For the 12th year in a row, the comptroller and auditor general qualified HMRC’s accounts for 2011-12 for the lack of verifiable evidence concerning tax credits errors and fraud.
Ever since it first started pumping out billions in tax credit overpayments (estimated at £2.2bn a year in 2003-4), the Revenue has failed to produce accurate figures for erroneous payments and related fraud. The 2010-11 figures were only published this month and showed it had failed to reduce the figure to a targeted maximum of 5% for the year. The latest available estimate was 8.1%, equating to £2.3bn.
The NAO’s assessment for 2011-12 was that HMRC “has inadequate management information” on the recoverability of tax credits debt. The NAO assessment of the tax credit debt balance at 31 March 2012 indicated that the level of irrecoverable debt could be substantially higher than HMRC was estimating and led to a £638m increase in the provision for irrecoverable debts to £2.3bn by the time the final versions of the accounts were published.
Aside from that continuing multi-billion pound niggle, and £5.2bn of debt write-offs swelled by £81m for small PAYE underpayments that will not be collected following the botched National Insurance and PAYE Service (NPS) implementation, the department is showing signs of emerging from the torments of recent years.
New chief executive Lin Homer struck a breezy tone in her introduction, accentuating the positive achievements and neglecting to mention the negatives. Among their achievements, she and chairman Mike Clasper highlighted:
- £474.2bn of tax raised in 2011-12, £4.5bn up on the previous year.
- Compliance activities yielded £16.7bn, a 20% increase on 2010-11. Homer said HMRC’s progress in this area “puts us well on course to bring in an extra £20bn per year by 2015”.
- Around 12m open PAYE cases cleared (there are discrepancies in the numbers quoted), with the department “on track to clear all remaining legacy cases by the end of 2012”.
- Written off tax held to £5.2bn - a mild improvement on the figure of £5.5m last year.
- 74% of calls to contact centres answered compared to 48% in 2010-11; also improved processing times for post (63.7% handled within 15 working days, up from 36.8% last year, but still short of 80% target) and tax credit/child benefit claims.
HMRC’s annual accounts statement is a big document - 200 pages (2.1MB PDF) detailing the department’s resource accounts, accounting policies, internal functions, risk management strategy and including the auditor general’s report. It is possible to put many different interpretations on the information provided, and many accountants might see a rueful irony in positive accounting figures that don't appear to reflect their personal experiences of the entity. This overview looks at some of the areas that have attracted the most attention and controversy on AccountingWEB during the past year.