Question
To ask the Chancellor of the Exchequer, with reference to the report entitled The management of tax expenditures, published by the NAO on 14 February 2020, Session 2019-20, HC46, whether data on tax revenue lost through abuse and error for all tax expenditures is being gathered by HMRC and analysed to help prevent potential future abuses; and what steps he plans to take to ensure HMRC staff are fully trained on tackling those potential abuses and errors.
Answer
HMRC has developed a detailed programme to understand the costs of tax reliefs and expenditures. They publish statistics on tax reliefs annually. HMRC have been developing the content of those statistics over the past 2 years, in line with Public Accounts Committee and National Audit Office recommendations. In the latest December 2021 publication, they published cost estimates for 220 out of 300 non-structural reliefs, up from 111 in Autumn 2019.
HMRC estimates the tax gap, which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The UK tax gap is estimated to be 5.2 per cent of total theoretical tax liabilities (£34.8 billion) in the tax year 2019-20. Non-compliance with tax reliefs and expenditures contributes to the overall tax gap estimates. However, HMRC does not make a disaggregated estimate of the tax gap for tax reliefs and expenditures. HMRC’s tax gap estimates are official statistics produced in accordance with the UK Statistics Authority’s Code of Practice for Statistics.
HMRC undertakes a wide range of compliance activity to collect or protect revenue as part of the commitment to narrow the tax gap. This includes collaborative compliance activity across specialist teams trained in tackling avoidance, evasion, and criminal attack. They have developed a professionalism programme with focused training, leading to increased criminal and civil fraud investigations.
HMRC already has well established training schemes for its caseworkers, which include:
- The flagship Tax Specialist Programme, an intensive 3-year graduate-level programme equipping staff with the skills and knowledge needed for the most challenging compliance work.
- An 18-month programme for all other caseworkers managing tax compliance, which incorporates foundation skills and dedicated training ‘routeways’ for different tax regimes, consolidated by specialist on-the-job training within compliance teams. HMRC has also recently established a dedicated Central Training Unit (CTU) to embed compliance professional standards consistently from Day 1 for new recruits; the CTU is currently training over 3,000 new recruits.
- HMRC’s Fraud Investigation Service tackles the most serious fraud and organised criminal attacks against the Exchequer, using both criminal and civil investigations. Those officers who are authorised to undertake criminal investigations receive accredited training that reflects the standards expected within the Criminal Justice System.