HM Revenue and customs has missed its key fraud-and-error reduction target and notched up tax credit overpayments of £1.46bn, its latest annual report reveals.
However, the tax-collection agency is closer to its 5% target than chief executive Sir Jon Thompson warned MPs it would be two years ago, and the measure is the only one of 14 performance commitments outlined in the report labelled as red and “not on track”.
According to HMRC’s latest report, fraud and error resulted in tax credits overpayments estimated at 5.7% of expenditure in 2017-18. The year is the latest that figures are available for because of the delay caused by the Self Assessment reporting cycle for income tax.
The figures are a step back from the within-target 4.7% rate reported last year for 2016-17, but an improvement on Thompson’s 2017 prediction that things were likely to get much worse than the 5.5% rate the department had reported in that year – which reflected overpayments of £1.57bn.
“If anything, the level of error and fraud will rise to somewhere between 7% and 8% under policies introduced by Treasury ministers,” he said at the time.
The National Audit Office commentary on the error rates in the latest report said the figure of £1.46bn in overpayments from an estimated 870,000 claims was the “highest rate since 2011-12”.
In his foreword to this year’s HMRC annual report – which will be his last as perm sec following Friday’s announcement that he is leaving to become chief executive of the Financial Reporting Council – Thompson said his department had secured a record contribution to the nation’s coffers over the past 12 months.
“It’s been an important year for our department – not just because of what we’ve achieved but also in the way we’ve adapted to deliver on urgent new priorities,” he said.
“In our primary purpose, to collect the tax that pays for the UK's public services, we achieved record revenues once again, increasing by 3.6% on last year to reach £627.9bn.
“We helped more customers than ever to pay their taxes quickly and easily online – 19 million people have signed up to Personal Tax Accounts and 93.5% of Self Assessment returns were completed online.
“We also took a major step forward in Making Tax Digital for Business, launching our new mandated service for digital record keeping and for filing VAT returns online.”
Thompson admitted that Brexit preparations had taken a toll on HMRC’s performance over the past 12 months, noting that the department had around 5,400 full-time equivalent staff planning for the UK’s departure from the European union.
“There’s no denying this has had an impact on our wider plans,” he said. “We’ve had to delay for now on some of our other projects, such as further improvements to our digital services. We've also regrettably seen a slight dip below targets in our customer service by phone and post – but we’re working hard to respond to this, shifting our resources to cope with peaks in demand. This challenge will continue into 2019-20.”
Thompson said he was proud of what HMRC teams had achieved in “unusual circumstances” and of the “values of professionalism, integrity, respect and innovation” they had shown.
Elsewhere in the annual report figures revealed a dip in the tip-off payouts HMRC had made to members of the public who provided “exceptionally helpful” information on tax evasion.
CSW reported in March that nearly £350,000 had been paid out for such information in 2017-18. Figures in the latest report said £290,250 had been paid out in 2018-19.