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National Audit Office (NAO) analysis of the annual accounts of HM Revenue and Customs (HMRC) calls for the department to be more transparent and ensure it builds trust with the public.
Earlier this year, HMRC began offering online tax accounts for individuals and businesses as part of its drive to become “one of the most digitally advanced tax administrations in the world”.
However, the NAO report said HMRC has failed to estimate “the costs for individual taxpayers or businesses of making the transition to online services, or sought to quantify the benefits they can expect”.
The report went on: “Most business customers will have to update HMRC quarterly rather than annually about their tax affairs. They may need to buy new software that works with the new systems. The business community is sceptical of HMRC’s evaluations of the costs and benefits of previous changes to the tax system.”
It added that HMRC needs to build “public trust that the new digital systems are easy to use and secure”, and that it needs to protect itself from data loss and cyber attacks as it becomes more digital and its data “becomes increasingly digitised and integrated”.
According to the report: “HMRC is therefore investing resources and expertise in making its data more secure and ensuring access to sensitive tax data in particular is safeguarded. It must also demonstrate to taxpayers that its controls to verify each taxpayer’s identity and protect the confidentiality of data are working effectively.”
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- The Office for Budget Responsibility says HMRC’s £1.3bn digital tax accounts project contains uncertainties in “behavioural response and operational delivery”.
NAO head Amyas Morse said the department is running complex and challenging change programmes.
“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,” he said.
The NAO also called on HMRC to make it clearer to the public and parliament what the department is doing and “where there is uncertainty”.
As part of the move to digital, HMRC cut staff in its personal tax department from 26,000 to 15,000 between 2010/11 and 2014/15. The NAO has previously pointed out that the department had misjudged the “cumulative impact of its complex transition and released too many customer service staff before completing the changes to its service”.