HMRC tax recovery limited by job cuts — MP report

Tax Return

A new report from MPs has praised the UK tax authority for recovering billions of pounds in tax, but claimed that it could have done considerably more without job cuts.

Over the last five years HM Revenue and Customs (HMRC) has collected an extra GBP4.32bn, representing a return 11 times greater than the GBP387m invested in its Compliance and Enforcement Programme.

However, the Public Accounts Committee (PAC) report says that the department could have collected a further GBP1.1bn, more than exceeding its target of GBP4.56bn, if it had not cut staff numbers by more than 3,300 over the period.

Nevertheless the changes introduced are expected to generate a further GBP8.87bn by 2014-15, with HMRC making better use of data to assess the risks and patterns of evasion and to deliver productivity improvements by processing cases more quickly and efficiently.

According to the PAC, the job losses at HMRC meant that about GBP10 in potential tax revenue was lost for every GBP1 in running costs saved. Margaret Hodge MP, chair of the committee, commented that the department “must consider whether further staff cuts will deliver value for money for the taxpayer”.

MPs also said that HMRC could have been more ambitious in its targets for the Compliance and Enforcement Programme and they welcomed the department’s commitment to reinvest GBP917m of its efficiency savings with the aim of generating a further GBP7bn a year in tax revenue by 2014-15.

Elsewhere in the report, MPs expressed shock that HMRC appears to have advised senior public sector employees that they could avoid tax by being employed indirectly via a managed service company. This week the government signalled its intention to stamp out such practices as Chief Secretary to the Treasury Danny Alexander announced a review of how managed service companies are used in the public sector.

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