HM Revenue and Customs Accounts for 2007-08

14 Jul 2008 04:09 PM

Tim Burr, head of the NAO, today issued his audit certificate on HM Revenue & Customs 2007-08 Trust Statement of revenue from tax and duties. He has issued an unqualified audit opinion on the truth and fairness of the Trust Statement. But, in common with the previous five years, he has issued a qualified opinion on the regularity of tax credits owing to high levels of error and fraud.

On Tax Credits
In 2007-08, the Department paid a net £20 billion in tax credits and an average of 5.7 million families received awards. The Department's latest estimates show that adjustments to awards led to £1 billion being overpaid to claimants in 2006-07, compared with £1.7 billion in 2005-06. At 31 March 2008, £4.3 billion remained to be recovered from claimants, of which £1.8 billion was in doubt. As part of its Tax Credits Transformation Programme the Department is evaluating service improvement pilots that are designed to assist claimants who need extra support in making a claim and reporting changes in circumstances. It anticipates that most of these will be implemented by April 2009.

On Tax Credits claimant error and fraud
In 2006-07, between £1.31 billion to £1.54 billion (7.2% to 8.4%) of tax credit entitlement was paid to claimants to which they were not entitled. The Department has now set a target to reduce this to 5% by 2011.

On collection of income tax through PAYE
In 2007-08, the Department collected £127 billion in income tax and £98 billion in National Insurance Contributions. At the end of March 2008, there were 16.2 million open cases where the taxpayer records for earlier years still need to be reconciled and cleared. The Department has not collected all tax due from some pensioners. This error could affect some 420,000 pensions with a tax loss of some £135 million a year.

In 2007-08, £81.2 billion in VAT was collected and around eight million VAT returns processed. The Department introduced long-term measures to increase VAT registration performance, but, owing to a combination of factors, performance significantly deteriorated during 2007. Performance recovered by January 2008 and continued with 83 per cent of applications processed within the 14 calendar day target in March 2008.

Tim Burr, head of the National Audit Office, said:

“Levels of tax credits error and fraud are significant when compared with the expenditure on the scheme. I have therefore qualified my opinion on the regularity of these payments. HMRC now has a target and has developed a strategy for reducing error and fraud. It will need to monitor how the measures it adopts are contributing to the achievement of the target and to respond effectively.”

“The Department must strike a balance between stopping criminals entering the VAT system and ensuring legitimate traders receive their VAT registrations without delay. Its performance in processing VAT registrations is now operating in line with targets. ”

Notes for Editors:

  1. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  2. The Comptroller and Auditor General, Tim Burr, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.