The UK’s HM Revenue and Customs (HMRC) has apologized to the MPs for wrongly estimating how much money it was bringing in additional tax income for the Exchequer.
National Audit Office (NAO) found that HMRC has surpassed its performance targets by £1.9 billion in 2011-12 and £2 billion in 2012-13. In addition, enhancements in compliance levels in the two subsequent years were also overestimated.
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HMRC chief executive Lin Homer said that she has accepted responsibility for setting the baseline level for tax yield too low when it started the process in 2010.
Homer added that HMRC has received £1 billion in additional Government funding for meeting targets, which would have been achieved even if the baseline was not set too low.
HMRC had also set its performance targets for tax compliance yield in 2010-2011 at £1.9 billion lower than they should have been.
The error comes after HMRC has recorded total tax revenue of £506 billion for 2013-14, £30 billion (or 6.3%) more than in 2012-13. The taxes that contributed are income tax and national insurance which increased by £16.2 billion (6.4%), VAT by £7.2 billion (7.1%) and stamp taxes which have significantly increased by £3.4 billion (35.8%).
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By GlobalDataAdditionally, the UK-Swiss tax agreement has brought in £1 billion by 31 March 2014, compared with the £5 billion HMRC had originally forecast it would collect by March 2016.
Sir Amyas Morse, the head of the NAO, said: "I am concerned that an error of as much as £1.9?billion in HMRC’s baseline calculation led it to report the trend in its performance in a way that inadvertently exaggerated the improvement since 2010-11."
Homer said: "I have made clear that when the NAO undertook their audit, we and they did find this error of calculation in the baseline. What I would want to emphasise is that the achievement my staff made over those years has been what the Government asked of it, perhaps slightly more.
"The fact HMRC did not know about this serious error in its calculations until the National Audit Office pointed it out paints a worrying picture. It is truly depressing that HMRC’s failure to take appropriate action has led to its unwittingly misleading ministers, Parliament and the taxpayer."
A spokesman for HMRC said: "We have corrected this error and even against the corrected baseline we have still exceeded our targets. We will work closely with the NAO to prevent this happening again."
