Administration and effectiveness of HM Revenue and Customs - Treasury Contents

1  Introduction

The origins of this Inquiry

1. In September 2010 Her Majesty's Revenue and Customs (HMRC) announced that up to 4.3 million Income Tax payers would be receiving repayments and 1.4 million taxpayers would be receiving requests to address underpayment. These over-and underpayments had arisen because the amounts of tax collected from individual taxpayers under the PAYE system in 2008-09 and 2009-10 had not been checked. HMRC usually reconciles tax collected under PAYE with the tax actually due once employers and other institutions have provided actual information about taxpayers' income after the end of the tax year.

2. Given the level of public concern and the number of taxpayers involved, we summoned senior HMRC officials to give evidence to us on 14 September. At the same meeting we agreed that the Sub-Committee should undertake a more detailed inquiry into the administration of HMRC.

3. HMRC as an organisation has undergone a continual process of change ever since its formation. This has been driven by the process of merging Inland Revenue and HM Customs and Excise, resource reductions, the changing responsibilities of the Department (for example, taking on the payment of tax credits), adapting to new technology and working patterns and responses to high-profile problems. On the ground this has meant the increasing use of technology and restructuring alongside job losses and office closures. At the top, the management and governance were revised following a highly critical Capability Review in 2007 and the Poynter Review into the loss of 25 million personal records in the same year. Both trends have involved a move away from a structure based around regional offices and towards one based around lines of business.

4. In the last Parliament the administration and expenditure of HMRC was subject to annual scrutiny by the Treasury Sub-Committee. These hearings identified a number of recurring problems with staff morale, service standards, IT and property contracts and the impact of institutional change within HMRC. Many of these issues are revisited in this report. In particular, many of the concerns raised with the Sub-Committee about the possible impact of the efficiency programme on service standards echo those raised with our predecessors as part of their work on The Efficiency Programme in the Chancellor's Departments.[1]

Conduct of the Inquiry

5. The Sub-Committee's inquiry focused on the concerns that have been raised with it about HMRC's performance, particularly in relation to service standards and staffing. In this report we put down markers against which the Sub-Committee will measure HMRC's administrative and operational performance during the Parliament. We have received evidence on HMRC's record at collecting revenue and paying out tax credits and the Sub-Committee is holding further oral evidence sessions on these issues. With a couple of exceptions, discussed in Chapter Six, we intend to report on these issues separately.

6. The Sub-Committee received thirty-seven written submissions to the inquiry, including responses from HMRC to a series of further requests for information. It undertook four oral evidence sessions with the HMRC unions, professional bodies, senior HMRC officials and the Exchequer Secretary, David Gauke MP. We are grateful to all those who gave written or oral evidence to the inquiry and to Anita Monteith, who acted as a specialist adviser during the inquiry.[2]

Structure and content of the Report

7. Chapter Two looks at the resourcing of HMRC since its creation in 2005 and some of the issues that have been raised with us as the new Department has worked to reduce costs and become more efficient. Chapter Three examines the staffing and management of the Department, particularly staff morale and organisational culture. Chapter Four focuses on the future of PAYE in the light of the implementation of the new National Insurance and PAYE Service (NPS) and the consultations on the introduction of Real-time Information. Chapter Five examines HMRC's service standards and communication with taxpayers and benefit claimants. Finally, Chapter Six examines issues relating to the management of large tax cases and debt management.

1   Treasury Committee, Eighth Report of Session 2006-07, The Efficiency Programme in the Chancellor's Departments, HC 483 Back

2   Anita Monteith declared that she is a Member of the Office of Tax Simplification, SME Committee. Back

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Prepared 30 July 2011