HM Revenue and Customs lacks ambition to tackle fraud and error and recover losses, according to a committee of MPs.
The Public Accounts Committee says HMRC is still not deploying the resources required to maximise the tax revenues it collects or provide an acceptable level of customer service. The committee in a report on HMRC Annual Report and Accounts 21-22 says that HMRC only expects to recover around a quarter of the estimated £4.5 billion lost to fraud and error in its COVID-19 support schemes. Fraud and error are also high for research and development tax reliefs, which are ‘costly, prone to abuse and provide questionable benefit to the UK economy’.
Dame Meg Hillier, a London Labour MP and chair of the committee, said: “The PAC has reported on the many problems in the Covid support schemes that made an open goal for fraudsters, but HMRC is settling for trying to recover less than a quarter of estimated losses in schemes such as furlough. We recognise the problems HMRC faces – due to poor controls, the horse has bolted – but we believe there is a moral duty to pursue fraud. HMRC must ensure dishonesty is not seen to create advantage.”
In June 2022 £42 billion was owed to HMRC in tax debt, much more than before the covid pandemic. In 2021–22 HMRC generated £30.8 billion from its compliance activities, though this also remains below pre-pandemic levels of performance. For every £1 that HMRC spends on compliance activities, it recovers £18 in additional tax revenue. The government is missing the opportunity to recover billions in lost revenue by not resourcing compliance, the committee says.
Background
In 2021–22 HMRC provided £16.5 billion of support to businesses and individuals under the Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme; both ended in September 2022. Total support provided across the lifetime of the schemes was £96.9 billion. HMRC estimates that total error and fraud across the lifetime of the covid-support schemes is £4.5 billion, which works out at 4.6pc of the £96.9 billion.
In that financial year 2021-22, HMRC collected £731.1 billion in taxes and duties, the highest on record.
