The Public Accounts Committee (PAC) has stated that HM Revenue and Customs (HMRC) will not be able to deliver its ambitious transformation project, thanks in part to the demands of Brexit.
In a scathing annual report, PAC outlines a list of issues and failures facing the department in the near future, warning that taxpayers and vulnerable people waiting for tax credits are at increased risk of financial problems.
The report highlights a ‘dangerously overstretched’ department, which is trying to carry out 15 major transformation projects simultaneously. Due for delivery in 2020, the transformation programme was created to save HMRC £717 million in efficiencies.
It is estimated that dealing with Brexit has increased the department’s workload by 15% and introduced an additional 40 projects to HMRC’s workload. Despite this HMRC estimates it is on track to save £707 million in the same period.
The department’s IT strategy, published in January 2016 outlined a digital-first approach, removing legacy systems and building a new cloud-based system which would be built around customer requirements.
Impact on Customers
The PAC has stressed that HMRC: “…needs to be clear about what it will do differently, or not do, and what the impact will be on customer service.”
The summary of the report says: “Together with the Treasury, HMRC has to make tough decisions on how it allocates limited resources to its operations to increase tax revenues, protect performance levels, prioritise its transformation and estate programmes, and invest in measures to tackle tax evasion, fraud and error.
“We are particularly concerned about the impacts on the ordinary taxpayer from the growing challenges facing HMRC, and whether HMRC is doing enough to support vulnerable Tax Credits recipients, especially as they transfer to Universal Credit.
“There is a lack of incentive for HMRC to reduce Tax Credits fraud and error in the transition period to Universal Credit.”
Everything at Once
Meg Hillier MP, the chair of the Public Accounts Committee, said: “HMRC’s transformation programme would have been less risky had it not attempted to do everything at the same time. What was already a precarious high-wire act is now being battered by the winds of Brexit, with potentially catastrophic consequences. Action arising from allegations in the so-called Paradise Papers could also significantly increase the authority’s workload.
“HMRC accepts something has to give and it now faces difficult decisions on how best to use its limited resources—decisions that must give full consideration to the needs of all taxpayers. In particular we are concerned about the effect on people simply trying to pay their fair share. HMRC’s customer service has improved on the appalling levels of recent years but its claims about call-answering times don’t stack up. Any new deterioration would be wholly unacceptable.
“There are concerns too about the impact of changes in the welfare system, which could increase the financial risks faced by vulnerable Tax Credits claimants. At the same time, the level of Tax Credits fraud and error has gone up and is only going to get worse.
“These are serious, pressing challenges for HMRC, requiring swift and coordinated action in Government. As a matter of urgency the authority must set out a coherent plan and demonstrate it is fit for the future.”
The committee has recommended that HMRC should report back by March 2018 with clear plans on how it plans to handle the challenges it faces due to Brexit and the ongoing transformation programmes. The committee has also asked the department to update its original assumptions and amend its forecasts for the programme by April 2018.
The committee’s full list of recommendations can be read here.