The Commons Public Accounts Committee stated that there was “an astonishing lack of economic planning for a pandemic”.
In a new report published by the House of Commons Public Accounts Committee, the body stated that there was “significant fraud and error in the furlough scheme”.
It said that this mistake was “very worrying” when looking at HMRC estimate figures of up to £3.5 billion of furlough payments being fraudulent or made in error, an estimated 10 per cent of all furlough claims.
The report also addressed the issue of compliance yield which halved in Q1 of 2020-21 (£7.5 billion) in comparison to this time last year (£15.4 billion), a decrease of 51 per cent. However, the Committee recognised that HMRC conducted fewer investigations into this difference due to its need to “prioritise the implementation of the COVID-19 support schemes” and to “be responsive to the needs of the taxpayers struggling with the impact of the pandemic”.
Despite this, the Committee has urged HMRC to “think fundamentally about how it collects unpaid tax” as it notes the fall in civil compliance checks from 62,000 in 2019-2020 to 40,000 in 2020-21. It states that the “HMRC may never catch up [to these claims] and it will inevitably have to change its approach to compliance because of COVID-19”.
The report states that, when analysing the tax gap (the difference between what should be paid to HMRC and what is actually paid), small businesses are responsible for over 40 per cent of this disparity. This is followed by big businesses at 17 per cent.
Meg Hillier, Chairwoman of the Committee, stated the Government’s role in this:
Our finding of the astonishing lack of economic planning for a pandemic shows how the unacceptable room for fraud against taxpayers was allowed into the government’s hastily drawn up economic support schemes.
I would like to see the government publish a list of the companies which received furlough money.
Where taxpayers’ money is being used, transparency should be a given. HMRC must act now to minimise fraud and error and ensure that taxpayers do not pay time and time again in the years to come.
The report also states that HMRC has indeed been compelled to reconsider its processes for administering the tax system.
HMRC told the Committee that the “assumptions that underpin its one-size-fits-all processes, namely that the vast majority of taxpayers can comply with their obligations and have the capability to do that, with a few exceptions that will need to be pursued for their non-compliance, may no longer hold true”.
As a result, HMRC have recently started issuing some penalties for people not filing tax returns as there has been a drop in the number of returns filed by the taxpayers.