HMRC has apologised after it incorrectly claimed that it had collected billions of pounds in extra tax.
In a report on HMRC's accounts for 2013-2014, the National Audit Office (NAO) found that HMRC has set the baseline to measure its performance £1.9bn too low in 2010.
Amyas Morse, head of the NAO said that although the Revenue has been "broadly successful" in collecting extra tax revenue he was concerned that "an error of as much as £1.9bn in HMRC’s baseline calculation led it to report the trend in its performance in a way that inadvertently exaggerated the improvement since 2010-11."
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
The Revenue said in a statement: "We regret an historic error made in 2011 when we wrongly calculated the baseline against which our performance was measured.
"We have corrected this error and even against the corrected baseline we have still exceeded our targets. We will work closely with the NAO to prevent this happening again."
HMRC said that last year was its best-ever performance. "We ... secured £23.9bn in additional compliance revenues and achieved our best-ever customer service levels, while also making £235m of efficiency savings."
The NAO said HMRC had made progress in modernising PAYE through the new RTI system for employers, including support for smaller companies that have struggled to adapt.
Under RTI, employers send information about tax and national insurance they deduct from employees’ wages to HMRC when they are made - rather than at the end of the tax year as previously happened.
Morse qualified his audit opinion on HMRC’s 2013-14 resource accounts for the third consecutive year because of "material levels of error and fraud in the payments of personal tax credits".
The UK-Swiss Tax Agreement, which came into force in January 2013, had brought in £1bn by 31 March 2014, compared with the £5bn HMRC had originally forecast it would collect by March 2016, but in line with its updated forecast of £1.7bn, the NAO said.
Source - BBC News