Ministers reject call for HMRC to set out its compliance-resourcing needs

Refusal follows MPs’ concerns over loss of billions of pounds through failure to reduce the “tax gap”
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By Jim Dunton

13 Apr 2023

The government has knocked back requests for transparency over the level of resourcing HM Revenue and Customs needs to make progress with reducing the so-called “tax gap” between what is owed and what is received – which stood at £32bn in 2020-21.

Members of parliament’s Public Accounts Committee said in a January report that funding HMRC compliance work to “maintain rather than reduce” the tax gap meant the government was “missing out on billions in lost revenue”.

They called on HMRC to set out the level of investment its compliance teams would require to shrink the gap, boosting revenue in the process – and for ministers to confirm whether they would make that investment.

MPs said the tax-gap figure for 2020-21 – the most recent year for which figures were available at the time – represented 5.1% of all tax liabilities, the same proportion as the previous year. PAC members also noted HMRC figures claiming that every pound spent on compliance work led to the recovery of £18 in additional tax revenue.

The PAC's January report said that as of June last year HMRC was owed a total of £42m in tax debt, a figure much higher than before the pandemic and set to fall more slowly as a result of the cost-of-living crisis.

In the government’s formal Treasury minutes response to the PAC report, published yesterday, the call for openness about HMRC’s resourcing needs and the intention to meet them was rebuffed.

“The government disagrees with the committee’s recommendation,” ministers said. “HMRC’s funding levels are a decision for Treasury ministers based on advice from HMRC and HM Treasury officials, and it is right that this advice is considered in private.

“The government has a track record of investing additional funds in HMRC’s compliance work to generate additional revenue.”

The Treasury minutes response said an investment of £79m in HMRC that was expected to generate an additional £740m of tax revenues had been announced in last year’s Autumn Statement.

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