HMRC Tax Revenues on the Up

Annual Report and Accounts 2016/17

HMRC has recently published its Annual Report and Accounts 2016/17 and whilst the department maybe congratulating itself in some of its achievements, some of its claims must be tempered by what the National Audit Office have to say.

Record tax revenues

For the fourth consecutive year, HMRC brought in record total tax revenues amounting to £574.9 billion, an increase by 38.1 billion from the previous year. In addition, £28.9 billion was generated in compliance yield as a result of action taken against individuals and businesses who attempted to “break the tax rules”.

Some individual taxes that rose in comparison to 2015/16 included:

• Income tax and NIC (30% & 21% of total revenue respectively), increased 5.3% due to increases in employment levels, higher wages and changes to the way NIC is calculated for state pensions
• Corporation tax (9% of total revenue) increased by 12.3% due to rising company profits
• Capital gains tax (1.5% of total revenue) increased by 15.1% due to the average gain per disposal of assets increasing by around 16%

The annual cost of running HMRC was £3.3 billion in 2016/17.

The department claim to maintain one of the lowest tax gaps in the world. The ‘tax gap’ is the shortfall between the amount of tax expected by the Treasury and the sums actually received.

Accelerated Payments

Last year, HMRC reached the end of their three year programme of issuing Accelerated Payment Notices (APN) to users of tax avoidance schemes. In those three years, 75,000 such notices worth in excess of £7 billion have been issued which has given rise to a tax take of nearly £4 billion.

Where a person disagrees with an APN, they have the right to make representations to HMRC. Of the 75,000 notices issued, a total of 40,000 representations were made. To date, HMRC have considered more than 32,000 of these representations and around 90% of the notices were upheld as valid, and more than 80% confirmed in the original amounts.

Three judicial reviews of the APNs were heard last year, with the High Court confirming that the APN legislation and HMRC’s procedures were legal. However, two of these three decisions are currently subject to appeal.

Telephone calls and postal performance

The department, on average, answered telephone calls within nearly four minutes, against their target for the year of under six minutes. They claim that their helplines have delivered consistently strong performance as a result of recruitment, more flexible working to deal with large fluctuations in demand and new online services that reduce the need for people to call.

Call attempts handled were 91.7% against HMRC’s target of 85%.

Post turnaround within 15 working days was 81% and for within 40 days was 96.3%. Are we supposed to be impressed by HMRC responding within 40 days??

In 2012, the National Audit Office (NAO) reported that HMRC’s performance in providing services was unacceptable. Whilst there was subsequent improvement, in May 2016 the NAO reported that HMRC customer service to personal taxpayers had suffered in 2014/15 and 2015/16 because they had, under budget pressure, released staff too quickly. As a result, HMRC could not sustain service levels and their speed to answer the telephone and respond to post were greatly reduced. Performance improved in the second half of 2015/16 after the Revenue recruited 2,400 additional staff. HMRC again plans to reduce costs significantly as it implements new digital services.

The NAO have cautioned that HMRC’s existing telephone measures risk miscategorising or excluding important aspects of taxpayer experience. HMRC’s established approach to measuring call-handling counts most calls terminated in its automated telephony system as successfully handled. Independent research commissioned by HMRC concluded that the department cannot assume that all callers have had their query resolved at the point a call ends, meaning HMRC could have resolved fewer queries than it has reported. While HMRC includes calls handled by automated telephony, it has excluded taxpayers’ time in the automated telephony system when measuring its speed to answer. The Revenue’s current approach to measurement could overstate calls handled, and understate the time to answer as experienced by the taxpayer. There is also opportunity for HMRC to improve some of its other performance measures to better reflect taxpayer experience, including whether it resolves queries first time, and the quality of its advice.

Workforce

By 31st March 2017, HMRC employed around 61,800 full-time equivalent staff members and there was a significant recruitment drive during the year.

As HMRC continue to transform its operations across the UK by creating new Regional Centres, it is committed to locating these centres in city centre locations. The department currently occupy 145 buildings in 92 towns and cities.

It is expected the move to Regional Centres will save more than £300 million up to 2025, and result in annual cost savings of more than £90 million a year from 2026.