HMRC avoids the looming axe in Spending Review
HMRC was spared any large scale spending cuts in the government's Comprehensive Spending Review, but the department is expected to make efficiency savings of 25% through enhanced use of new technology.
In his Commons speech, George Osborne confirmed plans to invest £900m to address HMRC’s tax gap and tackle avoidance and evasion, a measure the Chancellor claimed will bring in an additional £7bn a year in tax revenues by 2014-15.
While giving with one hand, however, the chancellor applied pressure with the other, demanding that the department makes overall resource savings of 15%, with efficiency savings of 25% to come from rationalising technology investments and maximising savings from IT contracts.
Osborne said the department would invest in new technology to “improve risk assessment capability, better join up taxpayer information and streamline internal processes.”
He also insisted that savings would be made by renegotiating IT and other procurement contracts, and that administration costs would be chopped by a third through reductions corporate services and back office support functions.
The chancellor also announced £100m of investment to improve the operation of PAYE for both employers and individuals. This news follows the publication of a recent discussion document detailing new proposals to reform the system, including the implementation of real time data submission and centralised deductions, where HMRC would calculate the tax and NICs due on an employee's income. The PAYE system came under fire last month after reconciliation backlogs and an avalanche of erroneous new records came to light in the wake of the department's transition to the new NPS computer system.
The Spending Review also contained a commitment to delivering £8bn of tax credit fraud and error savings by 2014-15.
Analysis and reactions - can the IT systems cut it?
But senior accounting figures warned of the risk of over-stretching the system. Given previous problems, can HMRC squeeze 25% efficiency savings out of its existing systems, pondered CIOT tax policy director John Whiting.