I commented a couple of days ago about the story circulated to the press by HMRC in which it claimed that it had collected £23.9 billion of extra tax revenue as a result of its compliance activities. I said then that I was quite sure that this figure was wrong and did not reflect a 'yield' from compliance work but actually from the supposed impact of new tax legislation, adding:
So what we actually have, it seems, are relatively small tax recoveries and massive claims for the impact of new tax legislation in deterring tax avoidance and evasion.
I have now investigated this further, having noted that Baker Tilly, chartered accountants, had also noted problems with this claim. So, I looked in more detail at the HMNRC background briefing on this claimed £23.9 billion recovery. Nowhere do they break the figures down. In fact, £23.9 billion is only mentioned four times and is never broken down. But then I noted this:
It was the small print at the bottom that especially caught my eye, so I went off to the 2012-13 HMRC annual report, which is the latest available. On the cover of that repot they claim a 'compliance yield' of £20.7 billion - which is the equivalent of the £23.9 billion claim for 2013-14. So I searched compliance yield in the report and found no explanation using that term - which is odd for something you put on the front cover, and so searched 20.7 instead and found this table:
I then searched 'revenue protected' to find what that means: there is no hint of another reference in the report. Searching 'protected' provided no better explanation. What we do know is that it was definitely not cash.
So, to go back to the press release that HMRC issued to the Financial Times on Monday, I think it means HMRC:
protected the Exchequer from future tax avoidance by closing corporation tax and stamp duty land tax loopholes
Now first of all that's a bogus claim by HMRC: Parliament closed those loopholes.
Second, to claim that's money saved is in the same category as claiming you saved £10,000 by buying a new Ford instead of a Jaguar. It's nonsense.
Third, nowhere is this sum explained. In other words, right now it's fair to conclude HMRC just made it up. And that puts this claimed tax recovery in the same category as a fraudster's tax return. To be polite: it's full of bogus numbers.
Fourth, whatever this is, it's not compliance activity.
As I said before, I wish we had an honest tax authority. It would help. They actually recovered less than £10 billion of tax in all likelihood in 2013-14, which is good news, but peanuts compared to the tax gap. And no doubt that's why they are making wild claims.
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Yes, the small print says “data series not directly comparable” but then the comment 2010 to 2015 double 2005 to 2010 does just that.
If revenue protected is not in the earlier figures then real compliance yield has stagnated as you would expect from a department deeply demoralised by cuts.
I would say that we have campaigned for legislative changes and it’s good to see them quantified.
where does revenue protected when, for example, a VAT officer stops a repayment fit into this picture? Again this is useful work, easily justifying the officer’s salary, but should not be confused with actual money coming in.
All good points
Thanks
It’s also a very creative way of demonstrating that HMRC is on track to achieve performance measurement targets (as the graphic shows) which in reality it cannot meet with the (reducing) resources it has at its disposal, Richard. Mind you, I suspect there’s one department/unit within HMRC that may have more resources than it once did: PR or Media relations, or whatever HMRC management label the people who mastermind press releases such as the one you highlight here. No doubt they also take the lead role in the preparation of HMRC’s annual reports to ensure the desired narrative is supported by “facts”.
There are of course some people who have no qualms about “manufacturing the news”. But I’m pretty sure they’ll be a lot of people within HMRC who are less than happy at being placed in a position where they cannot fulfill the functions they are supposed to fulfill but are forced into acting and saying that they can. In that sense HMRC is a victim of and participant in the same policy deception that attracts the likes of Pfizer to our shores: the Tories strategy of talking tough and PR puff about being tough on tax avoidance/evasion while simultaneously turning Britain into a tax haven.
Ivan
As usual I agree
It is good to note other accountants share the view
Frankly, this claim is unacceptable
I am unsure why HMRC want to undermine their own credibility
Richard
Revenue protected is an estimate of the additional tax that might have been lost in the future had an inquiry not been made into previous returns. For example if an inquiry results in additional tax of £10,000 due to incorrect returns in the past, then based on the number of years that the additional tax was due for, an estimate is made for the next two years of how much tax has been “protected” and will not be misdeclared in the future- which of course is making the assumption that the taxpayer would continue to make incorrect returns in the future and as Richard says it is not cash and is the equivalent of sticking your finger in the wind !
Fascinating
So it is making stuff up!
A bit like claiming false expenses
I was hoping someone from HMRC might intervene in this blog stream, Richard. As has happened in the past Anon HMRC officer has been most helpful (though I do worry that in this day and age GCHQ may well be lurking in the background).
I’d like to caution against rubbishing the concept of “revenue protected” excessively.
That said, I agree with the main thrust of the argument. If revenue protected was not in previous figures but is counted now then it is misleading to use these figures to suggest compliance results have improved while cuts are made. Though both are measured in £ sterling a £ of revenue protected is not worth the same as a £ of tax yield physically paid over to the treasury.
However revenue protected is an important part of measuring the usefulness of additional compliance officers. It is not imaginary money, and often if an enquiry is lasting over a year the officer may have seen the increased PAYE or profits declared for periods after his enquiry. The loss to the country from destroying compliance jobs in HMRC offices including closing those at Colwyn Bay, Kings Lynn, Irvine etc. is more than just the tax yield received. The missing officers would much more than justify the money spent on them not just from tax yield but also from taxpayers doing things right in future, and from work such as VAT repayments stopped.
Fair comment – if that is what is really meant – but if it is HMRC have a duty to say so, and aren’t, which still makes my point
Misinformation is misleading
This does sound like total junk statistics from HMRC – I wonder if it’s worth trying a PQ or FoI request to get more details on the assumptions underlying these figures?
It’s going today Howard
I went to the 2011-12 AR by accident – which was fortuitous as that says:
“Revenue protected: The value protected by activities including: seizing illicit goods, preventing erroneous payments, deterring future non-compliance, addressing avoidance loopholes etc.”
That’s not exactly helpful, is it?
But I amy amend my FoI for it, so thanks