HMRC have recently published their 2009/2010 accounts. Specific items to note are as follows:

• Overall, for the year to 31 March 2010, HMRC collected just over £436.3 billion (before provisions) across the various heads of tax and duties. This represents a fall of some £4.7bn (or 1.1%) from 2008/2009, though the fall in tax revenues has stabilised compared to the fall from 2008 to 2009 of £20.6 billion.
• About 84% of the total came from the main tax heads of income tax, NIC, VAT and corporation tax. Interestingly the fall in revenue is mainly attributed in the report to lower Capital Gains Tax (which in our opinion is likely to be due to lower asset values and a fall in transaction levels) and Corporation Tax.
• The Trust accounts are published with an audit report from the Comptroller and Auditor General and, as in previous years, the audit report is qualified because of uncertainty about the level of error and fraud in tax credit payments.
• The Auditor General specifically noted the difficulties under which HMRC has been operating, namely the recession, coupled with the increasing pressure to improve efficiency and reduce costs.

Three key areas come in for particular scrutiny.

1. Debt management

Over the last year HMRC's Debt Management and Banking Directorate managed to increase the value of debt recoveries by £5.6 billion to £67.9 billion, despite the recession making debts more difficult to recover. At the end of March 2010 the total level of receivables was £26.1 billion, compared to £27.7 billion as at 31 March 2009.

The Auditor General however has stated that despite HMRC's ongoing campaigns-based approach to debt collection in each of the major taxes, it is too early to say if this is working and the National Audit Office further notes that HMRC's management information systems “do not currently provide the necessary analysis of debt and customer behaviours to support the campaigns-based approach”

A number of recommendations in this area are made and it is interesting to note that HMRC have recently announced that they will use a select number of debt collection agencies during 2010/11 to “boost HMRC's debt collection capacity and help the pursuit of lower value debts.”

2. National PAYE service (NPS)

According to the report, the introduction of the NPS is classed as having been “difficult” – in particular the report details the delays and difficulties in implementing the system (and the increased costs as a result). It seems clear that HMRC was largely unprepared to deal with the huge number of problems that arose once NPS went live.

There remains a backlog of processing for 2008/09 and 2009/10 and the NAO says: “it is imperative that the Department stabilises the performance of the new Service so that work items are cleared promptly.”

3. Tax credits

In 2009/10, HMRC estimates that error and fraud resulted in tax credit payments of between £1.95bn and £2.27bn made to claimants incorrectly and between £0.20bn and £0.31bn not paid to claimants due to error. This particular level of error has resulted in the Comptroller & Auditor General qualifying his opinion on the regularity of the tax credits expenditure reported in the accounts.

The Report concludes on a positive note overall as follows:

“Whilst recognising that no tax collection system can ensure that all those who have a tax liability comply with their obligations, we conclude that, in 2009–10, HM Revenue & Customs has framed adequate regulations and procedure to secure an effective check on the assessment, collection and proper allocation of revenue, and that they were being duly carried out. This assurance is subject to the observations on specific aspects of the administration of taxes and tax credits in this report.”

The full 181 page set of HMRC's accounts is available at http://www.hmrc.gov.uk/about/hmrc-accs-0910.pdf