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Inland Revenue Appropriation Accounts 1999 – 2000

The Inland Revenue continued to provide an effective check over the assessment, collection and allocation of tax during the year 1999-00, according to the National Audit Office.

A report to Parliament today by Comptroller and Auditor General Sir John Bourn points out that the Inland Revenue collected almost £200 billion tax and national insurance receipts at the same time as managing a major change programme which saw:

  • the transfer of the Contributions Agency to the Department;
  • the introduction of new arrangements for collecting tax in the construction industry; and
  • an important new programme of tax credits for working families and disabled people.

Sir John reported that implementation of the new tax credits scheme went smoothly, with the Inland Revenue paying out more than £1 billion to around 1 million applicants. The Department is continuing to strengthen the controls necessary for the effective operation of the scheme. Key areas in which the Department is taking action are the management of the risk of incorrect or fraudulent applications and reconciliation of the amounts paid with the awards made to individuals.

The new taxation scheme for the construction industry scheme which started in August 1999 has led to the identification of 100,000 people not previously registered with the Department and around £280 million extra tax receipts. Sir John notes, however, that there were teething troubles in issuing registration cards and tax certificates and in managing the issue and receipt of returns from taxpayers. The Department is working to resolve the difficulties, which have increased the risk of fraud and error remaining undetected in the early stages of the scheme.

The transfer of the Contributions Agency to the Inland Revenue will help streamline the way in which checks on employers’ compliance with PAYE regulations are carried out. But this, and other organisational changes, affected the level and quality of employer compliance work during 1999-00. There have been a number of improvements following a Public Accounts Committee report in 1998, but there remains scope to improve the selection of cases for enquiry and the dissemination of best practice.

Sir John reports that the Inland Revenue cleared the records of 1 million PAYE taxpayers in 1997-98 without knowing whether they had paid the right amount of tax, because of difficulties in processing employers’ end of year returns. Had it been able to process these records in the normal way, the Department estimates that it would probably have identified £4 million underpaid tax and £22 million overpaid tax.

Although it will review these cases if further information comes to light or if the taxpayer makes a repayment claim, the NAO report suggests that the Department should consider the scope for alerting those taxpayers affected to the risk that they may have paid the wrong amount of tax.

The Department believes that the processing difficulties have been resolved but will not know for sure until it has completed processing end of year returns from employers for 1998-99. It is carrying out a fundamental review of the process which, according to Sir John, needs to be completed quickly as the Department’s systems will have to cope with additional information on tax credits and student loans from 2000-01.

"The Inland Revenue took on significant additional responsibilities during 1999-00 and continues to manage a challenging change programme. New schemes, such as tax credits, have, in general, gone smoothly but the Department should ensure that action is taken to manage risks which have emerged during the implementation of some projects."

Sir John Bourn

Notes for Editors


Section 2 of the Exchequer and Audit Departments Act 1921 requires the Comptroller and Auditor General to establish that the Revenue Departments’ systems provide an effective check on the assessment, collection and allocation of tax revenue and to report the results of his work to the House of Commons.

This report sets out the results of the National Audit Office’s examination of the Inland Revenue during the year ending 31 March 2000. The examination included reviews of both new and existing systems, the Department’s quality assurance work, its information technology installations and systems, and test checks on individual transactions and balances.

The Comptroller and Auditor General also examined the Inland Revenue’s trust statement which provides an account of the tax and national insurance contributions collected during the year and paid over to the Consolidated Fund and National Insurance Funds. He issued an unqualified opinion on the trust statement for 1999-00, which is published in the Inland Revenue’s Annual Report.

Press notices and reports are available from the date of publication on the NAO website at Hard copies can be obtained from The Stationery Office on 0845 702 3474.

The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 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.

PN: 11/01