HMRC increased their year-on-year revenue by less than 1% in 2011/12, official data shows.
According to the department’s latest accounts, the taxman added £474.2bn to the public purse in the most recently completed tax year: a growth of 0.96% on 2010/11’s £468.9bn.
In spite of the minimal growth, the figures suggest that tax receipts are recovering from the effects of the recession, with a record £16.7bn generated by compliance activities
VAT takings rose to £99.6bn from £90.3bn as a result of the coalition government’s rate increase and higher revenues from the oil, gas and business services sectors.
In spite of corporation tax receipts slumping to £40.1bn from £45.9bn as a result of difficulties in the financial sector, the decrease was partly offset by increased tax takings from offshore companies because of higher oil and gas prices.
The National Audit Office (NAO) report on the HMRC accounts noted the department met its target to process 6.7m end-of-year PAYE reconciliations relating to 2008/09 and 2009/10. In doing so, the Revenue wrote off £12.7m relating to claims from taxpayers on which it had failed to make proper and timely action.
The NAO paper also recommended that HMRC complete their review of the PAYE operating model, taking account of the findings from the pilot of their real-time information to help with workload forecasting.
The value of tax debt under active management decreased from £15bn at the previous year-end to £13.3bn at 31 March 2012, and the audit office found the Revenue made progress in implementing debt strategy.
HMRC should identify the full cost, and evaluate the cost-effectiveness, of each of their debt collection activities, said the NAO, recommending that the taxman accelerate work to undertake full risk-profiling and customer segmentation of debt balance, as recommended by the Public Accounts Committee in 2004 and 2008.
The Revenue met its target to reduce tax credit debt to £4bn at 31 March 2012, from £4.7bn a year earlier, but only after writing-off debts of £1.7bn. An estimated £2.3bn is unlikely to be recovered, and the NAO said the taxman’s campaign approach, aimed at collecting tax credits debts more promptly, had achieved limited success.
NAO head Amyas Morse claimed the Revenue needed to ‘get a better understanding of the costs and benefits of its interventions, such as debt campaigns and [disclosure] initiatives, to drive down levels of error and fraud in tax credits’.
He added, ‘Secondly, [HMRC] should prioritise and target activities on the basis of a better understanding of risks, such as risk-profiling of taxpayers.
‘Finally, before implementing significant structural changes, the department needs to be clear about what its future operating model will be: it needs to understand how its business will change following the introduction of real-time information and universal credit.’
