HMRC’s Chief Executive discusses the tax gap, EU transition and the Coronavirus Job Retention Scheme
08 September 2020
HMRC’s Chief Executive and First Permanent Secretary, Jim Harra, spoke at the Public Accounts Committee on a variety of topics, focusing on the tax gap, the EU transition and of course, the Coronavirus Job Retention Scheme (CJRS).
He confirmed that the tax gap in the UK is at its lowest ever level and counts itself as one of the smallest in the world. The tax gap is the difference between the amount of tax that should have been paid, and the amount that has actually been paid, and for 2018-19, it has been confirmed that tax revenue was £627.9 billion – 95% of the tax due. There has been an increase of 3.6%, or £22.1 billion, from the amounts collected in tax year 2017-18.
Mr. Harra was asked how HMRC is ensuring compliance with the CJRS, and to give a prediction on the amount of error and fraud. Ordinarily, past evidence would be used as the basis on which to estimate future fraud and error levels, but as the CJRS has only recently been implemented, in rapid response to the outbreak of coronavirus, there is no such evidence available. HMRC has, therefore, utilised evidence of fraud in the tax credit scheme, as this is the best possible grant and benefit scheme for comparison.
The comparison techniques being used are less than ideal as the people that apply for the tax credit scheme are very different to employers who are applying for the CJRS. HMRC has also warned that the nature of the threat to the UK economy is different to anything that has ever been observed in the past.
It is expected that the level of error and fraud could sit anywhere between 5-10%, but this comes with the caveat that the CJRS, again, is unlike anything that the UK has ever seen before. HMRC has already put preventative measures in place to attempt to combat fraud, through the design of the system, and the fact that HMRC is involved in the process prior to payments being made. Updates will be provided, along with associated figures, at the end of 2020 and then again in Spring 2021. It is HMRC’s intention to release a publication detailing the full estimate of error and fraud, in 2022.
More information about these subjects can be heard in the recording.
The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.