A recent report into HMRC’s accounts for 2011 / 2012, carried out by the National Audit Office (NAO) revealed that HMRC overpaid between £2 and £2.5 billion in tax credits, and underpaid up to £290 million as a result of fraud and error.
It was stated within the report that over the last two years, there had been a ''large increase'' in the amount of tax which HMRC has decided not to pursue, including £756 million worth of income tax in 2011/ 2012 alone.
The chairman of the influential House of Commons Public Accounts Committee, Margaret Hodge, said she was shocked by ''the sheer scale of waste and mismanagement'' at HMRC.
Ms Hodge added: ''Sadly it is no surprise that the NAO has found substantial problems with the HMRC's accounts. This year has seen a litany of tax errors and scandals come to light with mistakes made at the most senior level from the permanent secretary for tax downwards.
''The sheer scale of waste and mismanagement at HMRC never ceases to shock me. Without even mentioning the tax gap, in 2011 / 2012 the department wrote off a staggering £5.2 billion of tax owed, overpaid nearly £2.5 billion in tax credits due to fraud and error and underpaid around £290 million.”
Ms Hodge went on to say of HMRC: ''In some areas the department is moving in the right direction and has made progress to implement improvement plans. But the department is still plagued by IT problems; limiting, for example, its ability to link together the debts owed by taxpayers across different tax streams.
''With its long history of large scale IT failures, the department needs to get a grip before it introduces its new real-time PAYE information systems and begins the high-risk move from tax credits to the universal credit.''
For more information, speak to London Accountants Harris Lipman.
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