Key HMRC IT plans delayed due to spending freeze, says NAO

Key HMRC IT implementations have been delayed because of the Cabinet Office’s moratorium on spending, the National Audit Office (NAO) has found.

The report called for a better understanding of the costs of benefits of the HMRC’s interventions, following revelations that the department overpaid up to £2.46bn to claimants, and underpaid up to £290m to claimants, in 2011-12, in error. 

HMRC has not met its target to reduce the level of tax credits error and fraud to 5% or less of entitlements.

Amyas Morse, head of the NAO, said the department should prioritise and target its activities on the basis of a better understanding of risks, such as risk-profiling taxpayers.

But HMRC has delayed implementing full risk-profiling – as recommended by the Committee of Public Accounts in its 2004 and 2008 reports – until October 2012.

The postponement resulted from the government-wide moratorium on new IT projects and civil service recruitment freeze of 2010, the NAO said.

HMRC has also delayed its debt management strategy – to tailor debt action to each taxpayer’s characteristics and past behaviour – from April 2011 to October 2012. 

“This delay was due to the government’s moratorium on IT projects in 2010 and the civil service recruitment freeze, which meant the department could not recruit the specialist analysts it needed,” HMRC said.

The NAO also described the timetable for full implementation of real-time information PAYE systems, a key component in the deployment of Universal Credit systems, as challenging.

The auditor recommends that the department complete its review of its PAYE operating model, taking account of the findings from the pilot for testing a real time information (RTI) system.

Last year MPs told the Public Accounts Committee (PAC) that dependence on tight deadlines for IT systems such as RTI for the deployment of Universal Credit were unrealistic.

Morse said: “Before implementing significant structural changes, the department needs to be clear about what its future operating model will be.

"It needs to understand how its business will change, following the introduction of real-time information and Universal Credit."

HMRC also cannot easily link together the debts from different tax streams owed by a single taxpayer because of a long-standing limitation in its IT systems. 

Linking of debts tends to occur only when HMRC initiates court action or other enforcement proceedings, it said.

The report added that HMRC could better achieve value for money from its investment in compliance work by helping people to use new technology by providing the right training at the right time.