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HMRC miscalculates tax

09.07.14

A report from the National Audit Office (NAO) last week has forced HM Revenue & Customs (HMRC) chief executive Lin Homer to apologise after they falsely claimed that they had recouped an extra £1.9bn in tax.

After agreeing with the government that they needed to claw back more tax, HMRC claimed they had exceeded their performance target by £1.9bn, but it appears now that they set their baseline £1.9bn too low back in 2010. Two months ago they claimed they'd clawed back an estimated £9bn in extra taxes, but it appears now that the amount is closer to £7bn.

"While not diminishing the focus and energy HMRC has put into maximising revenue from its compliance work, this made the original targets easier to achieve. For example, in the first year HMRC agreed to deliver an incremental improvement of £2bn. As the baseline against which it was measuring was set £1.9bn too low, the incremental improvement required to meet the target was in reality only £100m" it said in the NAO report.

The report from the NAO also found that:

• HMRC received total tax revenue of £506bn, £30bn (or 6.3%) more than in 2012-13.
• The taxes that contributed most of this increase were income tax and national insurance which increased by £16.2bn (6.4%), VAT by £7.2bn (7.1%) and stamp taxes which increased by £3.4bn (35.8%)
• The value of debt either written off or 'remitted' (not pursued by HMRC for reasons such as hardship or value for money) during the year was £5.1bn
• HMRC reported compliance yield (the additional revenue it generates through its compliance activities) of £23.9 billion in 2013-14 - its highest yield so far

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