HMRC must create trustworthy digital system

The National Audit Office has warned that HMRC will need to build public trust in its new digital services

The NAO said in the Revenue’s 2015/16 report and accounts that, while its plan to have “the most digitally advanced tax system in the world” looks credible and proportionate to the scale of the risks involved, it must ensure these services are both secure and easy to use.

HMRC announced last year its five-year plan to create a more efficient workforce and digitised tax services, while cutting staff numbers by 16% and closing 137 offices.

It aims to raise an additional £5bn a year by 2019/20 by tackling avoidance, evasion, compliance and aggressive tax planning.

The NAO warned the Revenue was being over-optimistic about how much change it could deliver at all once, pointing out that it led to a collapse of its service to personal taxpayers in 2014/15 and in the first half of 2015/16.

Moreover, it said HMRC has not yet estimated the costs for individual taxpayers or businesses of making the transition to online services, as most business customers will be required to update their tax affairs with HMRC quarterly and some might need to buy new software that works with the new systems.

According to the report, some businesses are sceptical of HMRC’s evaluations of the costs and benefits of previous changes to the tax system.
It also warned that as HMRC’s data becomes increasingly digitised and integrated, the importance of protecting its systems against data loss and cyber attack also rises.

Amyas Morse, head of the NAO, said, “HMRC is running a complex and challenging set of change programmes, and aiming to maintain service to taxpayers at the same time.

“On the one hand, it needs to keep its nerve and commitment to its goals even if there are occasional setbacks along the way; on the other, it needs to ensure that it does not make the taxpayer underwrite the risk of failure through service breakdowns.”

According to the NAO, the Revenue raised £536.8bn of tax revenues this year, a 3.7% increase from one year earlier.

The tax and national insurance contributions increased by £10.3bn. Corporate tax increased by £4.1bn, VAT rose by £2.1bn and capital gains tax grew by 28.1% to £7.3bn.

It also found that the annual cost of running HMRC was £3.2bn in 2015-16, up from £3.1bn a year earlier.