MPs on the Public Accounts Committee (PAC) have found that HM Revenue & Customs (HMRC) lacks full disaster recovery arrangements in its critical real time information (RTI) system, which could result in delayed payments for Universal Credit claimants.
The RTI system will automatically update employee tax records, to ensure that workers pay the right tax and/or receive the correct benefits. DWP’s Universal Credit relies on HMRC, both because Universal Credit uses information transferred to it from RTI to calculate payments to claimants and because it will eventually replace tax credits.
However, the committee’s latest report on HMRC’s tax collection found that any problems with RTI could impact citizens claiming benefits via Universal Credit.
Chair of the committee, Margaret Hodge said: “The successful implementation of Universal Credit depends on RTI continuing to work properly but the system does not have full disaster recovery arrangements. System failures could have serious consequences for payments to individuals.”
The report also found that although HMRC has extended RTI’s implementation deadline for smaller businesses, some are still facing challenges in adopting it. MPs are concerned that HMRC is planning to introduce fines for non-compliance with RTI from April 2014, despite these challenges.
HMRC confused about its ‘tax gap’
There has been growing concern that the UK government is struggling to collect a fair amount of tax from global internet companies, which have complex international tax arrangements. For example, it was revealed earlier this year that Google’s UK business paid just £6.09 million, or 1.5 percent, of tax in 2011 on turnover of £395 million. The previous year Google UK paid just £935,000 of tax on revenues of £239 million.
MPs on the committee found that last year HMRC collected less tax in real terms than it managed to collect in 2011-12. Hodge claims that the department isn’t putting enough pressure on global organisations.
“This was despite the stated ambition to crack down on tax avoidance. The tax gap as defined by HMRC did not shrink, but in 2011-12 grew to £35 billion. Yet that measure does not capture all the tax government should be collecting. For instance, this figure does not include all the tax revenue lost to aggressive tax avoidance schemes.
“HMRC holds back from using the full range of sanctions at its disposal. It pursues tax owed by the smaller businesses but seems to lose its nerve when it comes to mounting prosecutions against multinational corporations,” she said.
“It predicted that it would collect £3.12 billion unpaid tax from UK holders of Swiss bank accounts and this figure was built into budget estimates, but in 2013-14 it has so far secured just £440 million. We were astonished that HMRC could not give any reasons for such a shortfall.”
The committee recommended that HMRC should be more willing to pursue prosecutions against individuals and large businesses to test the boundaries of the law and to demonstrate firm action against those who have knowingly misled or withheld information.
The report states: “HMRC has yet to test how existing tax law impacts on global internet-based companies.
“Despite assurances given to us by HMRC a year ago, it remains the case that only one of 16 cases subject to criminal investigations arising from the Lagarde list of Swiss bank account holders has resulted in a prosecution.”