Sir John Bourn, head of the NAO, today published a report on the Inland Revenue’s accounts for the year 2003-04. Sir John confirmed that overall the Inland Revenue continued to secure an effective check over the assessment, collection and allocation of tax during the year. However, he has qualified his opinion in respect of Tax Credits.
Qualified Audit Opinion
The Inland Revenue distributed some £13.5 billion in 2003-04 on Child Tax Credit and Working Tax Credit. The high level of overpayment under earlier tax credit schemes – some 10 per cent to 14 percent by value – led Sir John to qualify his audit opinion on the Trust Statement for the previous year, 2002-03.
The Inland Revenue told the Committee of Public Accounts in December 2003 that claimant error rates under the new Tax Credits payable from 2003-04 might be half the rates under the previous schemes. They have not yet estimated the level of financial error on the new Tax Credits and so Sir John has no evidence that error has reduced significantly to enable him to give an unqualified audit opinion. He has therefore qualified his audit opinion on the 2003-04 Trust Statement account.
Problems with the start of Child and Working Tax Credits in April 2003
The systems did not work as intended when the Inland Revenue introduced Child and Working Tax Credits in April 2003, causing problems for claimants, employers and the Department. They had to move staff from other tax work to help with these problems. They plan to recover fully from the impacts of the initial Tax Credits problems by the end of 2004-2005.
Stamp Duty Land Tax
Stamp Duty Land Tax, introduced on 1 December 2003, was implemented without the introduction of an automated system and the success of the interim, manual arrangements is a credit to those involved.
The Department is developing IT systems to remedy the limitations in procedures and controls during manual running. During that period, some checks on returns and tax payable were undertaken to a lower level than planned and the Department plans to introduce a more comprehensive approach. This will be fully effective only once the IT systems are in place.