HM Revenue & Customs (HMRC) has published its 2024-25 accounts. Gareth Davies, the Comptroller and Auditor General (C&AG), has issued a clean audit opinion for the Trust Statement, providing assurance to Parliament on the financial statements.

Here we share highlights from his Trust Statement audit report on the revenue recorded by HMRC for taxes and duties in 2024-25. You can read the full report in context in HMRC’s annual report and accounts.

See also HMRC Resource Accounts and the C&AG’s Report on Accounts.

Opinion on financial statements

In my opinion, the financial statements:

  • give a true and fair view of the state of the HMRC Trust Statement’s affairs as at 31 March 2025 and its net tax receipts revenue for the year then ended; and
  • have been properly prepared in accordance with the Exchequer and Audit Departments Act 1921 and HM Treasury directions issued thereunder.

Opinion on regularity

In my opinion, in all material respects, the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Key audit matters

IT systems that impact financial reporting

Description of risk

HMRC’s IT environment is complex with several new and legacy IT systems supporting a wide range of taxes. Due to HMRC’s significant reliance on IT systems, effective general IT controls are critical to allow reliance to be placed on the completeness and accuracy of financial data. IT audit forms a core part of my assurance of the tax administration and financial reporting systems.

Key observations

I am satisfied that HM Revenue & Customs’ overall IT control environment appropriately supports the financial reporting process.

Presumed Risk of Fraud in Revenue Recognition

Description of risk

Under International Standard on Auditing (ISA UK) 240 there is a presumed rebuttable significant risk of material misstatement due to fraud in revenue recognition. HMRC’s Trust Statement reports £875.9 billion of tax revenue in accordance with the revenue recognition requirements of the Government Financial Reporting Manual (FReM).

An element of the tax receipts revenue figure relies on judgement and is brought to account through material accounting estimates which could, in theory, be subject to manipulation. The focus of my audit is, therefore, on those areas of tax receipts revenue that are subject to high degrees of estimation and where the application of HMRC’s accounting policy for the recognition of revenue requires judgements to be made. I consider that this risk relates primarily to two specific areas as follows:

  • the Accrued Revenue Receivable (ARR) estimates in relation to taxes and duties such as Self-Assessment income tax and Corporation Tax, where management need to make judgements on the amount of revenue accrued as tax returns reporting taxpayer liabilities or associated tax payments are not filed until after the Trust Statement has been published. These account for £146.2 billion of total tax receipts revenue generated.
  • Postponed tax liabilities where these are pending the outcome of an appeal by the taxpayer against the tax assessments raised. These primarily relate to Corporation Tax, Self Assessed Income Tax and VAT and amounted to some £38 billion in 2024-25

Key observations

Based on the evidence reviewed and the audit work completed I have not identified any instances of fraud in revenue recognition.

Corporation Tax and Self-Assessment Accrued Revenue Receivable Estimates

Description of risk

HMRC relies on complex models to calculate the value of the Corporation Tax (CT) and Self-Assessment (SA) Accrued Revenue Receivable (ARR) balance in the Trust Statement. HMRC estimate tax receipts for CT and SA because there is a considerable time lag between the end of the period to which the tax liability relates and the submission of a tax return by the taxpayer in line with appropriate tax legislation. The CT ARR estimate reported in the 2024- 25 accounts is £14.3 billion (2023-24 £14.1 billion) of which £8.7 billion (2023-24 £8.9 billion) related to CT ARR estimate with the remainder relating to postponed adjustments. The SA ARR balance reported in the 2024-25 accounts is £28.9 billion (2023-24 £31.4 billion).

I consider this gives rise to significant risks for the audit due to the complexity of the models, the extent of estimation uncertainty arising from the need for management to make significant judgements around the balance of tax receipts revenue accrued and apply assumptions around areas such as late payments, overpayment and economic determinants when producing the estimate.

In planning the audit, I considered that the prevailing economic conditions which remain uncertain may increase the level of estimation uncertainty and that HMRC may need to revisit some long-standing assumptions, including those that rely on historical data such as income growth rates for SA and late payments and overpayments for CT.

Key observations

Based upon the evidence reviewed and the audit work completed, I am satisfied that the CT and SA ARR balances are reasonably stated and adequately disclosed in the accounts.

Oil and Gas Decommissioning provision

Description of risk

The Oil and Gas Decommissioning provision reflects HMRC’s estimate of the repayments of tax it expects to make to companies in future periods as they decommission oil and gas fields in the North Sea. It was valued at £5.8 billion at 31 March 2025 (£5.7 billion at 31 March 2024).

The provision is inherently uncertain in that it is required to forecast the future costs and profitability of the oil and gas sector, alongside other key assumptions such as future oil and gas prices and decommissioning costs, in arriving at an estimate of HMRC’s liability. Accordingly, I consider the provision to represent a significant risk in the context of my audit.

Key features that necessarily drive complexity and estimation uncertainty in the model include: the use of micro simulation modelling techniques; the number of data sources and economic determinants applied; the long-range nature of the key assumptions extending out to 2067; the complex coding required in arriving at the model outputs, the current volatility of oil and gas prices and the impact of climate change on future production.

Key observations

Based upon the evidence reviewed and the audit work completed, I am satisfied that the oil and gas decommissioning provision is reasonably stated and adequately disclosed in the accounts.

VAT and Self-Assessment Repayments

Description of risk

The tax receipts revenue repayable by HMRC each year is significant at £156.6 billion (£148.8 billion in 2023-24) The two largest components of repayments are VAT £108.9 billion (£112.2 billion 2022-23) and income tax £17.3 billion (£17.9 billion 2023-24). For both VAT and income tax, HMRC used TRUCE (the Transaction Risking Upstream in a Connect Environment) to identify and stop repayments that may require investigation. From August 2023, HMRC replaced TRUCE with IDRS (the Investigation and Detection Risking Service) for VAT repayments. The migration for Self Assessment took place in May 2024.

There is a risk that repayments may be made for the incorrect amount, or where the taxpayer is not properly entitled to it. These repayments would be considered to be inconsistent with the relevant legislation and so the expenditure (the net of repayments and related revenue) in the Trust Statement would be considered to be ‘irregular’. There is also a risk that repayments are made to entities for which financial sanctions are in place, but where no licence has been obtained by HMRC to authorise these payments. These would also be ‘irregular’, although they are likely to be immaterial in aggregate.

My risk assessment has identified that the risk of irregular repayments is more likely to arise in VAT and Self-Assessment (as repayments in these taxes can be generated without a corresponding overpayment). Accordingly, the focus of my work was on repayments arising from those tax streams.

Key observations

Based upon the evidence reviewed and the audit work completed, I am satisfied that repayments are reasonably stated, are regular and adequately disclosed in the accounts.

Impairment of Receivables and ARR

Description of risk

As agreed with HM Treasury, HMRC’s accounting policy is to apply the simplified approach for impairments under IFRS 9 to tax and duty receivables and accrued revenue receivables.

Under IFRS 9, in addition to the information from past events and current conditions, impairment should also be measured using forecasts of future economic conditions available at the reporting date. HMRC has historically calculated the impairment of receivables and accrued revenue receivables based on prior year collection statistics and revenue losses. The prevailing economic conditions have had a significant impact on businesses and individuals in 2024-25, which required HMRC to revisit and update its impairment methodology. As well as using prior year data, HMRC has also considered the age of debt and the speed of debt clearance. Determining the recoverability of receivables is a key source of estimation uncertainty which needs to be adequately and appropriately measured and disclosed in the accounts.

Tax debt was £42.8 billion at 31 March 2025 (£43.0 billion at 31 March 2024), £0.2 billion (0.5%) lower than the debt reported at 31 March 2024. The tax debt balance is lower than the £68.5 billion reported at the height of the pandemic but remains significantly higher than the pre-pandemic level.

Key observations

Based upon the evidence reviewed and the audit work completed, I am satisfied that the impairment of receivables and ARR is reasonably stated and adequately disclosed in the accounts.

Cash tax receipts processing via the EBS

Description of risk

Cash tax receipts for the year are estimated to total £1,004 billion (2023–24: £971.5 billion), of which approximately 96.7% (£971.1 billion) is processed through the Enterprise Business System (EBS). Given the scale and value of tax receipts involved, the EBS process is a critical component in the preparation of the Trust Statement and is inherently associated with elevated risk.

In particular, the EBS is currently undergoing an enhancement project. The progress made with this project in 2024-25 leads to improved transparency and reconciliation by segregating payment types and, where possible, automatically matching payments to the relevant tax charge or customer account. This leads to unmatched tax receipts being investigated more quickly and allocated to taxpayer records. The system is also designed to post the relevant general ledger entries automatically.

We consider this gives rise to a significant risk for our audit due to the complexity of the system, and the high volume and value of data passing through this process. Accordingly, we have applied enhanced audit procedures in this area to assess the effectiveness of controls, data integrity, and the impact of the system enhancements on financial reporting.

Key observations

Based upon the evidence reviewed and the audit work completed, I am satisfied that cash tax receipts are reasonably stated and adequately disclosed in the accounts.

Application of materiality

Materiality: £8.6 billion

Basis for determining materiality: Approximately 1% of tax receipts revenue of £876 billion (2023-24 £843 billion)

Rationale for the benchmark applied: The main driver of the Trust Statement is tax receipts revenue, with the underlying purpose for its production to communicate the tax revenues collected by Government. The Trust Statement has limited expenditure. The key Statement of Financial Position balances relate to accrued revenue receivables which are part of the overall revenue. I consider that the tax receipts revenue figures are of greatest interest to users of the accounts.

HM Revenue & Customs Annual Report and Accounts 2024-25

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