Administration and effectiveness of HM Revenue and Customs - Treasury Contents


There is considerable dissatisfaction among the public and tax professionals with the service that Her Majesty's Revenue and Customs (HMRC) provides to taxpayers and benefit claimants. Three areas in particular stood out in the evidence we received: access to advice over the telephone; responses to post; and offline alternatives to internet-based filing and guidance. This dissatisfaction has been building for some years now, and was reported on by our predecessors in the last Parliament. As such, we do not accept the Department's explanation that these problems are primarily the result of reconciling of multiple PAYE tax years at once. There is a serious risk that if communicating with HMRC becomes too time-consuming, difficult and expensive, respect for the tax system, and with it voluntary compliance, may be undermined.

The PAYE system itself has been the subject of negative publicity throughout the last year. The National Insurance and PAYE Service should ultimately make PAYE work more effectively and ensure efficiencies across the Department. However, the problems resulting from its flawed implementation have done significant damage to the public perception of HMRC and the tax system more generally. It is crucially important that the 2012 target for clearing open cases is met and that improvements in overall performance follow soon afterwards.

Looking further ahead, HMRC has committed to an ambitious timescale to deliver Real-time Information (RTI), driven in part by the importance of the project in delivering the Universal Credit. Implementing RTI before the system and its interface into HMRC have been properly tested could led to greater delays later on and further damage public confidence in the Department and the tax system. We recommend that the Government only go ahead with full implementation once the system has been fully tested, and that its preparations should be subject to a real-time external audit.

HMRC operates under significant pressures. It has to implement increasingly complex tax legislation, sometimes developed without full account of the practical consequences, whilst undergoing restructuring, delivering substantial resource reductions and job cuts. The Government has agreed a Spending Review settlement with HMRC that involves further reductions, offset by "reinvestment" in compliance and PAYE. Whilst genuine efficiencies have and will continue to be made, we are concerned that performance may deteriorate further if resource reductions are badly managed: we received disturbing evidence of job cuts being made before the efficiencies that were intended to enable them had been delivered, and of a culture of command and control that disengages staff and prevents potential problems from being dealt with effectively.

HMRC continues to face major difficulties with staff engagement. Whilst staff remain dedicated to their work despite the pressures HMRC is under, they have little confidence in the leadership of the Department or that change will be for the better. This has been a long-running problem for the Department. Whilst senior management are very aware of the problem and have made efforts to improve engagement, there has been little evidence of any positive impact to date.

This report does not examine HMRC's performance in ensuring it raises the correct amount of revenue in detail. We intend to report on this later in the year. However, we do agree with the Committee of Public Accounts that HMRC should examine how it can improve accountability regarding the settlement of large tax cases.

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© Parliamentary copyright 2011
Prepared 30 July 2011