HMRC have published their Report and Accounts and other documents for 2021-22. HMRC accounts report revenues of £731.1 billion, a 20.1% increase since 2020-21, although 23.8% of this (£173.8 billion) remained unpaid at the year-end. Its audit was qualified due to high levels of error and fraud.
Highlights of the HMRC accounts are:
- Increases were reported in all revenue streams, most notably in relation to Income Tax, Value Added Tax (VAT) and Corporation Tax, which increased by 21.6%, 21.9% and 27.2% respectively
- Estimates of the tax gap, remains unchanged at an estimated 5% of all tax liabilities, making it £32 billion.
- The yield from tax compliance (investigations and enquires) activities in 2021-22 was £30.8 billion, up 1.1%.
- Total tax debt was £41.6 billion on 31 March 2022, £15.9 billion less than the debt reported on 31 March 2021.
The Comptroller and Auditor General from the National Audit Office also qualified his opinion in respect of material levels of error and fraud in:
- The main COVID-19 support scheme saw fraud at £617 million. Of that £241 million relates to Coronavirus Job Retention Scheme (CJRS) and £376 million to the Self-Employment Income Support Scheme (SEISS). Total error and fraud across the lifetime of the schemes based on HMRC’s accounts current estimates is £4.46 billion, of which £3.46 billion relates to CJRS and £1 billion to SEISS.
- Personal Tax Credits led to overpayments of £780 million from an estimated 400,000 claims and underpayments of £120 million from an estimated 300,000 claims.
- Corporation Tax research and development reliefs; recent estimate shows that the level of error and fraud present in this area of expenditure is £469 million or 4.9% of related expenditure
Tax yields by customer type
Half of the tax gap, some £15.6bn is down to small businesses which represent more than 95% of businesses in the UK.
In terms of investigation yield, big business is the most profitable to pursue.
In terms of areas of tax which generate the biggest compliance yield across medium and large businesses, these are avoidance schemes, international, VAT and employment taxes.
|Customer||Yield||Tax gap||Tax compliance:
yield versus cost
|Individual customers: income up to £200,000, net assets up to £2m||£285bn - PAYE & NICs|
£15bn - other taxes
|£2.5bn||£2.7bn v. £410m|
|High net worth individuals||£55bn - PAYE & NICs|
£45bn - other taxes
|£1.5bn||£2.5bn v. £220m|
|Small Business: turnover below £10 million and typically fewer than 20 employees||£75bn PAYE & NICs |
£95bn Corporation Tax, VAT, and other taxes
|£15.6||7.6bn v. £550m|
|Mid-sized businesses, charities and public bodies: turnover between £10 million and £200 million, or typically 20 or more employees||£125bn PAYE & NICs|
£50bn Corporation Tax, VAT, and other taxes
|£3.9bn||£3.5bn v. £270m|
|Large business||£140bn PAYE & NICs|
£170bn Corporation Tax, VAT, and other taxes
|£3.6bn||£10.2bn v. £260m|
**www.rossmartin.co.uk. Nichola Ross Martin FCA CTA (Fellow)