantial majority of cases, the Department has
complied with its governance arrangements for settling tax disputes
with large companies. To give confidence to external and internal
stakeholders, however, HMRC needs to ensure that, for all major tax
disputes, there is a demonstrable separation between those
responsible for negotiating the settlements and those responsible
for approving them.
"HMRC’s revised strategy for dealing with error and
fraud in the tax credits system, including the increase in the
number and depth of checks at the point of claim, is beginning to
reduce the amount of losses. The Department has made less progress
in dealing with the overall amount of tax credit debt, which
continues to increase."
Notes for Editors
- The end of year reconciliation is a stage in the PAYE process
and allows HMRC to confirm that the right amount of tax has been
collected. Where the Department identifies an over or underpayment,
it will issue a tax calculation which the taxpayer can
challenge.
- Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk. Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Amyas Morse, is the head
of the National Audit Office which employs some 880 staff. He and
the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 39/11
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