Tax agency supported by chancellor 

Credit: Carl de Souza/PA Archive/PA Images

Chancellor Rishi Sunak has used his 2021 Budget to confirm a £280m investment in HM Revenue and Customs that will underpin a task force to combat fraud in Covid-19 support schemes and bring in additional compliance resources as well as new technology.

The Treasury said that the IT component of the allocation would cover investment in systems that would enable taxpayers to digitally access services and update their accounts more easily, making the collection of tax and payments easier in the process. 

The cash injection follows £268m that was committed in the November spending review to help upgrade ageing IT across the tax agency. 

This investment came shortly before a report from the Public Accounts Committee found that “patching up legacy systems” had cost HMRC £53.2m during the pandemic – equating to 80% of all the additional expenses incurred by the department during the period.

The budget funding will also allow HMRC to carry out initial design and development of Digitalising Business Rates to help modernise the business rates system in England and support more effective analysis and oversight of the collection of the tax.

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HMRC will next also year continue with the rollout of the Making Tax Digital scheme; from April 2022, all businesses will be required to use tech platform to file their VAT returns. Currently, only those with turnover in excess of £85,000 need to do so. From 2023, MTD will be further extended to cover Income Tax for individuals with annual business or property income of £10,000 or more.

Sunak said that £100m would be ploughed into a “Taxpayer Protection Taskforce” of 1,265 staff who would target illicit activity related to the Coronavirus Job Retention Scheme – also known as the furlough scheme – and Self-Employment Income Support Scheme, among others.

Both schemes are now due to continue in operation until the end of September – even though Sunak sent a strong message that they would end in April when he set today’s Budget date back in December. 

Last year HMRC acknowledged that up to £3.9bn could have been lost to fraudsters in the first months the schemes were in operation. Public spending watchdog the National Audit Office subsequently said it believed the department could have done more to protect government funds.

The chancellor told MPs today that the funding proposed would “tackle fraud in our Covid schemes” and  provide “new investment and new measures in HMRC to clamp down on tax avoidance and evasion”.

HM Treasury’s Red Book for the Budget, which details spending commitments, said that in addition to the £100m announced for the task force, a further £180m would bring extra resources and new technology to HMRC. It said the move was forecast to deliver more than £1.6bn of extra tax revenue over the next five years.

The Treasury Red Book said the funding would cover the recruitment of additional compliance staff to increase HMRC’S ability to target revenue loss through “illicit financial flows”. It will also support the continuation of the department’s controversial compliance work on the Loan Charge, which seeks to recover revenue lost through historic disguised remuneration cases, and early intervention work to encourage individuals to stop using tax-avoidance schemes.

The budget added that other measures to tackle fraud would see a “significant strengthening” of  law enforcement for Bounce Back Loans and further investment to improve the Department for Work and Pensions’ capacity and capability to tackle welfare fraud and error.