Qualified NAO Report

Last week the National Audit Office (NAO) published a qualified report (as per previous years) on the 2010–11 accounts of HMRC.

"There is clear evidence that HMRC is beginning to stabilise its administration of PAYE, following the disruption to processing which flowed from the introduction of its new computer system. However, stabilisation will not be fully complete until 2013, according to the Department, and it will need to deliver its plan to improve PAYE data quality if it is to realise the benefits of the new system and prepare for the move to real time information.

"In a substantial majority of cases, the Department has complied with its governance arrangements for settling tax disputes with large companies. To give confidence to external and internal stakeholders, however, HMRC needs to ensure that, for all major tax disputes, there is a demonstrable separation between those responsible for negotiating the settlements and those responsible for approving them.

"HMRC’s revised strategy for dealing with error and fraud in the tax credits system, including the increase in the number and depth of checks at the point of claim, is beginning to reduce the amount of losses. The Department has made less progress in dealing with the overall amount of tax credit debt, which continues to increase."

Amyas Morse, head of the National Audit Office, 8 July 2011

The Comptroller and Auditor General has qualified his opinion wrt tax credits expenditure.

The NAO also looked at three areas which were a priority for HMRC during this period:

- The resolution of tax disputes.
- The stabilisation of the PAYE system.
- Tax credits.

The resolution of tax disputes

In three of the largest settlements examined, one or both of the Commissioners of HMRC signed off the settlement in which he/she had also participated in the negotiations. This apparent lack of independence undermines the credibility of the settlements reached.

Tax credits

The overall level of error and fraud has decreased from between 8.3% and 9.6% in 2008–09 to between 6.6% and 8.1% in 2009–10. However, as this expenditure has not been for the purposes intended by Parliament, the Comptroller and Auditor General has qualified his opinion on the regularity of tax credits expenditure.

Additionally tax credit debt continues to increase. At the end of March 2011, the overall level of tax credits debt was £4.7BN against a target of £4.3BN.

Tax does have to be taxing.

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