Customer compliance: How HMRC’s compliance yield is split by business area
Published 18 July 2022
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Compliance yield breakdown in 2021 to 2022
In HMRC’s Annual Report, we report compliance results under the headings of Cash Expected, Revenue Losses Prevented, Future Revenue Benefit, Upstream Product and Process and Upstream Operational yield. In our 2021 to 2022 Annual Report we also report, below, from which specific directorate the compliance results were delivered, and the head of duty under which the risks tackled were identified.
In its 2014 to 2015 Standard Report, the National Audit Office (NAO) said that there were inconsistencies between how we recorded Future Revenue Benefit (FRB) and product and process yield. These classifications are explained further in HMRC’s Annual Report and Accounts 2021 to 2022. FRB was reported in the year the compliance intervention concluded, whereas product and process yield is reported when the product or process change has an impact on Exchequer receipts.
At the beginning of the Spending Review 2015 period (financial year 2016 to 2017 to financial year 2019 to 2020), and responding to the NAO’s recommendation, we started recording FRB for the future year or years in which the FRB has an impact on Exchequer receipts. The technical note published provides more background to this methodology.
The following tables show the compliance yield generated by HMRC during 2021 to 2022, broken down by directorate. Head of duty and directorate splits of compliance yield are reported on the same basis as the Annual Report and Accounts. Based on this methodology, this results in the total yield generated of £30,792 million.
Please note, yield from our compliance activity on the COVID-19 support schemes is not included in our measure of compliance yield and is therefore not a part of this analysis.
FRB in 2021 to 2022: Impact of COVID-19
When estimating the impact of our compliance checks on future years’ liabilities, we estimate how much additional tax the taxpayer will pay in each future year as a result of the corrected tax position. This FRB estimate assumes that overall tax receipts in those future years are relatively stable and the taxpayer’s circumstances remain similar. However, tax receipts were impacted by the pandemic in a way we could not have foreseen at the time we calculated the future revenue benefit, meaning we would have overestimated the impact of our investigations.
To take account of this, we made an adjustment to the FRB brought forward from previous years to 2020 to 2021, in line with the reduction in tax receipts compared to the Office for Budget Responsibility’s (OBR) pre-COVID-19 forecasts. The 9% adjustment reduced FRB assessed in previous years impacting in 2020 to 2021 from £5,517 million to £5,020 million.
In 2021 to 2022 tax receipts were broadly in line with the OBR’s pre-COVID-19 forecasts and we have assessed that this will not have had a material impact on FRB brought forward from previous years. As such no adjustment has been made to FRB assessed in previous years impacting in 2021 to 2022.
The value of FRB scored as a result of our compliance activity in 2020 to 2021 and 2021 to 2022 when compared to previous years. This is partly due to lower economic activity and partly because our compliance officers have less certainty over future liabilities and taxpayer circumstances, so are more cautious in their estimates. This impact will be evident in our compliance yield delivery in future years as we report FRB by year of impact on the Exchequer.
Large Business Directorate
| Tax regime | 2021 to 2022 (£ milion) |
|---|---|
| Corporation Tax | 1,835 |
| Excise | 657 |
| Income Tax | 95 |
| VAT | 4,118 |
| Other compliance interventions | 444 |
| Total | 7,149 |
Wealthy and Mid-Sized Business Compliance Directorate (WMBC)
WMBC deals with wealthy individuals (both high net worth and affluent), mid-sized businesses as well as public bodies and specialist employer compliance.
| Tax regime | 2021 to 2022 (£ million) |
|---|---|
| Corporation Tax | 486 |
| Excise | - |
| Income Tax | 1,820 |
| VAT | 1,480 |
| Other compliance interventions | 930 |
| Total | 4,715 |
Note: figures do not sum to total due to rounding
Individuals and Small Business Compliance Directorate
| Tax regime | 2021 to 2022 (£ million) |
|---|---|
| Corporation Tax | 103 |
| Excise | 173 |
| Income Tax | 3,352 |
| VAT | 1,679 |
| Other compliance interventions | 454 |
| Total | 5,761 |
Counter-Avoidance Directorate
| Tax regime | 2021 to 2022 (£ million) |
|---|---|
| Corporation Tax | 48 |
| Income tax | 455 |
| Other compliance interventions | 181 |
| Total | 684 |
Fraud Investigation Service
| Tax regime | 2021 to 2022 (£ million) |
|---|---|
| Corporation Tax | 128 |
| Excise | 2,381 |
| Income Tax | 234 |
| VAT | 594 |
| Other compliance interventions | 353 |
| Total | 3,690 |
Other customer group activities
This includes other activities in relation to Risk and Intelligence Service activities, Debt Collection work and other tax compliance activity.
| 2021 to 2022 (£ million) | |
|---|---|
| Other compliance activities | 8,793 |
| Total | 30,792 |