Corporate report

HMRC's annual report and accounts 2022 to 2023: performance analysis

Published 17 July 2023

Strategic objective 1: Collect the right tax and pay out the right financial support

Our first strategic objective reflects our core purpose and is a priority outcome for us as a department. It touches the lives of almost everyone in the UK, including over 5 million businesses and over 34 million individuals – and the money we collect is spent on public services including schools, the NHS and the police.

How we performed

Collecting the right tax

The vast majority of our customers pay their taxes in full and on time, and most do this automatically or deal with their tax and customs affairs through our online services, without needing to contact us directly.

As your tax service, we’re here to help and ensure that everyone plays by the same rules. We do this through education, guidance, and digital services, as well as traditional post and phone services for those who need them – and by stepping in to take action when tax is at risk of not being paid. We also protect the tax system from attack by organised criminals who deliberately set out to defraud the UK.

Our approach is underpinned by data analysis, which we use to identify risks and target our interventions.

During financial year 2022 to 2023, we collected total revenues of £814.0 billion (£82.9 billion more than last year, an increase of 11.3%). We saw increased revenues in most tax types. A full breakdown of these is provided in figure 36 in the Tax revenues section of the Financial review.

Every year, through our work to ensure the correct tax is paid, we collect and protect billions of pounds of ‘compliance yield’, which is revenue that would have been lost to the Exchequer without our interventions. We set our targets for compliance yield at a level intended to keep the tax gap stable and deliver additional revenues from recent investments in our compliance work.

In 2022 to 2023, we delivered £34.0 billion of compliance yield, which is equivalent to around 4.2% of total revenues. This was below our internal target of £36 billion, but higher than the 2 previous financial years (2020 to 2021 and 2021 to 2022). It is also above 2018 to 2019 and 2019 to 2020, once adjusted for the exceptionally large, one-off cases which settled in those 2 years.

Compliance yield outturns are impacted by revenue effects from our interventions in previous years, so we’re still seeing the effects of restrictions on activity during the COVID-19 pandemic in 2022 to 2023 performance. We also invested in over 4,000 new compliance officers in 2021 to 2022, providing a strong foundation for future years that will help us in maintaining a stable tax gap – but this has contributed to our performance challenge this year as we redeployed staff to train and support our new officers. It takes around 18 months to train new compliance officers and around 4 years for them to reach full productivity due to the training and experience required in these roles.

Our overall compliance yield measure does not include revenue relating to our compliance work on the COVID-19 support schemes, which is measured separately within the COVID-19 financial support schemes section.

Read more in our technical notes on compliance yield and tax by different customer groups.

In focus: managing the UK’s tax gap

To understand whether the right tax is being collected, we measure the UK’s tax gap on an annual basis: this is the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually collected.

We’ve maintained a long-term reduction in the UK’s tax gap from 7.5% in 2005 to 2006 to our latest tax gap figure (for 2021 to 2022) which was estimated to be 4.8% of total theoretical tax liabilities, or £35.8 billion in absolute terms. This means we successfully brought in 95.2% of all tax due.

HMRC is the only tax authority in the world that measures and publishes tax gap estimates annually in such a comprehensive way. A limited number of countries publish comprehensive tax gap estimates less frequently or for specific regimes. Where tax gap data is published, we compare favourably.

The tax gap from small businesses is the largest proportion of the tax gap by customer group, at 56% in 2021 to 2022. We’re focused on helping businesses with a range of tools and services to help them get their tax right, including digital record-keeping, targeted communications and guidance on tax obligations. Read more in the Strategic objective 2 section.

Read our latest tax gap report.

Supporting customers with tax compliance

A substantial portion of the UK’s tax gap is caused by taxpayer error or failure to take reasonable care, rather than deliberate behaviour such as tax evasion or criminal attacks. While there can be individual cases where large amounts of tax are at risk, 56% (£20.2 billion) of the tax gap is attributed to small businesses, with small amounts of tax due from a very large number of taxpayers.

This is why we’re improving our systems to help customers pay the right tax at the outset, rather than fixing problems after they happen. We want to make it easy for customers to understand and comply with their obligations, so we can focus our resources where they make the most difference. Key examples include:

• Digital records for business: from April 2022, all VAT registered businesses have been required to keep digital records and submit their VAT returns using software that is compatible with our systems (unless exempt) – known as Making Tax Digital for VAT. This is a key element of our strategy to reduce the tax gap: it enables us to collect information directly from customers, closer to real time, and prevents mistakes by reducing opportunities for calculation and transposition errors. This in turn frees up our resources to tackle deliberate tax avoidance and evasion. Similar benefits will be achieved through the delivery of Making Tax Digital for Income Tax Self Assessment (ITSA), which will require certain customers to use accounting software to keep digital records and share regular updates with HMRC (read more within the Modernising the tax return process section of Strategic objective 2).
• Investigation and detection risking service: this new system will be up and running in 2023 to 2024 for both VAT and ITSA, with further analysis and risking services to be developed in future. It will improve our data analytics capability and enable more effective risking of 5.5 million VAT and Self Assessment repayment claims each year, with a value of around £100 billion.
• Targeted messages and campaigns: we are promoting good compliance by embedding digital prompts in our online customer services and delivering targeted campaigns and communications for particular sectors or groups of customers to help them meet their tax obligations, particularly where we think tax may be at risk. We will do this to encourage awareness before a tax return is completed, address common errors, or highlight new or complex tax rules. This year, our campaigns included contacting foreign companies regarding PAYE errors, reminding landlords and online marketplace sellers to declare their earnings correctly and contacting employers about meeting National Minimum Wage obligations.

When customers do not comply with the rules, we work with them to put things right and get them on the right track for the future. In 2022 to 2023, we opened 299,000 new compliance checks and completed 280,000 compliance checks. We also take action to tackle businesses and individuals who have tried to cheat the tax system, or who commit serious fraud.

For more detail on our work against serious fraud and economic crime, see the Taking action against serious fraud and economic crime section, and our work to protect society from harm and level the playing field, see the Protecting society from harm section in Strategic objective 3.

Collecting debt

While most of our customers pay what they owe at the right time, we are seeing more customers getting into debt in the current challenging economic conditions, and the average value of customers’ debts is increasing. The majority of tax debt is owed by small and medium-sized businesses.

We have seen a steady increase in the level of tax debt in 2022 to 2023. The value of new debt was over 50% higher in 2021 to 2022 compared to the average for the tax years from April 2017 to March 2020. The flow of new debt has remained at this elevated level throughout 2022 to 2023.

Our analysis shows there has been very little change in the proportion of customers filing their tax returns and declaring their liabilities on time, but there has been a reduction in the number of customers paying on time, which is increasing the volume of new debt. This suggests customers remain committed to complying with their tax obligations but are struggling to pay.

The debt balance at the end of March 2023 was £45.9 billion, £4.3 billion higher than the balance at the end of March 2022. This includes £43.9 billion of tax debt (which equates to 5.4% of revenues) and £2.1 billion of tax credits debt (figures in this paragraph may appear not to sum due to rounding). At the end of 2022 to 2023 we were managing £5.7 billion of debt through time to pay arrangements, in which customers pay off their debt in affordable and sustainable instalments (see more detail below).

Even though we are resolving debts at levels significantly above the average for tax years from April 2017 to March 2020, the volume of new debt exceeds the level at which we are able to resolve it. There are many external factors that influence the debt balance which makes it difficult to predict, but we expect it to remain at an elevated level in 2023 to 2024.

In focus: identifying customers who need extra support

We recognise the importance of supporting people in debt who have a physical or mental health condition or are in difficult personal circumstances. All our debt collection officers undertake training to help them identify customers who need extra support. Where appropriate, we refer customers to our Extra Support Team who provide bespoke additional support.

In October 2022, we announced a partnership with the Samaritans, to improve our understanding of customers in vulnerable circumstances, identify existing trigger points in our processes and highlight areas for improvement.

Samaritans are sharing their expertise with our specialist advisers and guiding them on how to help customers in vulnerable circumstances. Where needed, we will signpost customers to specialist emotional support through a dedicated Samaritans helpline. 

Helping customers to pay in instalments

We do all we can to help those in temporary financial difficulty who contact us. Our flexible Time to Pay arrangements are designed to collect debt in affordable instalments. By the end of 2022 to 2023, we were supporting 912,000 customers in this way, an increase of around 69,000 customers compared to the end of 2021 to 2022.

Self Assessment customers with debts up to £30,000 (that they can pay off over 12 months) and employers with PAYE debts up to £15,000 (that they can pay off over 6 months) can set up a Time to Pay arrangement online, without having to call us. This will be extended to VAT debts in the summer of 2023.

Tax losses

Sometimes we cannot collect money owed to us. As the debt balance increases, we would expect the amount we cannot collect to also increase. Where we decide we can’t collect a debt, it becomes a ‘tax loss’. Tax losses in 2022 to 2023 were £3.8 billion, split between remissions of £0.6 billion and write-offs of £3.2 billion.

‘Remissions’ describes money owed to us which we have decided not to pursue any further – for example, on the grounds of value for money. ‘Write-offs’ is the term we use for money owed that cannot be collected – for example, due to a company liquidation or personal bankruptcy, or where legal protections for creditors of the business prove insufficient and there are no practical means of pursuing the debt.

Losses (remissions and write-offs) have increased in 2022 to 2023, compared to the 2 previous years, and we expect them to increase further as the elevated levels of debt are pursued and insolvencies held back by the moratorium during the pandemic (which applied to all creditors, including HMRC) begin to take place. Over the coming years, the level of annual losses is expected to be around £800 million higher than the past average of around £4 billion, but that is uncertain as it depends on the behaviour of debtors and the wider economic picture.

Our strategy for collecting tax debt

We have developed a new approach to collecting tax debt over the coming years. Our objective will always be to support customers in financial difficulty to manage their way out of debt quickly and sustainably. If customers don’t engage, refuse to pay, or if a business has little chance of recovery, we will take prompt enforcement action to collect the tax due where it is cost effective to do so.

The 4 pillars of our debt strategy are:

• Prevent: to prevent debts arising we will promote payment on time – for example, by designing tax policy to minimise the opportunity for debt to arise
• Tailoring: we will bring together all relevant information about a debtor to make an informed decision on the best next step to increase the amount of debt cleared
• Effective and efficient: we will ensure our steps and processes are as efficient as possible for our staff and for debtors, so debts are cleared as quickly and cheaply as possible
• Adaptability: we recognise that there are factors outside our control that affect the debt balance and debtor behaviour, so we will adapt our debt management functions according to the circumstances

We are committed to being a responsible creditor. This means that we clearly articulate the options and their consequences to debtors and, specifically, individuals who are in problem debt. We will continue to champion industry best practice and the Government Debt Standard so we can ensure equitable outcomes for both debtors and HMRC.

We are already making progress in implementing our new strategy, including simplifying and improving our Budget Payment Plan service, which helps Self Assessment customers plan for their upcoming tax payments, and doing more to promote the service. We are also expanding our Self-Serve Time to Pay scheme, to give greater flexibility to people and businesses in managing their debt online which will ensure more debt is in a managed position.

Read about the Government Debt Standard.

In focus: Our role in supporting Ukrainian refugees

We are actively working with other government departments to ensure that Ukrainian refugees can apply immediately for appropriate financial support, such as Child Benefit, and have correct guidance on their tax obligations in the UK.

By 31 March 2023, we had received 26,182 Child Benefit claims from Ukrainian refugees, with over 25,000 claims in payment for nearly 37,000 children. Together with the Department for Levelling Up, Housing and Communities, we also supported the ‘Homes for Ukraine’ sponsorship scheme by legislating to exempt the associated payments from tax.

For more detail on our support to the cross-government response to the war in Ukraine, see the Supporting the cross-government response to the war in Ukraine section in Strategic objective 5.

Delivering financial support

As well as ensuring the right tax gets paid, we also play a vital role in helping individuals and families with financial support – either through established government schemes or in response to urgent priorities identified by the government.

Child Benefit and Tax-Free Childcare

In 2022 to 2023, we provided Child Benefit to more than 7 million eligible families, supporting around 12.2 million children. We have processed over 743,000 claims for Child Benefit this year. We also administer Tax-Free Childcare – and in 2022 to 2023 we saw a continuing upward trend of working parents claiming this. In March 2023, we supported 477,000 families with Tax-Free Childcare for 577,000 children, compared with 384,000 families and 458,000 children in March 2022.

Cost of Living Payments

In May 2022, the government introduced Cost of Living Payments to qualifying households who receive tax credits from HMRC, or other qualifying benefits from the Department for Work and Pensions. We administered payments of up to £650 for eligible tax credits customers, paying the first payment of £326 (to 1.2 million customers) as of September 2022 and a further payment of £324 (to 1 million customers) as of November 2022.

The estimated levels of error and fraud in the 2022 to 2023 Cost of Living Payments were very low, between 0.1% (£0.6 million) and 0.3% (£1.7 million). This is attributable to the design of these payments, which minimised the risk of non-compliance while ensuring people received the financial support they needed as quickly as possible. This included working with the Department for Work and Pensions to avoid duplicate payments to the same household.

Tax credits

Tax credits are designed to support families with children, tackle child poverty and help to make sure that work pays more than welfare. We provided Child Tax Credit and/or Working Tax Credits to around 1.15 million families and 2.13 million children in 2022 to 2023.

From April 2022, these tax credits were permanently closed to all new claims, with all future benefits paid through Universal Credit, administered by the Department for Work and Pensions. Since 2013, 1.75 million customers have moved from tax credits to Universal Credit (UC) following a change in their circumstances. From May 2022, we started to migrate the remaining 1.2 million customers. This activity is expected to scale up from April 2023 to a peak of around 80,000 migrations per month. We expect to have completed all the migration activity by March 2025. Within this time frame we also expect to complete the migration of around 30,000 eligible customers from tax credits to Pension Credit. This leaves only a small number of tax credit customers ineligible to claim Universal Credit, for example, International Cases and those without a National Insurance Number. Activity is under way to ensure legislation is in place for April 2025 that effectively closes tax credits.

Tackling error and fraud in financial support and tax relief

While effective financial support for individuals and targeted tax relief for businesses plays an important role in supporting the economy, we are always focused on ensuring the system is trusted, fair, and protected from harm caused by mistakes or intentional fraud.

Tax credits and Child Benefit

Our approach to tackling error and fraud in tax credits and Child Benefit payments is increasingly focused on prevention – guiding customers to meet their obligations voluntarily and manage their awards more effectively through education and reminder campaigns.

Our target is to keep overpayments as a result of error and fraud in the tax credits system at no more than 5% of paid entitlement. As it takes around 14 months after the end of the tax year until all tax credits claims are finalised, our latest estimate of error and fraud for tax credits relates to 2021 to 2022. Our estimate suggests that we met our expectation, with an error and fraud overpayment rate of 4.5% (£0.51 billion) of paid entitlement, compared to a final estimate of 4.7% (£0.73 billion) in 2020 to 2021.

Tax credits underpayments occur when the finalised award value is lower than the customers actual entitlement. The latest estimate for underpayments in 2021 to 2022 is 0.4% (£40 million), decreasing in percentage terms from the 2020 to 2021 estimate of 0.8% (£120 million).

Our estimate of the overall level of Child Benefit overpaid due to error and fraud in 2022 to 2023 is 0.8% of total Child Benefit expenditure (£90 million), compared to the 2021 to 2022 estimate of 0.9% (£105 million). The 2022 to 2023 estimate will be the last produced using our current methodology, from 2023 to 2024 we will change the method of measuring Child Benefit error and fraud to a monthly sampling approach. This will make it easier to assess the duration of error and fraud as we will assess eligibility within each month, rather than the full year.

Read more about tax credits error and fraud in the Principal Accounting Officer’s report, in the Control challenges in financial year 2022 to 2023 section.

Research and development tax reliefs

We administer research and development (R&D) tax reliefs, which support companies that work on innovative projects in science and technology. The reliefs are vital to the government’s economic strategy: they help drive innovation, growth and productivity. Therefore, it is important that the support they provide is timely and effectively targeted.

We have recently significantly updated our methodology for estimating the level of non-compliance in these schemes, with the latest estimates for Small and Medium Enterprises (SME) produced using a random enquiry programme. This introduces a lag into our estimates due to the timing of Corporation Tax returns and the time it takes to carry out a compliance enquiry. Our estimate of the overall level of error and fraud for both schemes for 2020 to 2021 is 16.7% (£1.13 billion), higher than the previously published estimate of 3.6% (£336 million) for 2020 to 2021. The level of error and fraud in 2020 to 2021 is 24.4% (£1.04 billion) for the SME scheme and 3.6% (£90 million) for the RDEC (Research and Development expenditure credit) scheme. Expenditure on R&D reliefs during the year was £6.8 billion (see note 5.1.5 in the Resource Accounts).

We found fraud indicators in under 10% of claims examined in the random enquiry programme and these claims accounted for under 5% of the total value claimed. To be classified as fraud, a caseworker needs to have found evidence that the claimant deliberately set out to misrepresent their circumstances to get money to which they were not entitled. This indicates that the majority of non-compliance is down to other behaviours. As with other regimes, the term ‘error and fraud’ encapsulates this full range of behaviours, from mistakes and failure to take reasonable care through to deliberate non-compliance.

We remain committed to ensuring that tax reliefs are used in the right way. In 2021, the government announced a package of measures to help address concerns that the level of non-compliance in the R&D schemes was too high. This included measures to increase the quality of information we receive upfront from claimants, and the creation of our cross-cutting Anti Abuse Unit. Further changes to relief rates were announced in 2022, with the aim of reducing the SME scheme’s exposure to abuse.

The impact of these measures is not reflected in the above estimate for 2020 to 2021 as the measures were not in place during that financial year. These measures have been designed to significantly reduce error and fraud following their implementation. The full impact will not be known until all legislative changes take effect and evaluations have taken place.

In April 2022, we identified irregular claims considered to be a criminal attack on the R&D payable tax credit regime. In response, we implemented additional measures including further payment identification and verification controls and have since refused £85 million of suspected fraudulent claims and issued over 2,500 letters challenging suspect claims. Additionally, we have arrested 9 people suspected of conspiring to submit £16 million of fraudulent claims.

We will set out our compliance approach in more detail in an R&D Compliance Action Plan, which we will publish this summer.

Read more about research and development error and fraud in the Principal Accounting Officer’s report, in the Control challenges in financial year 2022 to 2023 section.

Our tax relief statistics are published on GOV.UK.

COVID-19 financial support schemes

The COVID-19 financial support schemes ended during 2021 to 2022, so there was no significant expenditure related to them in 2022 to 2023, but we continued to recover the amounts overpaid owing to error and fraud.

We published estimates of error and fraud for the COVID-19 financial support schemes in our 2021 to 2022 Annual Report and Accounts. Since then, we have completed a second random enquiry programme for the Coronavirus Job Retention Scheme (CJRS), conducted a new random enquiry programme and have more complete Self Assessment tax return data for the Self-Employment Income Support Scheme (SEISS) and have newly available insight from operational compliance activity for both schemes.

Across the full lifecycle of the CJRS, SEISS and Eat Out to Help Out financial support schemes (covering 2020 to 2021 and 2021 to 2022), the total value of error and fraud is now estimated to be between £3.3 billion (3.3%) and £7.3 billion (7.4%), with a most likely estimate of £5.0 billion (5.1%). This is an increase from last year’s previously published (provisional) estimate (between £3.2 billion (3.3%) and £6.4 billion (6.5%), with a most likely estimate of £4.5 billion (4.6%)) but less than the original estimate in 2020 to 2021 (between £4.5 billion (5.5%) and £8.0 billion (9.9%), with a most likely estimate of £5.8 billion (7.2%)). These will be our final estimates of error and fraud for the COVID-19 financial support schemes.

At the Spring Budget 2021, the government announced a 2-year investment of over £100 million in the Taxpayer Protection Taskforce. The intention of the Budget measure was to provide additional resources to tackle fraud within the COVID-19 support schemes and, over a period of time, ensure that there would be no impact on our tax compliance results. The funding enabled us to recruit and train new colleagues to backfill those staff redeployed onto COVID-19 support scheme compliance work. By September 2023, we expect to have deployed over 2,500 staff against the Budget expectation of 2,440 staff.

Up to the end of 2022 to 2023, we opened 46,000 individual compliance checks, exceeding the Budget 2021 target of opening 30,000 interventions in this time period.

The taskforce had recovered £520 million by the end of March 2023. This is below the original expectation of between £800 million and £1 billion due to individual recoveries per customer being lower than originally expected, there being less evidence of error and fraud than initially estimated, and due to the majority of errors being low value. We are well on track to meet the revised expectation of between £525 million and £625 million by the time the taskforce transitions to ‘business as usual’ activity in September 2023.

As with our approach to non-compliance in the tax system, we address the majority of fraudulent COVID-19 scheme claims through cost-effective civil investigation procedures. Where appropriate we will conduct criminal investigations and seek criminal prosecutions if it is in the public interest, particularly where the behaviour is very serious or where a criminal prosecution will act as a strong deterrent.

Since the start of the schemes and by the end of March 2023, we have commenced 47 criminal investigations into suspected fraud in the COVID-19 support schemes, which are now at various stages, and made a total of 75 arrests. These investigations often include fraud against more than one financial support scheme, and broader tax fraud, and can involve a large number of companies, claims and suspects.

As planned, in March 2023, we began transitioning the work of the taskforce to business-as-usual tax compliance work that will be concluded by September 2023. Moving the work of the taskforce into business-as-usual compliance activity is the most efficient way to ensure we protect and recover taxpayers’ money, and will allow us to deal with all aspects of potential non-compliance together, including those related to the COVID-19 support schemes.

The table below sets out the post-payment compliance activity we have undertaken for each of the COVID-19 support schemes from 2022 to 2023.

Table 1: 2022 to 2023 post-payment compliance activity results (note 1)

	Number of One to Many nudge letters	Value of One to Many Disclosures	Number of One to One activities opened (note 3)	Number of One to One activities closed	Value of One to One Enquiries
CJRS	-	-	8,391	7,981	£88.8m
SEISS (note 2)	-	£0.8m (note 4)	3,199	6,101	£26.7m
SEISS non-filers (note 5)	48,624	-	51,639	45,888	£166.9m
Eat Out to Help Out Scheme	-	-	6	471	£10.9m
Total	48,624	£0.8m	63,235	60,441	£293.5m

Note 1: Figures may not sum due to rounding.

Note 2: Following an internal review the total number of SEISS cases opened during 2021 to 2022 was 15,656 and total number of SEISS cases closed was 14,427.

Note 3: One to One activity includes compliance interventions and officers assessments.

Note 4: Value of disclosures are as a result of residual activity from 2021 to 2022.

Note 5: In addition to COVID-19 scheme compliance recoveries, HMRC took steps to ensure that SEISS payments were correctly declared on Self Assessment tax returns. This resulted in additional Income Tax compliance yield received through Self Assessment returns of £128.2 million. These amounts are reported within the Compliance yield metric of the Strategic objective 1 key performance metrics.

More detail on our approach to estimating the level of error and fraud from COVID-19 financial support schemes can be found in our supporting technical publication.

Our commitments: strategic objective 1

In financial year 2022 to 2023, alongside all our activity to collect the right tax and pay out the right financial support, we made 12 specific commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Commitment	What we delivered	Status
Taxpayer Protection Taskforce (TPT)	We did not meet the initial expectation to recover between £800 million to £1 billion across the lifecycle of the taskforce. This is due to lower amounts of error and fraud in the schemes than originally estimated, and a large volume of low value errors. The taskforce will have recovered between £525 million and £625 million by the time it transitions to ‘business-as-usual’ activity (September 2023), in line with revised operational expectations. The taskforce had recovered £520 million by end of March 2023. Read more in the COVID-19 financial support schemes section.	Not on track
Deliver £1.1 billion additional tax compliance yield between 2020-21 and 2024-25	We met our additional yield expectation for 2022 to 2023 by expanding our tax compliance campaigns and projects. We remain on track to deliver the amount included in the OBR’s latest forecast for the scorecard period ending 2024 to 2025.	On track or complete
Individual Savings Account (ISA) Compliance	We met our commitment to fully resource and train our ISA Compliance Team by April 2022 in response to recommendations in the Gloster Report (an independent investigation into the Financial Conduct Authority’s regulation and supervision of London Capital & Finance). During 2022 to 2023, the team completed audit work as expected.	On track or complete
New anti-evasion and other measures to tackle the tax gap	We implemented measures to tackle tax abuse in the construction sector. We also continued working to introduce legal powers for tougher sanctions on illicit tobacco sales, as well as plans to strengthen transfer pricing documentation requirements for large multinational companies, helping to prevent profit shifting to avoid tax. This is in line with the Organisation for Economic Co-operation and Development (OECD)’s Transfer Pricing Guidelines.	On track or complete
Manage Time to Pay	We continued to offer customers in financial difficulty ‘Time to Pay’ arrangements, where appropriate, extending our Self- Serve Time to Pay service to Employers PAYE customers, with a plan to extend this to VAT customers in 2023 to 2024.	On track or complete
Debt Respite Scheme	In 2022 to 2023, 4,930 customers used our Breathing Space scheme to pause all creditor actions for up to 60 days. The second phase of the scheme (Statutory Debt Repayment Plan) allowing customers to repay their debts, usually over an agreed 3-to-10-year period, has been paused while the government reviews the Personal Insolvency Framework.	On track or complete
Support the introduction of Universal Credit	We continued to support the Department for Work and Pensions with the introduction of Universal Credit (UC), with managed migration of tax credit recipients to UC to be completed by March 2025. This included delivering IT and guidance to support UC migration and updating records with National Insurance Credits data. Read more on Tax credits.	On track or complete
Modernise our IT estate	We continued to modernise our IT estate by taking full advantage of cloud hosting, so our systems are up to date and compliant with security and data requirements. This will make our systems perform better, be more resilient, and be easier to update and continues our commitment to protect customers’ data. Delays to some IT programmes led to slippage into 2023 to 2024. Read more on Building a resilient tax system in Strategic objective 5.	Risk to delivery
Plastic Packaging Tax	On 1 April 2022, we introduced the UK’s new, world-leading tax on plastic packaging containing less than 30% recycled plastic. The tax supports the government’s resources and waste strategy. This year we focused on helping customers understand the new tax and their obligations.	On track or complete
Economic Crime Levy	We laid Economic Crime Levy (ECL) Regulations in Parliament and published guidance to support businesses within the scope of ECL. We continued to work on the IT needed to enable ECL reporting and payment to be introduced by September 2023. The Amber RAG reflects the number of IT updates that need to be made and tested in a compressed period before September 2023.	Risk to delivery
Health and Social Care Levy	We implemented a 1.25 percentage point increase to the main rates of National Insurance contributions from 6 April 2022, ahead of the proposed Health and Social Care Levy being introduced from 6 April 2023. In September 2022, the government cancelled the levy. The 1.25 percentage point increase was reversed with effect from 6 November 2022.	On track or complete
Residential property developer tax	We implemented the new tax on the UK residential property development sector to help to pay for the costs of removing unsafe cladding in residential buildings in England and updated the Company Tax return to make it easier for those within scope to declare their profits and tax due.	On track or complete

 Key performance metrics: strategic objective 1

Figure 1: Compliance yield (note 1)

Compliance yield is revenue collected and protected that would otherwise have been lost to the Exchequer through error or deliberate non-compliance such as tax avoidance or evasion. It consists of a number of components as shown below.

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 1.

Accelerated payments: Disputed amounts of tax that people using tax avoidance schemes are required to pay up front within 90 days, and an estimate of the behavioural change caused by this policy. In figure 1 these are incorporated within cash expected and upstream product and process yield from 2021 to 2022.

Upstream product and process yield: Estimated annual impact on net tax receipts of legislative changes to close tax loopholes and changes to our processes which reduce opportunities to avoid or evade tax.

Future revenue benefit: Estimated effect of our past compliance work on customers’ compliance in the current tax year.

Revenue losses prevented: Revenue that we prevented from being lost to the Exchequer.

Upstream operational yield: (Categorised with cash expected until 2019 to 2020) Estimated impact of operational activities undertaken to promote compliance and prevent non-compliance before it occurs. Does not include yield from legislative or process changes.

Cash expected: Additional revenue due when we identify past non-compliance, with a reduction to reflect revenue that we estimate will not be collected.

Read more in our technical note on compliance yield.

Figure 2: Receivables

When individuals and businesses owe taxes, duties, or tax credits to HMRC, we call these amounts ‘receivables’ for accounting purposes (this becomes a debt if the amount owed becomes overdue for payment and is not under appeal). At 31 March 2023, gross receivables amounted to £62.9 billion, compared to £54.5 billion at 31 March 2022, consisting of £60 billion for taxes and duties owed to HMRC (see Trust Statement, Note 4 and £3.0 billion for tax credits owed to HMRC (see Resource Accounts, Note 5.1.2) (note 1)

Note 1: Figures in this paragraph may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 2.

Figure 3: Total debt balance (including as a % of overall revenue)

This chart shows the trend of our total debt balance between 2018 to 2019 and 2022 to 2023 and tax debt as a proportion of overall tax revenue.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 3.

Figure 4: Tax debt and tax losses compared to revenue

This chart shows a comparison of tax debt to total tax revenue.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 4.

Strategic objective 2: Make it easy to get tax right and hard to bend or break the rules

We want to make tax and customs straightforward for customers – making things easy, preventing non-compliance and being here to support when people need it. This chapter reports on how we performed across our service channels, as well as our progress in transforming the system to fit more seamlessly with the way people run their businesses and lives.

How we performed

Our customer base is growing and more of our customers have increasingly complex needs. Over time, this is creating increased demand for our services and putting more pressure on the tax gap. At the same time, there are pressures on government spending – and our 2021 Spending Review settlement commits us to greater efficiencies as a department. Rightly, every pound we spend needs to deliver value for money.

All these factors taken together are making it harder to meet our service standards, especially when combined with the typical short-term challenges and demand spikes we face as an operational department. We’re responding with a clear strategy to modernise the tax administration system: simplifying things for our customers, improving guidance and removing the causes of unnecessary contact.

Six ways we are improving our services

Introducing quicker and easier digital services via the HMRC app and online in 2023 to 2024, with improved digital accounts designed around customers’ needs and tasks.

Making it easier for customers to view their personal details and notify us of a change to their circumstances so they automatically update all the HMRC services they use.

Enabling customers to store their National Insurance details in a chosen device such as a digital wallet, so they can easily locate them when needed without the need to call.

Introducing a new Direct Debit Variable Payment Plan that allows employer PAYE customers to complete a direct debit instruction once, rather than set up monthly single payments. Over 77,500 businesses have used this since October 2022.

Using Open Banking technology for customers to authorise payment from their bank to HMRC – with all the correct details auto-populated in a couple of easy and secure steps

Supporting GOV.UK One Login, so customers need only prove their identity once to use most government services. In 2022 to 2023, we adopted part of this service early, so customers using our online services have an alternative way to prove their identity.

Making tax easier through digital services

To deliver the modern, efficient service that our customers expect, it’s vital that we help more people and businesses to engage with the tax and customs system in ways that are easy, fair, less prone to error or fraud, and closer to real-time.

Use of our digital channels is increasing fast – overall, our personal and business tax accounts, and app, were accessed almost 200 million times in financial year 2022 to 2023 compared with 61.6 million times in 2016 to 2017.

These services provide a quick and easy way for customers to carry out simple tasks like finding their national insurance number or Unique Taxpayer Reference, as well as more substantive tasks like claiming a tax refund or filling out and submitting a tax return. When customers use our online services, satisfaction is generally high at over 80% – indicating the ease and speed with which they meet customer needs.

An increasing number of customers are using the HMRC mobile app – with more than 1 million new users and more than 56 million logins in 2022 to 2023. It lets people view their PAYE tax code and annual tax summary, manage details for tax credits and Child Benefit, file their Self Assessment return, pay their tax bill and use a tax calculator, all from smartphones or tablets.

Since February 2022, Self Assessment customers have been able to pay their tax bill using Open Banking via the HMRC app, making 177,000 payments totalling over £240 million. Since November 2022, employers with eligible PAYE debt can also make arrangements online via our Self-Serve Time to Pay service, with over 1,000 payment plans with a value of £4.2 million set up online and over £650,000 received in upfront payments by the end of March 2023. Our customers rate the app highly, with a current rating of 4.8 out of 5 (Apple app store) and 4.7 stars out of 5 (Google play store).

We want to go much further in using new and improved online services to make it easier for individuals and small businesses to get things right first time and find the support they want without the need to call us. We’re already replacing old paper-based processes with modern, digital services. For example, during 2022 to 2023 we enabled Child Benefit claimants to view their claim details and proof of entitlement online whenever they need it, rather than calling us and waiting up to 15 days for a letter. This means customers can access grants and Local Authority Services quicker, and without having to call us or wait for a paper letter.

In 2022 to 2023 we worked towards delivering a major milestone, launching a new online Child Benefit claim service in May 2023. This enables most parents to complete the process fully online and receive payment within days rather than weeks. Later this year, we’ll be providing an improved digital experience and bringing together more digital services in the HMRC app and online.

Modernising the tax return process

We’re modernising the tax return process and giving more customers the ability to file via compatible software that talks directly to our systems. Our aim is to save businesses time on tax administration and improve accuracy in tax returns by reducing avoidable errors.

Transforming VAT returns

As of April 2022, using Making Tax Digital (MTD)-compatible software became the standard way for VAT-registered businesses to file their tax returns. This was a significant change for businesses and a big milestone for us.

Nearly 2 million VAT-registered businesses now keep their records and file their returns in this way. Our latest data shows that over 99% of returns from VAT-registered businesses over the £85,000 VAT threshold did so using MTD-compatible software, as did 98% of returns from those under the threshold (up from 52% in April 2022, due to a sustained communications campaign). In total, we have processed over 25 million VAT returns via this route to date.

A peer reviewed evaluation based on the VAT returns of 400,000 businesses showed that filing with MTD-compatible software is helping to ensure the right amount of tax is collected from businesses and reducing opportunities for error or miscalculation. It is predicted to deliver revenue of over £3 billion up to the end of 2027 to 2028.

Further studies show that two-thirds of businesses felt that using MTD-compatible software has reduced the potential for mistakes in at least one aspect of their record-keeping, while 80% of businesses said that they found the process of filing through MTD-compatible software easy. Evidence also points to the use of MTD-compatible software encouraging businesses to digitalise other elements of their business due to the productivity benefits.

The future of Self Assessment returns

In December 2022, the government announced that, from April 2026, self-employed individuals and landlords with income of more than £50,000 will have to keep digital records and submit their Income Tax Self Assessment information to HMRC through MTD-compatible software. Customers with an income between £30,000 and £50,000 will need to do this from April 2027.

Introducing the requirement to keep digital records and submit Income Tax Self Assessment information via MTD-compatible software is a crucial part of our strategy for modernising the tax system. Postponing the introduction of MTD for Income Tax Self Assessment means we have more time to test and develop the service with the software industry and agents, to ensure we deliver the best possible experience for users. This extra time will also enable us to provide opportunities for the self-employed, landlords and agents to get involved in testing before it’s mandated.

Read more at Evaluating additional tax revenue from Making Tax Digital for VAT.

In focus: How do customers rate their experience with us?

We conduct regular surveys of our customers on their experience with us, using the findings to gain insight, better understand our customers’ needs, and take action to improve our operational performance. Overall experience ratings were unchanged amongst Individuals, Small Businesses and Agents compared with 2021.

Here is how small businesses, individuals and agents rated HMRC as an organisation in 2022:

Ease of dealing with tax issues

Individuals	57% positive
Small Businesses	73% positive
Agents	44% positive

Overall experience of dealing with HMRC over the last 12 months

Individuals	65% positive
Small Businesses	74% positive
Agents	45% positive

Ease of finding information from HMRC

Individuals	57% positive
Small Businesses	60% positive
Agents	46% positive

Read our full Individuals, small business and agents survey.

Supporting our customers to get tax right

Although we are seeing increasing numbers of customers using digital channels to resolve their tax affairs, we recognise that some customers continue to need direct support through services like phone or post. Our Charter sets out the standards of service that customers can expect from us – read more in Embedding our Charter standards in Strategic objective 3.

We want our customer service performance to meet our service standards and at the beginning of 2022 to 2023 we had an ambitious plan to achieve this, which included stretching efficiency improvements. We were able to deliver some, but not all, of these improvements meaning service levels during the year weren’t always where we wanted them to be. Other factors have added further pressure, such as higher than expected inflation, while the decision to freeze tax thresholds means that over time there are more customers with complex tax affairs requiring active management in the tax system.

Although most of our customers pay their tax automatically through PAYE or online without needing to contact us, we still handle a very large amount of customer contact each year. In 2022 to 2023, we had over 38 million phone contacts and over 16 million items of correspondence where customers require a response. We’re here to support every customer who needs it, but much of the contact we receive isn’t necessary – for example, around two thirds of all Self Assessment calls can be resolved by customers themselves online. That’s why, in this challenging environment, we need to enable and direct those customers who can to self-serve using digital services in the first instance. This is vital in order for us to focus our adviser-led services, such as phone lines, on those who have complex circumstances, are unable to engage with us digitally or otherwise need extra help.

While we make this transition, it remains difficult at times to match our resource levels with demand for our phone and post services, particularly when other short-term factors also impact on operational delivery. For example, as we embedded our new telephony platform which will improve the customer experience, we saw longer call handling times, which alongside some IT outages led to repeat calls and increased demand on our services. Some of our necessarily fast-paced and ambitious automation activity has not come online as quickly as planned.

We also need to respond to changing behaviour of those within the tax system. Throughout the year, we received unpredictable levels of submissions from some High Volume Repayment Agents, often in bulk and often including large numbers of ineligible claims. During these periods, it was difficult to allocate our resource effectively, which delayed our response to other claims and had knock-on consequences for the rest of our correspondence performance.

A key factor in managing the level of customer demand is ensuring that we respond to correspondence before customers call us to chase progress – this simply adds to the pressure on our phone lines. In 2022 to 2023, we made considerable progress in improving the proportion of customer correspondence that we turn around within 15 working days, increasing from 45.5% across 2021 to 2022 to 72.7% – much closer to the 80% service standard we aim to achieve. We turned around 89.4% of our customer correspondence within 40 days, up from 64.1% in 2021 to 2022, but below our service standard of 95%.

While we maintained the proportion of callers wanting to speak to an adviser who were able to do so at 2021 to 2022 performance levels (77.3%) for several months of the year, due to the factors already described, our final average for the end of the year was below this at 71.1% – lower than our service standard of 85%.

We are taking a number of other actions to reduce the need for customers to contact us via phone and post. For example, our digital assistant automatically helps customers to find the information they are looking for and links the customer to an adviser through webchat if it can’t locate the answer. Around 66% of customers who use the assistant don’t need further support.

In January 2023, we trialled sending a direct website link by text to customers who phone us with simple, routine queries, like finding out their reference number or resetting a password. Following positive feedback, we’ve also expanded access to our new online performance dashboard, so all customers can use it to check current service levels and processing times to find out when to expect a response from us, without having to call.

Where customers do need to get in touch over the phone, we’ve introduced a new system that uses features such as intelligent voice recognition to improve and simplify the customer experience. Migrating our telephony services onto this new platform has enabled us to streamline the range of helpline numbers that customers use to contact us.

Since the end of 2022 to 2023, we have taken additional steps to manage our customer helplines more efficiently. For example, from 12 June 2023, we piloted a new seasonal model for our Self Assessment helpline, closing it for 3 months during this quieter time of year so that our expert advisors can focus on other priority areas of work, and in turn reduce the need for customers to call looking for progress updates on those issues. Self Assessment support is still available via webchat, online services and increased capacity in our Extra Support Team, so that customers who really do need to speak to us about Self Assessment still can.

Our commitments: strategic objective 2

In the financial year 2022 to 2023, alongside all our activity to make it easy to get tax right and hard to bend or break the rules, we made 5 commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Commitment	What we delivered	Status
Contact Engagement Programme	We successfully decommissioned our legacy telephony system and rolled out a modernised platform to improve our telephony and customer service tools that has handled over 14.8 million calls up to the end of March 2023.	On track or complete
Making Tax Digital for VAT	We met our commitment to roll out Making Tax Digital for VAT-registered businesses with a turnover below £85,000, who were mandated to use it from April 2022. Filing through this software is now the norm for 99% of VAT customers.	On track or complete
Making Tax Digital for Income Tax Self Assessment (ITSA)	In December 2022 the government announced more time for customers and HMRC to prepare for Making Tax Digital for ITSA. Our focus is on enabling MTD-compatible software for ITSA from April 2026, making the filing of tax returns easier, fairer, less prone to error and closer to real time. We are reviewing whether or how the service can be shaped to meet the needs of small businesses. Read more on the future of Self Assessment returns.	Risk to delivery
Single customer account	The Single Customer Account programme is providing customers with simple, secure and personalised services on the HMRC app and online. We have delivered a new online Child Benefit claims service and launched online features to view Child Benefit payments, get proof of entitlement or change bank details – so customers no longer need to call for these. This improves the customer experience and reduces costs to taxpayers. We need to deliver more services to meet our ambition for more customers to shift to digital services.	Risk to delivery
Unique Customer Record	The Unique Customer Record will give a holistic view of every customer, unlocking greater potential for us to support customers who need help and identify those trying to avoid doing the right thing. We have embedded more effective governance to standardise and improve data quality, and how we access it. We also carried out our first test of a new ‘data matching’ tool, using over 1 million customer records – a crucial first step in merging data to provide a single view of each customer. After refining the tool’s capabilities, we will test it on a further 8 million records. This commitment is Amber due to a delay in delivering some milestones this year.	Risk to delivery

Key performance metrics: strategic objective 2

Figure 5: Customer experience – Net Easy for digital, webchat and telephony contact

In 2020, we introduced a new performance metric called Net Easy. This metric is based on a survey offered to customers after every telephone and digital interaction asking the question: ‘How easy was it to deal with us today?’. The score represents the total of positive responses minus the total of negative responses, to achieve a net score. Whilst our overall score of +59.8 is below our service standard of +70, our expectation for this measure was always uncertain with limited data to benchmark our performance.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 5.

Figure 6: Customer experience – 3-year trend for Net Easy for Digital, Webchat and Telephony contact

We started tracking Net Easy on our digital interactions in 2020 to 2021, expanding the scope to include telephone interactions in 2021 to 2022. The chart below shows the trends for each category over that period.

• 2020-21 (includes webchat and digital services)	72.2
  2021-22 (includes webchat, digital services and phone services)	65.5
  2022-23 (includes webchat, digital services and phone services)	59.8

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 6.

Webchat adviser attempts handled

The proportion of customers requesting a webchat who were then able to chat to an adviser remained consistent throughout 2022 to 2023 and averaged 94.7% for the year, a slight increase from 2021 to 2022.

Figure 7: Telephony adviser attempts handled

Telephony Adviser Attempts Handled Percentage (AAH) is one of our core customer service performance metrics. It measures the proportion of callers that successfully got through to an adviser after hearing the automated messages and choosing to speak to an adviser. In 2022 to 2023 we received over 38 million phone calls (of which 28 million were handled either by an adviser or our automated systems) compared to receiving 35 million in 2021 to 2022.

Historically we have reported against customer facing telephone numbers (such as tax credits, PAYE and SA) only. From 2021 to 2022, to enable HMRC to provide a complete picture of our telephony performance, we now include all HMRC helplines (for example, phone lines used when a call is transferred from an advisor for further back-office support number or lines used by Debt Management for customers to respond directly to following a campaign).

• 2020-21 (includes customer facing telephone numbers)	71.6%
  2021-22 (includes all HMRC helplines)	77.3%
  2022-23 (includes all HMRC helplines)	71.1%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 7.

Figure 8: % of customer correspondence responded to within 15 working days of receipt

In 2022 to 2023 we received a total of 19 million post items and 2.8 million iForms, compared to 16.3 million post items and 2.3 million iForms in 2021 to 2022 respectively. Out of the total customer correspondence received this year, 16 million required a direct response from HMRC. The proportion of these turned around within 15 working days of receipt was 72.7% across the year.

• 2018-19 (includes priority 1 and priority 2 post)	76.6%
  2019-20 (includes priority 1 and priority 2 post)	70.3%
  2020-21 (includes priority 1 and priority 2 post)	64.4%
  2021-22 (includes priority 1 and priority 2 post and iForms)	45.5%
  2022-23 (includes priority 1 and priority 2 post and iForms)	72.7%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 8.

Strategic objective 3: Maintain taxpayers’ consent through fair treatment and protect society from harm

We have a responsibility to be impartial and ensure that everyone plays by the same rules. This chapter sets out our work to build public trust and maintain taxpayer consent through the way we operate, as well as our work to protect society from harm by tackling deliberate wrong-doing.

How we performed

Building public trust

Public trust is crucial for us to operate effectively and ensure the correct tax is paid. It’s vital that we support our customers when they’re trying to get things right and we’re committed to making our systems, services and processes inclusive and fair for all customers, recognising people’s different personal situations.

Embedding our Charter standards

The HMRC Charter sets out the standards of service and behaviour that our customers should expect from us, including how we will support customers who need extra help and how we will keep customer data secure. Our Charter Annual Report describes our progress in embedding the - Charter standards and our priorities to further improve our customers’ experience of interacting with us. We continue to make good progress but have more work to do to truly embed our Charter standards across the department. In 2022 to 2023 work included:

• introducing new and improved guidance to improve the clarity, and tone of our communication with customers, supporting them to get things right
• continuing to help colleagues develop the skills they need to deliver the Charter standards through our work to embed the Compliance Professional Standards into our compliance work
• ensuring our customers who need extra help are identified at the earliest opportunity, and signposting those going through a difficult time to appropriate support such as the Samaritans – see Strategic objective 1, Identifying customers who need extra support.

In focus: Do customers have confidence in HMRC?

The figures below show how small businesses, individuals and agents rated HMRC in 2022. Positive ratings of confidence in HMRC by small businesses and agents have decreased since 2021, with a smaller drop for individuals. We will be conducting an agent contact review to identify specific areas for improvement.

Confidence in the way HMRC does its job

Individuals	43% positive
Small Businesses	54% positive
Agents	35% positive

HMRC applies penalties and sanctions equally

Individuals	34% positive
Small Businesses	39% positive
Agents	49% positive

Read our full Individuals, small business and agents survey.

Read our Charter Annual Report for 2021 to 2022 at GOV.UK.

Read our principles of support for customers who need extra help at GOV.UK.

Using our powers appropriately

We work to ensure that our powers are applied appropriately and fairly, with oversight and safeguards to maintain and build public trust. We have partnered with agents and their representatives to implement and deliver the 21 commitments set out in the February 2021 report ‘Evaluation of HMRC’s implementation of powers, obligations and safeguards introduced since 2012’. An update report on the work undertaken to deliver the commitments was published recently as part of Tax Administration and Maintenance Day.

Read ‘Evaluation of HMRC’s implementation of powers, obligations and safeguards introduced since 2012’ at GOV.UK.

Protecting human rights

We have procedures in place to ensure that all our policies and legislation are compliant with the requirements of the Human Rights Act 1998. Our approach is to understand our customers and their needs, treat everyone with respect, recognise that we have privileged access to information (and need to protect that information), and behave professionally with integrity. As part of this, we promote mutual respect and the dignity of the individual.

Increasing transparency

We aim to increase transparency and build public trust by publishing data and information on how we perform our role as the UK’s tax and customs authority. This includes metrics that are published quarterly, including customer experience, debt management, customs and compliance measures, as well as findings from our external research programme and a wide range of official and national statistics.

We published our Evaluation Framework and Evaluation List in November 2021, setting out our approach to monitoring and evaluation and how we gain an understanding of whether policies, programmes and projects have been effective and achieved expected outcomes. We will continue to update the list of our future evaluation publications regularly, to maintain transparency.

Read quarterly performance updates at GOV.UK.

Read our Evaluation Framework at GOV.UK.

Read our Evaluation List at GOV.UK.

Resolving customer complaints

We want to get our services right for customers first time but when this doesn’t happen, we have a straightforward and accessible complaints process. Although we saw improvements across key aspects of our customer service delivery throughout 2022 to 2023, delays in operational services remained the main driver for complaints (see Supporting our customers to get tax right section in Strategic objective 2). We saw a rise in complaints, with new complaints up by 13.7% compared to last year and our average response time increasing from 29.6 days in 2021 to 2022 to 33.4 days in 2022 to 2023. Although higher than we would like, we improved our average response times in the final 6 months of the year.

The Adjudicator’s Office provides an independent service to investigate individual complaints that have gone through our internal complaints process but remain unresolved. We work with the Adjudicator’s Office to shape how we respond to and learn from complaints and provide them with early insight on customer feedback and issues arising from complaints. In March 2023, we launched a new Complaints Handling, Analysis and Reporting Tool, developed in collaboration with the Adjudicator’s Office, to enhance our recording of complaints and generate more robust insight to help us improve our service.

If a customer remains dissatisfied after referral to the Adjudicator’s Office, their MP can refer their complaint to the Parliamentary and Health Service Ombudsman (PHSO). Only 9 complaints about HMRC were taken up by the PHSO in 2022 to 2023 for a detailed investigation. We have worked in partnership with the PHSO and other government departments to support the development and launch of the PHSO UK Central Government Complaint Standards. These standards provide colleagues across government with principles and guidance for best practice in complaint handling. We have agreed to pioneer these standards, enabling us to play a leading role in their further development.

Read our response to the Adjudicator’s annual report 2021 to 2022 at GOV.UK

In focus: Protecting customers claiming tax repayments

We want to ensure that taxpayers pay the right amount of tax and can easily access refunds they are entitled to. Taxpayers can use repayment agents to make claims for repayments of tax, and many are happy with the service they receive from such agents. However, between January 2022 and October 2022, we received over 2,200 complaints about the activity of some repayment agents, mainly regarding:

• the use of assignments, which legally transfer the benefit of the taxpayer’s repayments to the agent
• taxpayers not being made aware of, or fully understanding, the terms and conditions to which they are agreeing
• taxpayers being unaware that they are dealing with a third party and not HMRC

We are taking action to deal with agent misconduct. To get this right, we consulted on ways to protect consumers claiming income tax and PAYE repayments using a repayment agent. In June 2022, we launched a 12-week consultation ‘Raising standards in tax advice: Protecting customers claiming tax repayments’, on how to tackle the unique issues associated with poor repayment agents and consider ways to better protect taxpayers.

After analysing the responses, we published the ‘Summary of Responses and Next Steps’ in January 2023 and are taking steps to improve transparency and customer protection in the repayment agent market, including:

• legislating to render void assignments for income tax repayments from 15 March 2023 as stated in this year’s budget
• introducing new transparency requirements in the HMRC Standard for Agents
• undertaking further work to strengthen the evidence that a claim has been made with a customer’s consent
• introducing a new requirement from 2 May for paid agents to register with HMRC via our agent services account if they want to continue to submit claims for income tax repayments

We work to monitor agents and challenge them when there are potential concerns about their practices. We will take action if a Repayment Agent does not adhere to the HMRC Standard for Agents – including suspending claim processing until any issues are resolved, to protect taxpayers and the tax system.

Penalty reform

We’re introducing a fairer and more proportionate approach to applying penalties to customers who miss a submission deadline or pay tax late, so that we only penalise the small minority who are persistently late to pay and submit returns – not those who make the occasional error.

Our aim is to help customers get things right before monetary penalties are applied. The points-based system for late returns will not punish customers who occasionally miss a deadline. For late payment penalties, we actively encourage those customers to settle payments immediately or set up a Time to Pay arrangement where necessary.

Our new approach to penalties was launched for VAT on 1 January 2023 and will be extended to Income Tax Self Assessment in the next few years, in line with the timetable for when these customers will be expected to submit returns using Making Tax Digital-compatible software.

In focus: enforcing UK strategic export compliance

The UK’s system of export controls and licensing for military and dual use goods is administered by the Department for Business and Trade – but HMRC has responsibility for enforcing UK export controls and trade sanctions.

Dual use goods are those which can be used for both civilian and military purposes. In 2022, a UK company pleaded guilty after we investigated a suspected deliberate evasion of UK export licensing controls concerning a shipment of dual use controlled chemicals. We have more investigations underway to make sure military and dual use items do not end up in the wrong hands.

Protecting society from harm

Tax fraud and criminal attacks on the tax system undermine our economy, create unfair competition for legitimate businesses and rob our public services of much-needed funds. They also support crimes that harm communities across the UK.

We use a range of powers and specialist investigation capabilities where we believe that a business or individual is trying to cheat or defraud us. These enable us to uncover even the most complex and determined frauds and bring the perpetrators to account.

Taking action against serious fraud and economic crime

While most people abide by the law, some deliberately and dishonestly set out to defraud HMRC by evading tax, stealing public funds or cheating the system in other ways.

Most of our work to tackle tax fraud makes use of our civil powers. These allow us to obtain the information we need to identify and collect unpaid tax, while imposing financial penalties on those responsible (up to 200 percent of the tax due in some cases).

When a fraud is particularly serious, when we want to send a strong deterrent message, or when our civil powers aren’t enough to uncover the truth or recover the tax that is at stake, we have the option to use criminal investigation powers. We reserve complete discretion to conduct a criminal investigation in any case.

We focus criminal investigations on the most harmful organised crime and serious frauds, where they have the most impact. As a result, in 2022 to 2023:

• the average value of our criminal cases has increased from £2.3 million in 2016 to 2017 to £6.2 million
• our serious fraud investigators initiated 396 new criminal cases and more than 12,500 civil investigations into suspected fraud
• 240 prosecutions were brought as a result of HMRC criminal investigations, securing 218 convictions with a success rate of 91% in court
• we recovered £165 million in criminal assets using UK proceeds of crime legislation

In our capacity as a statutory Anti-Money Laundering Supervisor, we delivered 3,279 supervisory interventions, issued over £5.5 million in fines and suspended or cancelled the registration of 27 businesses – playing an important part in tackling economic crime.

A key aspect of our approach to serious fraud is strong partnership with other organisations. We regularly exchange data with domestic law enforcement partners such as the Police, the National Economic Crime Centre and others, to support cross-government efforts to tackle risks. This year we received 43,516 requests for HMRC intelligence and information from those partners.

Our international relationships also help us to address the increasingly global nature of tax crime, enabling us to dismantle international smuggling chains and return tax fugitives to the UK. We work closely with the Organisation for Economic Co-operation and Development (OECD) and are a founding member of the Joint Chiefs of Global Tax Enforcement (J5), an alliance of tax authorities from the UK, US, Netherlands, Canada and Australia to share tools, data, technology and expertise to tackle global tax crime.

Tackling tax avoidance

Tax avoidance involves trying to bend the rules to gain a tax advantage that was never intended. We took strong action this year to challenge the promoters of mass marketed tax avoidance schemes, contacting individuals within weeks of knowing they may have entered an employment-based avoidance scheme, advising them of the risk and giving them the opportunity to get out.

Using new Finance Act 2021 and 2022 powers, we named 27 promoters and 5 directors alongside details of the 31 tax avoidance schemes they were promoting. We also issued 13 stop notices requiring them to stop selling or promoting a scheme. Penalties of up to £1 million can be issued for failure to comply, and the government recently announced proposals to make non-compliance with a stop notice a criminal offence.

Read more about our work to address marketed tax avoidance at GOV.UK.

In focus: preventing phoenixism

Phoenixism is where the same business and/or directors trade successively through a series of companies, each becoming insolvent or wound up in turn, only to continue the same business as a new, separate company – with the deliberate intent to evade paying debts.

We estimate that phoenixism accounts for 10% to 15% of total losses reported in the Annual Report and Accounts between financial years 2017 to 2018 and 2019 to 2020. These estimates are subject to change as we refine our methodology.

Our approach to countering phoenixism is to use our data and information to target those people behind the abuse and prevent it occurring or reoccurring. Tools we use include taking securities and making referrals for disqualification from acting as director. We will measure the outcomes of our activity and publish information on our performance and impact on this risk in our next annual report.

Tackling the hidden economy

The hidden economy is largely made up of low-value undeclared income that might seem harmless to some but represents around 6% (£2.1 billion) of the overall tax gap in 2021 to 2022. This has a significant impact on the UK’s public funding and undermines honest taxpayers.

This year the government introduced legislation to extend tax checks to some public sector licences to Scotland and Northern Ireland, making the award of these licences conditional on applicants completing a tax registration check. These requirements will take effect from October 2023, extending existing rules for licences in England and Wales which came into effect in April 2022, and enable us to complete more than 120,000 checks to tackle the hidden economy.

Criminal attacks and phishing

We are constantly vigilant against criminal attacks on our systems and we actively prevent fraudsters from accessing them through strengthened identity verification and authentication. Using the latest data analytic tools, we’re identifying and stopping fraud before losses occur and targeting the criminal groups behind these attacks.

In 2022 to 2023, we identified and responded to a significant criminal attack on the VAT system. By deploying additional counter-fraud controls we were able to identify and cancel around 131,000 fraudulent attempted VAT registrations and repayments, helping prevent the loss of £1.83 billion in attempted VAT repayment fraud.

We introduced a new anti-phishing tool in August 2022, to help us deal with referrals from customers and intelligence from multiple sources. This helped increase the number of malicious sites identified from 6,104 in 2021 to 2022 to 24,504 in 2022 to 2023, enabling HMRC branded phishing sites to be removed, preventing harm to our customers.

We have also assisted UK Finance and Lloyds bank with the design and implementation of tailored fraud alerts for customers.

The past year has seen a downward trend in the number of HMRC related telephone scams, with 99,000 fewer scams reported to us in 2022 to 2023 than in 2021 to 2022.

Combating internal fraud, bribery and corruption

Protecting society from harm also extends to being alive to any internal threats. Our zero-tolerance approach to fraud, bribery and corruption is set out in our ‘Counter internal fraud, bribery and corruption’ strategy, along with a policy and fraud response plan describing our response to these threats. Our Chief Finance Officer has accountability for the policy, which applies to all our employees, suppliers, contractors and business partners.

In focus: enforcing the National Minimum Wage

Our work to protect society from harm extends beyond the tax system. All businesses, irrespective of their size or business sector, are responsible for paying at least the correct minimum or living wage to their employees and we enforce this on behalf of the Department for Business and Trade.

We consider all complaints from workers, proactively conduct enforcement activities and deliver educational activity to support employer compliance. This year we closed a total of 3,192 interventions and delivered targeted communication campaigns that reached nearly 12 million workers and employers, from which we identified arrears of £13.7 million for more than 108,000 workers.

Our commitments in 2022 to 2023: strategic objective 3

In financial year 2022 to 2023, alongside all our activity to maintain taxpayers’ consent and protect society from harm, we made 6 specific commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Commitment	What we delivered	Status
HMRC Charter	We made good progress in using our Charter standards throughout HMRC, although feedback from our colleagues and customers tells us there is more we must do and it may take several years to fully embed the Charter into all we do. Read more in the embedding our Charter standards section.	Risk to delivery
Consolidating anti-evasion and avoidance measures and powers	We continued our work to ensure that our use of powers builds trust and that safeguards are effective for taxpayers, publishing an evaluation of our progress at Budget 2023. Read more on using our powers appropriately.	On track or complete
Preventing revenue loss from serious fraud	We prevented revenue loss from serious fraud in excess of £3.5 billion. Read more about our approach to taking action against serious fraud and economic crime.	On track or complete
Tackling criminality by pursuing illicit financial transactions	We met our commitment to tackle the enablers of serious fraud, focusing on the illicit financial transactions that underpin tax crime and impact HMRC supervised sectors. We also exceeded our commitment in the number of anti-money laundering compliance supervisory interventions conducted.	On track or complete
Tackling promoters of tax avoidance	We continued to tackle promoters of tax avoidance in line with our promoters strategy, published in March 2020, including naming promoters and the schemes they promote using new powers introduced in Finance Act 2021 and 2022. Some new promoters joined the market during 2022 to 2023, which limited our overall impact. Read more on tackling tax avoidance.	Risk to delivery
Longer prison terms for egregious tax fraud	As announced at Spring Budget 2023, in 2023 to 2024 the government plans to introduce draft legislation to double the maximum prison term from 7 years to 14 years for individuals convicted of the most egregious examples of tax fraud.	On track or complete

Key performance metrics: strategic objective 3

Figure 9: Customer experience – customer satisfaction for digital, webchat and telephony contact

Our current key measure of how we are maintaining taxpayer consent is through overall customer satisfaction, which was 79.2% in 2022 to 2023. When we break this down further to the satisfaction levels on each of our different channels – phone, webchat and digital – we can see that the ever-increasing number of customers using our online services to manage their tax affairs are generally very satisfied with them.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 9.

Figure 10: Customer experience – 5-year trend for customer satisfaction for digital, webchat and telephony contact

We started tracking Net Easy on our digital interactions in 2020 to 2021, expanding the scope to include telephone interactions in 2021 to 2022. The chart below shows the trends for each category over that period.

• 2018-19 (includes webchat and digital services)	80.4%
  2019-20 (includes webchat and digital services)	81.6%
  2020-21 (includes webchat and digital services)	85.2%
  2021-22 (includes webchat, digital and phone services)	82.0%
  2022-23 (includes webchat, digital and phone services)	79.2%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 10.

Figure 11: Trust in HMRC

The graph below shows how small, large and mid-size businesses, individuals and agents rated us when asked whether HMRC is an organisation they trust. We introduced this question into our customer surveys in different years.

More than half of Individuals and Agents surveyed reported that they trust HMRC as an organisation in 2022. For Individuals this is consistent with 2021 and for Agents there has been a decrease in 2022 compared to 61% in 2021.

In 2020, there was a significant increase in the percentage of Large Businesses having trust in HMRC (from 77% in 2019 to 86% in 2020). In 2021, this decreased significantly to 70% has since remained consistent.

	2019	2020	2021	2022
Individuals	N/A	N/A	52%	54%
Agents	N/A	N/A	61%	55%
Mid-size businesses	N/A	64%	65%	64%
Small businesses	N/A	N/A	70%	68%
Large businesses	77%	86%	70%	71%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 11

Strategic objective 4: Make HMRC a great place to work

We want to make HMRC a great place to work, so we’re working hard to make sure that every colleague has the opportunity to develop new skills and grow their career in a modern inclusive environment, equipped with the tools, systems and technology that allow them to deliver effectively for our customers.

How we performed

Connection to purpose

HMRC’s purpose is unique, so it is important for every colleague to understand their connection and contribution to it. We want colleagues to feel proud and confident in the work they do.

We reinforce colleagues’ connection to our purpose by sharing their achievements with others which, in turn, helps them to deliver a great customer experience and builds public confidence in HMRC.

We celebrate these achievements in various ways, such as through our annual People Awards and Customer Service Champion Awards. Feeling connected is also about understanding the bigger picture of HMRC’s work, so we share regular updates on HMRC’s priorities and performance and encourage team discussions on the difference every colleague’s work makes to supporting customers and delivering HMRC’s objectives. Each year we conduct a people survey to gauge the experience and engagement of people working in HMRC. Two thirds of colleagues completed the 2022 People Survey – an improved response rate of 8 percentage points on 2021. 86% of respondents said they understood how their work contributes to HMRC’s wider objectives.

The Employee Engagement Index in the People Survey measures how connected colleagues feel to HMRC’s purpose, and how motivated and proud they feel in their work. Our score for 2022 was 59% – maintaining our 2021 score. Acting on insight from colleague feedback will help us to improve as an organisation and create a working environment we can all thrive in.

Our 5 pillars for a great place to work

To make HMRC a great place to work, we’re focusing our activity in 5 areas, based on feedback from colleagues and external insight:

• connection to purpose
• a great environment
• enabling colleagues to do their best work
• an attractive employment offer
• a continuous learning culture

A great working environment

We’re working hard to build a strong working environment for everyone at HMRC, where colleagues can come together easily to collaborate, learn and feel part of a diverse and inclusive organisation.

Our locations strategy, announced in 2015, remains key to this, and to all our departmental objectives. Throughout the UK we’re establishing safer, more modern workspaces with high-speed digital infrastructure that provide opportunities for smarter working, innovation and greater collaboration.

This year we opened 3 regional centres in Glasgow, Manchester and Nottingham and closed 10 outdated smaller offices. Along with our other regional centres, these new estates enable colleagues to work together as part of a professional community and create opportunities and career paths in every area of the UK. Our Belfast, Cardiff and Edinburgh regional centres also provide a home for UK ministers in the devolved nations, that can be used to host full Cabinet meetings.

Moving to hybrid working has enabled us to reduce our office space, saving public money. At the end of March 2023, we had let around 49,000 square metres of space in our offices to 39 other departments and organisations, accommodating over 12,000 FTE colleagues from these departments alongside HMRC and Valuation Office Agency colleagues. Sharing high quality, flexible office space with other departments enables smarter working, saves money and offers improved career paths for our employees.

But a great environment is not built on excellent workplace facilities alone. We recognise the importance of creating an inclusive culture that allows every colleague to be their best at work and which fully reflects the society we serve.

Our activity in 2022 that contributed to this included:

• strengthening our approach to equality, diversity and inclusion by developing evidence-based inclusion priorities and success measures, for implementation in 2023
• delivering the remaining aspects of our Respect at Work programme – which identifies and removes barriers to living according to our commitments of being fair, kind and human
• conducting research to better understand what we can do to ensure the Newcastle regional centre better reflects the region’s ethnic minority (note 1) labour market, as a pilot for other regional centres
• delivering a departmental race equality programme, that includes the development of online inclusion learning for all colleagues to be launched in 2023
• ongoing delivery of inclusive design and digital and physical accessibility in our workplaces

Note 1: The term ethnic minority includes colleagues who declared their ethnicity as Black, Asian, Chinese or mixed ethnic background.

In addition to this, responses in the 2021 People Survey showed that we have made significant progress in reducing the level of bullying, harassment and discrimination rates for ethnic minority, disabled and LGBO (an aggregated category that includes people who declared their sexual orientation as gay man, gay woman/lesbian, bisexual or ‘other’) colleagues, and this has stayed relatively stable in 2022. However, we acknowledge that there is more that can be done to ensure that all colleagues are treated with equal respect, and so tackling bullying, harassment and discrimination remains an area of focus for us.

Read HMRC’s equality objectives at GOV.UK.

Read HMRC’s gender pay gap report at GOV.UK.

In focus: building safe, healthy workplaces

Our managers and colleagues are supported by comprehensive health and safety arrangements, guidance and learning, with access to in-house and third-party professional support and advice.

To ensure we have effective health and safety arrangements for colleagues, we have trained a network of 531 Display Screen Equipment (DSE) assessors. At the end of 2022 to 2023, 93% of employees have completed our on-line DSE – using mobile devices training.

Throughout 2022 to 2023 we have focused on ensuring our workplaces remain safe and healthy for all occupants. We have reviewed the Occupied Building Risk Assessment (OBRA) to ensure a consistent approach in how we manage our workplaces. We have put in place new arrangements to provide statutory first aid and Incident Marshall cover in our workplaces using British Standard 9999.

We encourage employees to report all accidents or instances of work-related ill health, with reports going to directors to highlight trends and inform our health and safety performance. As an employer, we report incidents in specific categories to the Health and Safety Executive (HSE), under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR).

In 2022 to 2023, there was a 28% increase in RIDDOR incidents reported to HSE (23 this year compared to 18 reports in 2021 to 2022). The number of non-RIDDOR incidents reported also increased by 49% (1,322 this year up from 890 in 2021 to 2022).

Read Annex 4 for a breakdown of incident reports.

Enabling colleagues to do their best work

We’re taking action to make sure that everyone at HMRC has access to the right tools and support to enable them to do their best work. We aim to provide everything needed to do a professional job and deliver high-quality services to our customers, from clearly defined roles and expectations to modern and efficient facilities, good quality data, processes and technology.

For example, we have put in place new IT contracts that give colleagues better access to the latest technology and make our IT infrastructure more secure and reliable. Updating our IT estate is a sizeable and complex task, but it will benefit both colleagues and customers as in the longer-term systems will perform better, incur less ‘down-time’ and be easier to update.

In October 2022 we also launched a new intranet, designed using data about the information and services colleagues use the most, so everyone can find what they need more quickly and easily. Also in 2022 to 2023, we resumed and re-prioritised our strategic workforce planning, identifying the skills and capabilities we need to deliver our longer-term objectives, with work now focused on developing an organisation-wide strategic workforce plan.

An attractive employment offer

We want our people to feel rewarded for the great work they’re doing and to have an employment offer that supports flexibility in how, where and when they work. This helps us retain talent and attract new talent, so we have the right skills to deliver for customers.

We modernised our pay and contracts in 2021 to make our working arrangements and terms and conditions simpler, fairer and more consistent. The changes made it easier to deploy colleagues where they’re needed most, provided better pay, and gave greater choice and flexibility in how, where and when they work, where roles allow.

Like many organisations, we view flexibility of work location as an important part of an attractive employment offer. Most colleagues now have the option to work from home for a portion of the time, depending on business needs. This flexibility promotes an inclusive environment, and enables our employees to balance their work and personal commitments appropriately. And having listened to feedback from colleagues, in January 2023 we launched a trial giving colleagues the option to sell back some of their annual leave, bringing us into line with other government departments who offer this.

The wellbeing of our employees is paramount. We have continued to promote help available for colleagues to manage their health and wellbeing through regular communications, and provide easy access to information and support through our ‘Help for You’ intranet pages. This year we have particularly focused on helping colleagues to access services and support around financial wellbeing and cost of living concerns by promoting the help available through our Employee Assistance Programme and the Charity for Civil Servants.

In focus: building careers across the UK

We have been moving roles out of London – since 2020, we have reduced the overall size of our London footprint from 16% to 15% and only have 2% of our staff based in our central London headquarters. Of our Senior Civil Service roles, 52% are now based outside London, which already exceeds the 50% Places for Growth target. We have effective control measures to maintain this and we are committed to moving a further 2,500 FTE roles out of London by 2030 (500 by 2025).

A continuous learning culture

We want everyone at HMRC to feel in control of their own personal learning and development, giving them the knowledge, skills and experience they need to unlock their full potential and follow attractive and rewarding career paths.

So, we’re building a continuous learning culture that promotes and encourages opportunities for personal and career development, such as providing apprenticeships and online learning modules. The number of applicants for our accelerated development programmes has more than doubled this year, from 624 to 1,264.

In 2022 to 2023 we updated our leadership development strategy and launched a new programme, Leadership within the Enterprise, to help leaders develop their capability and confidence in systems thinking. In 2022 to 2023, 70 leaders participated in the pilot programme.

We launched new learning activity this year that gives colleagues a deeper understanding of the HMRC Charter and what it means for our customers. We’re training all colleagues who are new to customer compliance work to a set of professional standards which embody the Charter, to help make sure that we’re consistently focusing on the customer and how customers are treated. And colleagues in customer services roles can benefit from a new digital learning hub developed this year to support them in their roles.

Our approach to whistleblowing

Our commitment to creating a great place to work includes making sure that people can speak up if they feel that things are not right. We want people to feel safe and supported, know that their concerns will be taken seriously and dealt with quickly, and be assured that they will be kept informed.

Over the last year we have:

• improved our ‘In-confidence’ anonymous reporting system, creating a better user interface and more space for colleagues to report whistleblowing concerns, as well as new guidance to support people to speak up
• reached thousands of colleagues during the HMRC ‘Speak Up Week’ in 2022, with a broadened remit to cover counter fraud and personal security
• continued promoting the work of Nominated Officers who offer support to our people on whistleblowing concerns.

Whistleblowing case numbers in 2022 to 2023 are in line with those from 2021 to 2022 but are still far lower than numbers prior to the COVID-19 pandemic, when we would have seen around 150 cases annually. With case numbers remaining low, it is difficult to identify systemic issues or trends. We will work further to understand how we can support whistleblowing in a hybrid home-office working environment.

Table 2: Whistleblowing cases

Financial year	2022-23	2021-22
Total cases	88	61
Number categorised as whistleblowing	22 (note 1)	15

Note 1: At year end 16 cases are still under investigation and not yet categorised as whistleblowing.

Our commitments in 2022 to 2023: strategic objective 4

In financial year 2022 to 2023, alongside all our activity to make HMRC a great place to work, we made 1 specific commitment in this area. The table below details our progress against our commitment at the end of the financial year.

Commitment	What we delivered	Status
Transform our estate	We opened a further 3 regional centres in Nottingham, Glasgow and Manchester, enabling more than 10,350 HMRC employees to move into these new offices. We also closed a further 10 offices within the planned timescales. Read more on this within A great working environment section.	On track or complete

Key performance metrics: strategic objective 4

We are developing our approach to measuring our performance against this strategic objective, with a wider suite of measures, while using the Employee Engagement Index as a key indicator.

The following tables set out our employee data across a range of diversity characteristics. Workforce diversity characteristics other than sex are voluntarily reported by colleagues and the declaration rate varies by characteristic, so the data reported below excludes colleagues who have not declared diversity information. We publish workforce diversity data and equality information in our annual report on compliance with the public sector equality duties.

Figure 12: Proportion of employees who are female

SCS

• 2018-19	47%
  2019-20	46%
  2020-21	45%
  2021-22	47%
  2022-23	47%

All staff

• 2018-19	54%
  2019-20	54%
  2020-21	53%
  2021-22	52%
  2022-23	52%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 12.

Figure 13: Declared proportion of employees with a disability

SCS

• 2018-19	5%
  2019-20	6%
  2020-21	6%
  2021-22	6%
  2022-23	7%

All staff

• 2018-19	14%
  2019-20	14%
  2020-21	14%
  2021-22	13%
  2022-23	14%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 13.

Figure 14: Declared proportion of ethnic minority employees

The term ethnic minority includes colleagues who declared their ethnicity as Black, Asian, Chinese or mixed ethnic background. White ethnic minority backgrounds are not included in this data category.

SCS

• 2018-19	7%
  2019-20	9%
  2020-21	11%
  2021-22	11%
  2022-23	10%

All staff

• 2018-19	13%
  2019-20	14%
  2020-21	15%
  2021-22	17%
  2022-23	18%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 14

Figure 15: Declared religious belief status of employees – Yes

SCS

• 2018-19	53%
  2019-20	54%
  2020-21	53%
  2021-22	53%
  2022-23	52%

All staff

• 2018-19	64%
  2019-20	63%
  2020-21	61%
  2021-22	60%
  2022-23	59%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 15.

Figure 16: Declared religious belief status of employees – No

SCS

• 2018-19	48%
  2019-20	46%
  2020-21	47%
  2021-22	47%
  2022-23	48%

All staff

• 2018-19	36%
  2019-20	37%
  2020-21	39%
  2021-22	40%
  2022-23	41%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 16.

Figure 17: Declared sexual orientation category of employees: LGBO

This chart shows the percentage of people who declared their sexual orientation as gay man, gay woman/lesbian, bisexual or other.

SCS

• 2018-19	4%
  2019-20	4%
  2020-21	7%
  2021-22	7%
  2022-23	8%

All staff

• 2018-19	5%
  2019-20	5%
  2020-21	6%
  2021-22	6%
  2022-23	7%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 17.

Figure 18: Annual People Survey – fairness

Over the past 5 years we have introduced new values, commitments and behaviour standards and made changes to policies, processes and key employee interactions such as giving feedback, managing performance and speaking up. The fairness and inclusion scores in our annual People Survey reflect the improvement in colleagues’ experience of working at HMRC over the past 5 years.

I am treated fairly at work

• 2018-19	76%
  2019-20	76%
  2020-21	82%
  2021-22	84%
  2022-23	84%

I am treated with respect by the people I work with

• 2018-19	85%
  2019-20	84%
  2020-21	88%
  2021-22	90%
  2022-23	89%

Inclusion and fair treatment theme

• 2018-19	73%
  2019-20	72%
  2020-21	78%
  2021-22	81%
  2022-23	80%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 18.

Figure 19: Sickness absence data - Average Working Days Lost (AWDL)

Sickness absence levels are measured using Average Working Days Lost (AWDL), calculated by dividing the total number of days lost to sickness absence over a 12-month period by the current FTE. Whilst patterns of absence remain consistent with previous years once adjusted for pandemic related absence, total annual working days lost due to illness remains higher during 2022 to 2023 than the previous 2 years. The position throughout 2022 to 2023 remained relatively consistent, peaking at 8.88 AWDL before reducing to 8.75 AWDL and we are starting to see small but sustained reductions.

	Pandemic related absences	Non-pandemic related absences
2018-19	0	6.9
2019-20	0	7.48
2020-21	0.87	4.91
2021-22	1.61	6.65
2022-23	0.75	8.00

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 19.

Figure 20: Employee Engagement Index

Our Employee Engagement Index has trended upwards over the last 5 years. The score of 59% in 2022 maintains our 2021 score.

• 2018	49%
  2019	49%
  2020	57%
  2021	59%
  2022	59%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 20.

Strategic objective 5: Support wider government economic aims through a resilient, agile tax administration system

HMRC does much more than collect taxes. Our vital role in the government’s response to COVID-19 showed that a resilient, agile tax administration system is central to achieving wider government economic aims. Now we’re helping to deliver the government’s big priorities of growth, stability, and public services – for example, through reshaping the role of customs and making our IT, processes and activities more resilient and sustainable.

How we performed

Our vision for transforming the UK border

We are committed to supporting the vision, as set out in the government’s 2025 UK Border Strategy, of having the world’s most effective border. Our aim is to have a world-class customs system that makes it easier for customers to complete their obligations through simpler processes and more efficient modern platforms, supports economic stability and growth, and protects against market, security, biosecurity and fiscal risks from imports and exports.

Modernisation is integral to this vision, and 1 October 2022 marked an important milestone in our move towards a single customs platform. After 30 years of traders using our Customs Handling of Import and Export Freight (CHIEF) system to make declarations, importers are now submitting their import declarations through the new Customs Declaration Service (CDS).

We have successfully migrated importers to our new Customs Declaration System, with 97.8% of import declarations now being made on CDS (as of 31 March 2023). After engaging with industry, we have announced that exporters will need to make export declarations through CDS from 30 November 2023. This represents a challenging timescale for exporters to migrate from CHIEF, and we continue to work with traders to implement this change.

We are also responsible for delivering the cross-government programme to create a Single Trade Window – a digital gateway where users can meet all their import, export and transit obligations by submitting information once. This will support UK trade and facilitate growth by reducing administrative burdens at the border. Delivery is phased, with the first services available in late 2023 and early 2024. We intend the Single Trade Window to be fully operational by 2027, subject to the passage of new legislation, customer journey design and the integration of systems across government.

Improving the flow of trade at the border

To support the smooth flow of trade, we aim to manage as much customs activity as possible away from the border.

Inland Border Facilities (IBFs) in England and Wales enable us to carry out customs checks and activities where ports have limited capacity on site, supporting the flow of goods at the border. We constantly review the size of the IBF network to make sure it provides value for money and meets the demands of trade. As a result, we closed all temporary IBFs ahead of our December 2022 target which, combined with operational efficiencies, resulted in a saving of £19 million for the public purse while maintaining the flow of trade.

We are also supporting the roll out of Freeports, which are special areas within the UK’s border where different economic regulations apply, including a range of tax incentives and customs benefits for eligible businesses. Freeports will increase global trade and investment across the UK, promote regeneration and job creation and promote innovation.

Seven of 8 English Freeports are now operational with 23 out of 24 tax sites also being operational, opening up a range of tax incentives. The remaining Freeport has secured approval for 2 out of its 3 anticipated tax sites and is working towards establishing the customs site necessary to become operational as a Freeport.

There is joint responsibility for delivery of Freeports between the UK government and devolved administrations. Sites were determined for Green Freeports in Scotland and Freeports in Wales following a bidding process, and we are now working with them to establish their tax and customs sites. Discussions continue with our stakeholders in Northern Ireland about how we can extend the benefits associated with the Freeports programme there.

Supporting the Windsor Framework

We played a central role in supporting the negotiation of the Windsor Framework, announced on 27 February 2023. We are now implementing the solutions it provides, with a focus on delivering customs elements between now and October 2024, including:

• the green lane for goods arriving in Northern Ireland
• the new and expanded UK Internal Market Scheme which delivers benefits for ‘trusted traders’
• a new tariff reimbursement scheme for goods remaining within the UK
• removing declaration requirements on parcels destined for consumers

We continue to support traders already moving goods between Great Britain and Northern Ireland, in particular through the free-to-use Trader Support Service (TSS), which provides guidance on how to move goods into and out of Northern Ireland and can submit data to HMRC systems on traders’ behalf. More than 51,000 traders are registered with the TSS, and the service has facilitated 2.7 million goods movement declarations since its inception in 2021.

In October 2022, we announced that the TSS had been extended by one year until 31 December 2023. The government is committed to supporting traders with moving goods into and out of Northern Ireland and the new requirements of the Windsor Framework, and we are carefully considering the future of this support.

In focus: A new Target Operating Model for the UK border

HMRC is playing a key role in supporting Cabinet Office to develop a new Target Operating Model for the UK border – one that uses technology, data and better coordination to create a simpler border experience, reducing costs and friction for businesses and customers.

We are working closely with other government departments, including Home Office and DEFRA to develop a new model for importing goods into the UK from countries inside and outside of the EU.

The government published a draft of the new Target Operating Model in April 2023.

Following engagement with stakeholders, HMRC is now working closely with other government departments to develop the final Target Operating Model.

Supporting the cross-government response to the war in Ukraine

At the peak of our support, we deployed 362 FTE staff from our surge and rapid response teams and a further 148 FTE staff from other areas within HMRC, primarily from our customer service function, to support crucial cross-government Ukraine-related activities.

These staff worked on Visa processing and other activities across a range of government departments – for example on the Safeguarding and Response team with the Department for Levelling Up, Housing and Communities, and risk specialists supported the Office for Financial Sanctions Implementation through the provision of HMRC information to inform sanctions.

We continue to support wider government objectives on the implementation of the UK’s sanctions regime, including the enforcement of trade sanctions to prevent the export and import of specific goods and services to and from Russia, including gold and luxury goods.

Building a resilient tax system

We are continuing to modernise our IT estate and are working to ensure our systems are up to date and compliant with data and security standards. This will help our systems perform better, be more resilient and be easier to update – continuing our commitment to protect customer data. 

By migrating our services to modern infrastructure, taking full advantage of Cloud and Crown Hosting platforms, we will reduce the chances of IT outages and make it easier to innovate in our service delivery. So far, we have migrated or retired 62% of the services in scope from our legacy data centres, with the majority of the remaining services due to be migrated by December 2023. There will be more work to do to remediate or replace software that is out-of-date or no longer fit for purpose.

As guardians of one of the biggest sets of customer and staff personal data in government, we have a responsibility to ensure it is protected with industry standard levels of security, and that our data use is transparent, proportionate and complies with data protection laws.

We are reviewing and remediating 105 systems to ensure they are compliant with General Data Protection Regulations (GDPR). We have already mitigated over 200 business and IT data protection risks, contributing to the completed remediation of 59 systems up to the end of March 2023. We completed all of the work intended for this year against the action plan previously agreed with the Information Commissioner’s Office.

We have also continued digitising our historical physical records to make them easier to access and to meet our GDPR requirements, with more than 1.38 billion microfilm records already digitally accessible for the purposes of replying to customer Subject Access Requests.

Like many large organisations, our systems face targeted and frequent cyber-attacks. We have successfully thwarted these cyber-attacks but we need to continuously improve our data security to stay ahead of the criminals who attack our systems. Our 4-year Enterprise Security Programme, now in its second year, is designed to drive forward our work by:

• encrypting the majority of our data at rest and in transit
• reducing the points through which we can be attacked by applying patches and hardening our systems against known vulnerabilities
• deploying early warning technology, improving the visibility of potential breaches or activities that can or will lead to a breach
• transforming our security culture to minimise the ability of internal threat actors to access personal data
• implementing tools and processes to better control access to data, such as enhanced access rights

Using new measures and innovative technology, we have already significantly improved our cyber security in 2022 to 2023 – limiting the ability of criminals to use data they have stolen from our customers in order to impersonate them and gain access to their HMRC records.

Millions of online tax accounts are now more secure thanks to multi-factor authentication. Our identity verification services are similar to those seen in private sector financial services, and we continue to enhance and develop them. We are also using Artificial Intelligence to help identify common security flaws in code, making us more secure with less effort and greater speed.

Supporting devolution

We implement income tax policy on behalf of the UK, Scottish and Welsh governments and work closely with devolved revenue authorities in Scotland and Wales to support each other in administering the taxes for which we each have responsibility, such as Stamp Duty Land Tax and its devolved equivalents. We have also worked with the devolved governments to understand the tax, tax credits and National Insurance implications of cost of living and other support schemes. This year our support for the devolved governments and revenue bodies included:

Northern Ireland

In April 2022 Northern Ireland introduced Statutory Parental Bereavement Leave and Pay, which we administer for them. We will also work on the implementation of phase 2 of Northern Ireland’s scheme, which will make employees eligible sooner and extend its scope to cover bereavement through miscarriage.

Scotland

We continued work on introducing a series of benefits administered by Social Security Scotland, including building data sharing solutions to deliver for our shared customers – for example we may need to give customers additional premiums for Tax-Free Childcare or tax credits when they receive a Scottish benefit.

We also supported the roll-out of Adult Disability Payment and the extension of the Scottish Child Payment. We are now preparing for the introduction of Carer Support Payment in 2023 to 2024, and the proposed implementation of a new devolved aggregates levy.

Wales

The Welsh Government’s Basic Income Pilot scheme for care leavers is subject to income tax, and we worked with the Welsh Government to consider whether existing collection systems were suitable and proportionate – and helped them to support young recipients who have had limited interactions with HMRC and the tax system.

Further details regarding devolved taxes can be found at note 12 Devolved taxes of the Trust Statement.

Supporting a more sustainable future

We want our activities, processes and systems to be resilient so we can continue to support our customers in a sustainable way into the future. We’re doing this through our commitment to Net Zero, our performance against the Greening Government Commitments and UN sustainable development goals, as well as through other social, environmental and economic measures.

The Greening Government Commitments Framework sets out the actions government departments and their agencies will take to reduce their environmental impacts between 2021 and 2025, against the 2017 to 2018 baseline. See Figures 21 to 29 for detailed figures on our performance against our Greening Government Commitments sustainability targets.

See more detail on key Greening Government Commitment targets in Annex 3.

Achieving Net Zero by 2040

We have set a target to be Net Zero carbon across our operations by 2040. We are making great progress, having achieved a 58% reduction in carbon emissions from offices and domestic business travel since 2017 to 2018. We are initially focusing on developing roadmaps towards a Net Zero estate, Net Zero Information and Communications Technology and a Net Zero supply chain, as well as increasing our electric vehicle fleet.

In October 2022 we launched our Sustainability Board to embed sustainability and Net Zero into our decision making and ways of working, including climate change adaptation. Sustainability is also represented at HMRC’s Strategy Committee. We will look at how sustainability can be incorporated into impact assessments, and programme and project gateway reviews. We have also started work on a Green Skills framework that identifies the knowledge, skills and competencies needed to embed sustainability across the department and have conducted an HMRC-wide assessment to identify gaps.

Sustainable construction and adapting to climate change

We are committed to reducing our environmental impact, so sustainability is at the forefront of our regional centre design. All our new build regional centres achieved a Building Research Establishment Environmental Assessment Method (BREEAM) rating of ‘excellent’ or ‘very good’. The regional centres use solar panels which contribute to our electricity needs and are also designed to help reduce our carbon footprint and water-usage, increase recycling and reduce the waste we send to landfill.

Our estate supports sustainable and healthy travel options by providing cycling facilities and e-bike charging points as well as close proximity to public transport. We are also installing electric vehicle charge points to support our Greening Government Commitments. We will have a climate change adaptation plan in place by 2025.

Sustainable procurement

Government Buying Standards (GBS) are embedded in our contracts and we encourage our suppliers to go beyond the minimum requirements. The facilities management and catering contracts for our regional centres have all met GBS best practice.

We adhere to Cabinet Office Procurement Policy Note 6/21 which requires suppliers for in scope contracts to provide a Carbon Reduction Plan confirming their commitment to achieving Net Zero. We are making good progress towards eliminating consumer single-use plastics from our estate. Out of 23 identified items, 21 have been either fully or partially removed from the estate and alternatives for the remaining items are currently being investigated. We are working with our suppliers to collect data on the number of consumer single-use plastic items purchased, establishing 2022 to 2023 as the baseline year to report against in the future.

In 2023 to 2024 we will be working with a key catering supplier to roll out a system for measuring ingredients to cut down on food waste. Our Glasgow regional centre is taking part in a food redistribution scheme; something we want to explore in our other regional centres.

Nature recovery and biodiversity action planning

We will be developing a nature recovery plan in 2023 to 2024. Our regional centres are located close to transport hubs in city centres and therefore have minimal green space. Work is underway to review our Inland Border Facilities and the opportunities they present to enhance nature and biodiversity.

Social sustainability

Our people are an integral part of their local communities, with many volunteering in schools, charities and third sector organisations, or undertaking public duty roles such as being school governors or magistrates.

Our people have 5 days paid volunteering leave. In 2022 to 2023, more than 1,000 HMRC colleagues across all grades, locations and business groups have collectively invested 3,575 days volunteering in their communities. Our colleagues donated £552,556 to charities in 2022 to 2023 through local fundraising and Payroll Giving.

We also support colleagues who volunteer to serve in the Armed Forces Reserves. We currently have around 180 colleagues actively serving as part-time volunteer reservists. We offer 15 days paid special leave per year for reservist training or duties, ensuring our reservists are ready to support regular forces in times of crisis.

In focus: Tax Facts

We take an active role in promoting economic sustainability through our external outreach. This year we relaunched our award-winning Tax Facts programme for schools and young people with updated materials.

There were on average 2,971 monthly views of our Tax Facts animations for young people, and our teaching and home learning packs were downloaded 3,029 times during the year.

This initiative also promotes the HMRC app, allowing our next generation of customers to start their journey with us digitally.

How we contribute to UN Sustainable Development Goals

We contribute to achieving a number of UN Sustainable Development Goals through our work.

Strategic objective	What we’re doing	UN Sustainability Goals
Collect the right tax and pay out the right financial support	We are ensuring that the tax and customs system continues to work in the right way to bring in revenue due and working to maintain the long-term reduction in the tax gap.	1 – No poverty, 8 – Decent work and economic growth
Make it easy to get tax right and hard to bend or break the rules	We are expanding and improving our digital services and data systems, including extending Making Tax Digital for VAT and Income Tax.	8 – Decent work and economic growth
Maintain taxpayers’ consent through fair treatment and protect society from harm	We are protecting society from harm by reducing our own carbon emissions and those in our supply chain, working towards Net Zero by 2040.	13 – Climate action, 17 – Partnership for the goals
Make HMRC a great place to work	We are building the leadership, tax and digital skills that we need for the future. By 2025, we will see an increase of 25% in the number of young people in our target audience who have seen our Tax Facts animations. We also launched British Sign Language versions of our Tax Facts videos in March 2021.	4 – Quality education, 5 – Gender equality, 10 – Reduced inequalities
Support wider government economic aims through a resilient, agile tax administration system	We are improving our technology and data to ensure that the UK has a more resilient, agile tax administration system.	1 – No poverty, 8 – Decent work and economic growth

Our commitments in 2022 to 2023: strategic objective 5

In financial year 2022 to 2023, alongside all our activity to support wider government economic aims, we made 8 specific commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Commitment	What we delivered	Status at year end
Borders and Trade – Northern Ireland	We delivered new services and process changes to support our commitments under the Northern Ireland Protocol, including key legislation for import and excise control systems. We have also rescheduled activity following the introduction of the Windsor Framework.	Risk to delivery
Borders and Trade – ending of staged customs controls	We continued to implement full border controls through the ending of staged customs controls, working to improve and align customs and tax systems that enable traders to interact with HMRC as a single entity.	On track or complete
Single customs platform	In December 2022, following migration of import declarations to the Customs Declaration Service (CDS), it was announced that the migration of exports to the new system would be moved from 31 March 2023 to the end of November 2023 to allow more time for industry to prepare for the new platform. From then, CDS will serve as the UK’s single customs platform.	Risk to delivery
Inland Border Facilities	We delivered, operated, and decommissioned Inland Border Facilities (IBFs) across England and Wales. These are critical to enabling customs and document checks to take place away from port locations, easing congestion at the border. Where IBFs were decommissioned, everything of value was sold, recycled or re-used elsewhere, providing savings to the taxpayer and helping the government reduce its environmental footprint.	On track or complete
Single Trade Window	We have worked with partners across government and industry to understand the changes needed to deliver a world-class Single Trade Window, allowing users to meet their import, export and transit obligations by submitting information once, and in one place. We intend it to be fully operational by 2027. This commitment is amber as to deliver the optimum customer experience and maximise benefits, the programme is dependent on transformation of customer journeys in line with the HMG Border Strategy, and primary legislation to collect and share information across departments. The STW programme is working closely with partners across government to manage these dependencies.	Risk to delivery
Freeports	As announced at Budget 2021, we are supporting the introduction of 8 Freeports in England via tax and customs reliefs. At the end of 2022 to 2023, 7 of the 8 English Freeports were operational. The remaining Freeport has secured approval for 2 out of its 3 anticipated tax sites and is working towards establishing the customs site necessary to become operational as a Freeport.	On track or complete
Unity Programme (formerly known as Government Shared Services)	In line with the Shared Services Strategy for Government, we are leading a cluster of other government departments including Department for Transport (DfT) and Department for Levelling Up Housing & Communities (DLUHC) to transform HR, finance and procurement. Unity Business Service will provide shared services that are user-centric, swift and cost-effective to DfT and HMRC from 2024 with DLUHC joining from financial year 2026 to 2027. Development of our business and technical requirements is on track, but not yet mature enough to assess specific risks to the programme’s delivery timelines. We are also engaged in commercial activity which will more sufficiently mitigate against potential systems and service disruption when completed.	Risk to delivery
Sustainability targets	In 2022 to 2023 we achieved a 58% reduction in greenhouse gas emissions, compared with the 2017 to 2018 baseline, to support our Net Zero ambitions and our targets under the Greening Government Commitments. The amber rating is because we missed our stretching internal milestone targets set for recycling and reducing the number of domestic flights.	Risk to delivery

Key performance metrics: strategic objective 5

Figure 21: Sustainable ICT (Information and Communication Technology)

Our ICT strategy complies with the Greening Government Commitments, Government Buying Standards, the government’s Cloud First policy and the Waste Electrical and Electronic Equipment Directive. It is designed to reduce our impact on the environment by increasing digital and hybrid ways of working, using more sustainable hardware, (hardware being refreshed every 4 years, rather than 3 years), and aiming to move our onsite data centres to the Cloud by 2024. Our strategy will enable us to make efficient use of sustainable energy and using providers who are committed to Net Zero and renewable power. ICT waste reused includes waste that is redeployed across HMRC.

• Recycled (tonnes) 2022-23	121
  Reused (tonnes) 2022-23	271
  Recycled (tonnes) 2021-22	122
  Reused (tonnes) 2021-22	231
  Recycled (tonnes) 2020-21	48
  Reused (tonnes) 2020-21	124
  Recycled (tonnes) 2019-20	65
  Reused (tonnes) 2019-20	199

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 21.

Figure 22: Greenhouse gas emissions (Greening Government Commitment)

Our target for greenhouse gas emissions combines emissions from our buildings and domestic business travel. The 58% reduction is due to our move from legacy offices into more energy-efficient regional centres and our continued efforts to reduce emissions from business travel. We are rolling out an Energy Management System across the estate, to provide real-time energy data. This information has been used to identify inefficiencies across the estate. Read a breakdown of total greenhouse gas emissions data in Annex 3. Against a baseline of 1.16 tonnes of CO2e per FTE in greenhouse gas emissions, our performance in 2022 to 2023 was 0.55 per FTE.

• CO2e (tonnes) 2018-19	74,662
  CO2e (tonnes) 2019-20	60,036
  CO2e (tonnes) 2020-21	50,479
  CO2e (tonnes) 2021-22	38,452
  CO2e (tonnes) 2022-23	37,032
  Baseline (tonnes) 2017-18	88,382
  Target (tonnes) 2025	35,353

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 22.

Ultra-Low Emission Vehicles (Greening Government Commitment)

We have met the target for 25% of our vehicle fleet being ultra-low emission by December 2022, with 29% being ultra-low emission by this date. We are now working to install the charge point infrastructure we need as we move towards the December 2027 target for 100% of our vehicle fleet being zero emission.

Figure 23: Direct building emissions (Greening Government Commitment)

The 31% reduction in our direct building emissions is a result of our move from legacy offices –many of which used oil for heating – into more energy-efficient regional centres. Against a baseline of 0.32 tonnes of CO2e per FTE in direct building emissions, our performance in 2022 to 2023 was 0.26 per FTE.

• CO2e (tonnes) 2018-19	24,954
  CO2e (tonnes) 2019-20	21,921
  CO2e (tonnes) 2020-21	25,094
  CO2e (tonnes) 2021-22	18,678
  CO2e (tonnes) 2022-23	17,419
  Baseline (tonnes) 2017-18	25,397
  Target (tonnes) 2025	15,238

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 23.

Figure 24: Domestic flight emissions (Greening Government Commitment)

We saw an increase in travel in 2022 to 2023, following the lifting of COVID-19 restrictions, but travel was still significantly reduced from pre-pandemic levels. We took 13,359 flights (716 tonnes of CO2e), a reduction in CO2e of 67% (23,277 fewer flights/ 1,482 tonnes of CO2e)] against a 2017 to 2018 baseline. 62% of our domestic flights were to or from Northern Ireland. We also travelled 4 million miles for international travel in 2022 to 2023. Read more detail in Annex 3. Against a baseline of 0.04 tonnes of CO2e per FTE for domestic flight emissions, our performance in 2022 to 2023 was 0.01 per FTE.

• CO2e (tonnes) 2018-19	2,320
  CO2e (tonnes) 2019-20	1,558
  CO2e (tonnes) 2020-21	47
  CO2e (tonnes) 2021-22	194
  CO2e (tonnes) 2022-23	726
  Baseline (tonnes) 2017-18	2,198
  Target (tonnes) 2025	1,539

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 24.

Figure 25: Water consumption (Greening Government Commitment)

The 63% reduction in water consumption has been achieved through moving to more water efficient regional centres. A water efficiency review will take place in 2023 to 2024 and some projects have already been identified that could further reduce consumption. A breakdown of water data is in Annex 3. Against a baseline 7.12 m3 per FTE, our performance in 2022 to 2023 was 3.12 per FTE.

• Consumption (m3) 2018-19	539,633
  Consumption (m3) 2019-20	524,115
  Consumption (m3) 2020-21	283,474
  Consumption (m3) 2021-22	239,140
  Consumption (m3) 2022-23	211,307
  Baseline (m3) 2017-18	566,078
  Target (m3) 2025	520,792

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 25.

Figure 26: Waste generated (Greening Government Commitment)

The 57% reduction in waste generated has been achieved through smarter waste management, behaviour change, reductions in paper use and IT efficiencies. A breakdown of waste data is in Annex 3. Against a baseline of 0.12 tonnes per FTE of waste generated, our performance in 2022 to 2023 was 0.06 per FTE – well below the target.

• Waste generated (tonnes) 2018-19	8,504
  Waste generated (tonnes) 2019-20	8,868
  Waste generated (tonnes) 2020-21	4,980
  Waste generated (tonnes) 2021-22	4,921
  Waste generated (tonnes) 2022-23	4,028
  Baseline (tonnes) 2017-18	9,464
  Target (tonnes) 2025	8,044

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 26.

Figure 27: Waste to landfill (Greening Government Commitment)

Although just 0.04% of waste goes to landfill, we are working hard to reduce this to zero. As the operator of the Landfill Tax, we are acutely aware of the need to reduce our reliance on landfill as a waste solution, and we continue to work with our suppliers to minimise this. We follow the waste hierarchy and ensure no furniture goes to landfill. We do this by ensuring as much furniture as possible is reused internally or by distributing to other government departments or charities. In 2022 to 2023 we reused or donated 6,171 items. After this, any furniture unsuitable for reuse or donation is broken down into component parts to be recycled into new furniture. A breakdown of waste data is in Annex 3. We are substantially below this government wide target.

• Waste to landfill (%) 2018-19	1.2%
  Waste to landfill (%) 2019-20	0.7%
  Waste to landfill (%) 2020-21	0.5%
  Waste to landfill (%) 2021-22	0.2%
  Waste to landfill (%) 2022-23	0.04%
  Baseline (%) 2017-18	1.9%
  Target (%) 2025	5%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 27.

Figure 28: Waste recycled (Greening Government Commitment)

The percentage of waste recycled in 2022 to 2023 was 67%. This is below the Greening Government Commitment target of 70%. The percentage of waste recycled is impacted by our overall reduction in waste, in particular paper use. A breakdown of waste data is in Annex 3.

• Waste recycled (%) 2018-19	78%
  Waste recycled (%) 2019-20	80%
  Waste recycled (%) 2020-21	85%
  Waste recycled (%) 2021-22	76%
  Waste recycled (%) 2022-23	67%
  Baseline (%) 2017-18	81%
  Target (%) 2025	70%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 28.

Figure 29: Paper purchased (Greening Government Commitment)

The 88% reduction in paper purchased is driven by our digital transformation and reduction in office printing. Against a baseline of 4.72 reams per FTE, our performance in 2022 to 2023 was 0.53 per FTE.

• Reams of A4 equivalent 2018-19	205,190
  Reams of A4 equivalent 2019-20	142,389
  Reams of A4 equivalent 2020-21	23,039
  Reams of A4 equivalent 2021-22	22,831
  Reams of A4 equivalent 2022-23	35,744
  Baseline 2017-18	295,297
  Target 2025	147,649

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 29.

Financial review

This financial review covers our financial performance, setting out our funding and what we have spent our money on, trends within tax revenues and how we ensure we use public money appropriately and responsibly.

Chief Finance Officer’s Foreword

HMRC is one of the largest departments in government, and, as Chief Finance Officer, I’m pleased that we’re continuing to demonstrate value for money for the taxpayer as we deliver our core purpose.

In financial year 2022 to 2023, our expenditure of £6.9 billion enabled us to generate £814.0 billion in tax revenue for the UK’s public services and pay out £33.9 billion in support payments to customers. Overall, it costs us just half a penny to collect each pound of tax revenue – and in December 2022, the National Audit Office recognised that our compliance work offers good value for money. It returns, on average, £18 for every £1 of expenditure on our compliance staff.

Our funding comes directly from government, based on funding settlements at Spending Reviews. The investments the government makes in HMRC help us support our growing customer base to get their tax right, deliver a secure and efficient customs border and continue our transformation into a modern, trusted tax and customs department.

Through technological innovation, better and more efficient IT services, and a more effective use of our estate, we have delivered new and sustainable efficiency savings of £117 million in 2022 to 2023. Efficiency savings enable us to reduce our operating costs and help ensure we are delivering value for money for UK taxpayers.

Justin Holliday
Chief Finance Officer

Budgetary framework

HM Treasury sets the budgetary framework for government spending. Within this, we are given our own Supply Estimate, along with other government departments, which sets our proposed maximum spending and is voted on by Parliament at the start of the financial year.

The total amount we spend as a government department is known as Total Managed Expenditure (TME). In 2022 to 2023, our TME was £45,223 million. This funding is subject to strict HM Treasury controls and consists of budgets voted by Parliament (including for our running costs and other specific costs, such as Child Benefit or Cost of Living Payments) and budgets where appropriation is covered in other legislation (including tax credits, other reliefs and allowances and the National Insurance Fund).

Figure 30 shows how TME is split into Departmental Expenditure Limit (DEL) and Annually Managed Expenditure (AME) budgets, both of which are explained below.

Within our DEL budgets we have ringfences against some programmes where we receive budget for a specific policy measure, which we can only spend on that measure. This is referred to as the HM Treasury policy ringfence.

Figure 30: Our budgetary framework

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 30.

Departmental Expenditure Limit (DEL) explained

Departmental Expenditure Limit (DEL) is the firm budget set for our controllable expenditure. It is split between spending on day-to-day resources and administration (operational) costs, otherwise known as ‘Resource (RDEL)’, and spending on investment, otherwise known as ‘Capital (CDEL)’.

Operational funding: Resource (RDEL)

Figure 31 shows our overall operational funding year on year since 2018 to 2019. It shows how our funding has changed where we have supported wider government aims such as our work on exiting the European Union, delivered on measures set out at government fiscal events and made investments in our IT infrastructure.

The largest part of our funding is for our core operations, primarily to support customers and carry out work to tackle tax evasion, avoidance and non-compliance. As shown in figure 31 in financial year 2022 to 2023, our funding increased following our Spending Review 2021 settlement with additional resource in our customer compliance function, funding for HMRC pay awards and to account for inflation rises, as well as some for our fiscal event measures becoming part of our core operations following SR21 as we continue to deliver these measures.

Following the UK’s exit from the European Union, our funding for UK Transition rose over the past 4 years, peaking in 2021 to 2022, before falling by around £90 million in 2022 to 2023. This resource supports the delivery of key IT projects such as the transition from our old platform, CHIEF, to the new Customs Declaration Service, delivering the Trader Support Service and our Inland Border Facilities.

Resource funding for our transformation and system remediation programmes has increased over the last 2 financial years. This is to secure our technical infrastructure as well as support our ambition to transform our systems and modernise our IT, including projects that will reduce IT outages affecting our customers and staff while enabling future innovation of our services. Over 2022 to 2023, our transformation projects have delivered over £50 million in sustainable savings and achieved over £1 billion in additional tax revenue and yield.

The funding we have received at government fiscal events has also trended upwards over the last 5 years. This covers several initiatives – for example, the development of Making Tax Digital and additional funding to tackle evasion, avoidance and non-compliance.

Our depreciation funding also increased by £200 million in this financial year to account for an update in the way in which depreciation of our assets is calculated, such as for the life of our assets and the introduction of the new accounting standard for leases (IFRS16).

RDEL benefit funding

We received funding for COVID-19 administration costs and grant payments to customers between 2020 to 2021 and 2022 to 2023, and cost of living funding of £724 million for 2022 to 2023.

Our COVID-19 spend has decreased significantly from 2021 to 2022, largely due to a reduction in our COVID-19 administration costs following the closure of schemes, such as the one-off payment for working households receiving tax credits, where we provided payments in 2021 to 2022 only.

Figure 31: Resource funding 5 year trend (£m) (note 1)

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 31.

Investment funding: Capital (CDEL)

Figure 32 shows that our capital investment is now 76% higher than it was in 2018 to 2019. Most of this increase is funding for our work on exiting the European Union, which delivers critical customs systems that facilitate trade and deliver a secure and effective border.

Our funding for transformation projects has been around £150 million to £200 million since 2019 to 2020 as we continue to improve our IT systems. This funding delivers a variety of projects that improve the quality, resilience and security of our systems and provide new digital services to enhance our customers’ experience of interacting with the tax system. Our funding from government fiscal events has increased from 2020 to 2021 levels, mainly due to funding for the development of our Making Tax Digital programme.

Figure 32: Capital funding 5 year trend (£m) (note 1)

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 32.

What we spend our funding on

The diagram below shows our total expenditure in 2022 to 2023 broken down by different activities.

Figure 33: HMRC expenditure (TDEL) in 2022 to 2023 (note 1)

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 33.

Figure 33 shows that in 2022 to 2023 we spent £3,259 million delivering our core operations. This allowed us to provide essential services to customers. This year we had more than 56 million interactions through our app, 2.3 million unique logins to our business and personal tax accounts, and continued to support customers who still need to contact us by phone and post. We continued to deploy resources to tackle tax non-compliance which allows us to maintain a stable tax gap over time.

We spent £451 million on further work to address specific areas of tax evasion, avoidance and non-compliance and £446 million on delivering measures such as the Single Customer Account and the Payments Programme, which enables taxpayers to more easily access tax services and update customer accounts and makes it easier for customers to understand and pay what they owe.

We also played a central role in providing financial support to customers, spending £718 million on Help for Households, with Cost of Living Payments totalling £650 delivered to 1 million eligible tax credit customers.

COVID-19 administrative costs accounted for a spend of £102 million this year, which includes the cost of our Taxpayer Protection Taskforce. Although the COVID-19 schemes ended in September 2021, we continued making payments for complex cases and recovered money paid out, where customers have chosen to voluntarily repay it, or when customers repay following a prompt from HMRC we take compliance action to recover amounts wrongly claimed.

Further information on our work to tackle COVID-19 error and fraud can be found within the COVID-19 financial support schemes section in Strategic objective 1.

Our expenditure on work to facilitate the smooth flow of trade at the border was £893 million. We continued to deliver the Inland Border Facilities (IBF) across England and Wales, which are critical in enabling customs and documents checks to take place away from the UK’s busiest ports. We invested £525 million in our Single Customs Platform and IT changes to customs, VAT and excise systems to meet the requirements for the Northern Ireland Protocol and Free Trade agreements, including EU-UK Trade and Cooperation Agreements. At the same time, we continued to support traders moving goods between Great Britain and Northern Ireland through our expenditure on the Trader Support Service of £114 million. Staff and other costs to support delivery of these projects was £254 million.

We spent £539 million on transforming our systems and modernising our IT infrastructure. We’re focused on delivering service improvements and progressing the transformation and digitalisation of our services to make them more efficient, improve customer experience, reduce burdens on business and improve tax compliance.

Figure 34: HMRC expenditure (RDEL) in 2022 to 2023 by spend type (note 1)

Figure 34 shows our spend 2022 to 2023 by type of spend. The majority of our spend was on staff related costs and IT and Telecommunications.

Note 1: Figures may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 34.

Table 3: 5-year trend on our spending (note 1)

	2018-19 £m	2019-20 £m	2020-21 £m	2021-22 £m	2022-23 £m
RDEL	3,956	4,287	4,796	5,717	6,329
CDEL	362	337	538	665	556
Total DEL	4,318	4,624	5,334	6,382	6,885 (note 2)

Note 1: Numbers may not sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 34.

Note 2: 2022-23 RDEL includes Cost of Living spend of £718m, this is not part of our running costs in figure 34 above.

Table 3 shows our expenditure over time. The factors that explain how our funding has changed over time, also explain changes to our expenditure – primarily supporting wider government aims such as our work on exiting the European Union, expenditure on measures set out at government fiscal events and investments in our IT infrastructure.

Variances between budget and expenditure

Table 4 shows we have delivered a small underspend of £176 million (equivalent to 2% of our budget) against our overall DEL budget of £7,061 million. When excluding our budgets under HM Treasury policy ringfences (referenced in the Budgetary Framework section), we have delivered an underspend of £27 million.

Table 4: Financial performance (note 1)

	Budget £m	Expenditure £m	Expenditure compared to budget £m	Expenditure compared to budget %
Operational (RDEL)	6,400	6,329	-72	-1%
Investment (CDEL)	661	556	-104	-16%
Total DEL	7,061	6,885	-176	-2%

Note 1: There are some technical differences between how our expenditure appears in the financial statements and how it appears in relation to our funding and the wider government accounts. To make this difference easier to understand, we have included a reconciliation in SOPS 2.

Table 5: Financial Performance factoring in ringfence underspends (note 1)

	Expenditure compared to budget £m	Underspend on ringfences £m	Position excluding ringfence underspend £m	Position excluding ringfence underspend %
Operational (RDEL)	-72	70	-2	0%
Investment (CDEL)	-104	79	-25	-4%
Total DEL	-176	149	-27	0%

Note 1: Numbers may appear not to sum due to rounding.

Against an operational (RDEL) budget of £6,400 million, we underspent by £72 million (1%). Some of the factors contributing to the underspend were the decision not to proceed with plans for a new Dover Inland Border Facility and the early closure of temporary sites, efficiencies in our Trader Support Service and lower than expected costs when opening 3 further regional centres in 2022 to 2023.

These were offset by some increases in spend within our customer service function, where increases in the taxpaying population have resulted in more customers reaching out to HMRC for assistance. We also had higher costs in our compliance function where we had higher staff numbers through the year and fewer staff leaving the department than forecasted.

In 2022 to 2023, we spent £556 million, against a budget of £661 million in our investment (CDEL) budget, resulting in an underspend of £104 million (16%). The majority of the CDEL underspend is because we successfully sublet some of our space in our regional centres and therefore had a reduction in the value of the HMRC estate asset.

The remaining CDEL underspend is from our IT programmes due to capacity constraints and amended timelines. These have been offset by increased expenditure elsewhere, such as the migration of the customs system from our old platform, CHIEF, to the new Customs Declaration Service platform.

Annually Managed Expenditure (AME): explained

Annually Managed Expenditure (AME) covers our more flexible budgets for volatile or demand-led expenditure, including tax credits, Child Benefit and other reliefs and allowances. This spending may be unpredictable and is more challenging to control, so it requires careful monitoring. HM Treasury reviews these budgets annually.

AME is a volatile or demand-led expenditure, and we base our forecast on published Office of Budget Responsibility data.

Trends in Annually Managed Expenditure (AME)

Figure 35 shows that in 2022 to 2023, AME payments were below 2019 to 2020 levels following the closure of the COVID-19 schemes. In 2022 to 2023, we spent £33,930 million across Child Benefit, tax credits and other benefits, reliefs and allowances. We spent £13,632 million on other reliefs and allowances, largely in relation to research and development relief and film tax relief. There was also expenditure on Lifetime ISAs, Help to Save benefits, as well as payments in lieu of tax relief to certain bodies.

We supported around 12.2 million children through Child Benefit with total payments of £11,596 million. This was an increase from 2021 to 2022 mainly driven by an increase in the value of Child Benefit payments. We also paid out £8,835 million in tax credit payments to around 1.15 million families, a decrease of £1,770 million from the last financial year as we are gradually transferring customers from tax credits to Universal Credit, administered by the Department for Work and Pensions.

We also had a number of specific repayments of COVID-19 support grants (payments made in the period ended in September 2021). These totalled £132 million in 2022 to 2023 and these arise when customers entitled to a grant choose to voluntarily repay it, or when customers repay following a prompt from HMRC or an unprompted disclosure.

Figure 35: AME summary by type of expenditure (note 1)

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 35.

Variances between AME budget and expenditure

Table 6: AME variances between budget and outturn

	Funding £m	Outturn £m	Variance £m
Total annually managed expenditure	38,162	33,930	-4,232

In 2022 to 2023 we spent £33,930 million, against a budget of £38,162 million on annually managed expenditure, resulting in an underspend of £4,232 million. Any underspent funds are returned to HM Treasury.

In 2022 to 2023, a key factor behind our underspend was lower spending on tax credits due to the rate of migration of claimants onto Universal Credit. There were also other underspends within Child Benefit (lower expenditure than expected when the budget was set) and other relief and allowances related to corporation tax reliefs expenditure.

How we delivered value for money

Like any government department, we have a duty to use public money responsibly and obtain the best value from it. We can demonstrate value for money in several ways, such as by comparing the tax revenue we collect with the cost of collecting it, or by achieving efficiency savings. This section gives more information about how we delivered value for money this year.

Tax revenues

Total tax revenues represent all money HMRC received (or was due to receive), less any money that we owed or repaid. They are driven by a variety of factors, for example the overall level of activity in the economy and the rates of taxation, allowances and reliefs set by Parliament. Figure 36 shows total tax revenues between financial years 2018 to 2019 to 2022 to 2023.

Figure 36: Total tax revenues

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 36.

In general, tax revenues will increase year-on-year, reflecting factors such as population growth, growth in wages and profits, and inflation. We saw a reduction in tax revenues in 2020 to 2021 due to the economic impacts of the COVID-19 pandemic as well as deferred tax payments.

During financial year 2022 to 2023, we collected total revenues of £814.0 billion, £82.9 billion more than the previous financial year. Compared to 2021 to 2022, revenues were higher for Income Tax & NICs mainly due to the strength of employee earnings and the higher National Insurance rates in effect for some of the year. Some of the factors driving growth in revenues have also impacted on our operations. For example, while growth in the population of Income Tax customers and frozen tax thresholds have increased Income Tax receipts, having more customers that fall within Income Tax (up to more than 34 million, from 31 million in 2015 to 2016) has also resulted in more customers requiring our support.

We have also seen growth in VAT receipts in 2022 to 2023, which could have been influenced by both high levels of inflation and subsequent changes in real consumer expenditure. Some of these inflationary pressures have also driven up the cost of our operations. Business Taxes receipts have increased in 2022 to 2023 following economic recovery from the pandemic and growth in offshore receipts as a result of high energy prices and the introduction of the Energy Profits Levy.

Read more on tax receipts over time in our annual bulletin of HMRC tax receipts and National Insurance contributions at GOV.UK. Tax receipt data for 2022 to 2023 is provisional until Summer 2023. Please note: receipts are on a cash basis and so represent when a payment for a tax liability is received by HMRC. This is different to tax revenues which are on an accrued basis, based on when the tax liability accrues.

Our spending compared to total tax revenue in 2022 to 2023

Figure 37 shows what it cost to run HMRC in financial year 2022 to 2023. For a running cost of £6,885 million, we generated £814,023 million of tax for the UK’s public services and provided £33,930 million in financial support for tax credits, Child Benefit and other reliefs.

Figure 37: Total expenditure relative to total revenue

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 37.

Cost of collection

Figure 38 shows that in 2022 to 2023, the cost of collecting taxes was 0.51p for every pound we collected in tax revenue, a slight rise on last year’s figure of 0.50p in every pound. This reflects an increase in expenditure outweighing the increase in revenue, with the main drivers for the change being an expenditure increase in our compliance and debt management functions and on delivery of our transformation and remediation programmes.

Figure 38: Cost of collection 5 year view (note 1)

Year	Pence
2018-19	0.52
2019-20	0.51
2020-21	0.51
2021-22	0.50
2022-23	0.51

Note 1: A change to the methodology for the overall cost of collection was made in 2021 to 2022 and the ratio is now shown net of customs and international trade. This is because the nature of expenditure has moved towards border control rather than revenue collection. The 2019 to 2020 and 2020 to 2021 ratios are also restated net of customs and international trade.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 38.

Our progress in delivering efficiencies

Sustainable efficiencies are achieved when we improve how we carry out a process or activity, delivering a permanent cost reduction while maintaining or improving existing performance levels. In the first year of the current Spending Review period, financial year 2022 to 2023, we have delivered new sustainable efficiencies of £117 million. In the 5 year period since 2018 to 2019 (which spans 3 Spending Reviews) we have delivered total sustainable efficiencies of £634 million, as shown in figure 39.

In 2022 to 2023 we achieved these efficiencies in broadly 3 ways: people and productivity savings (which are generated through improvements to internal processes, and subsequent changes in productivity and staffing levels), IT savings, and Estates savings. For example, we generated £10 million in sustainable savings through the implementation of multiple process improvements to help shorten post handling times. In addition, moving compliance activity upstream through supporting customers and agents to get their tax, customs affairs and payment entitlements right at the earliest possible opportunity, continues to be a key method of generating efficiencies, and saved more than £6 million in 2022 to 2023.

Our Technology Sourcing Programme delivered £11 million of efficiency savings in 2022 to 2023, by replacing existing IT contracts with new, more efficient services and suppliers. In addition, our Locations programme delivered £33 million of efficiency savings, by enabling better use of the HMRC estate and bringing colleagues together in regional hubs.

Figure 39: 5 year view of cumulative sustainable efficiencies, including annual breakdown of each year’s contribution

Year	£m
2018-19	166
2019-20	286
2020-21	386
2021-22	517
2022-23	634

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2022 to 2023: chart data – tab 39.

Significant balance sheet movements in 2022 to 2023

The following movements in asset and/or liability balances took place during this financial year:

Application of International Financial Reporting Standard (IFRS) 16 Leases from 1 April 2022

We adopted the new accounting standard (IFRS 16) from 1 April 2022, which requires us to recognise various assets and liabilities on our balance sheet. The main impacts have come from recognising right-of-use assets for leases previously treated as operating leases, such as for our estates and vehicles, of £1,028 million and associated lease liabilities of £1,411 million, as at 31 March 2023.

Increase in balance sheet value of our intangible assets by £328 million (16%)

The majority of our intangible assets are software assets. The increase of £328 million from the balance at 31 March 2022 (£2,078 million) to 31 March 2023 (£2,405 million) is primarily due to additions to assets under construction of £560 million, as well as an increase from revaluation of existing IT software of £88 million, partly offset by the amortisation charge for intangible assets for the year of £330 million (this refers to our ‘consumption’ of the assets, reflecting that they reduce in value over time).

Significant reduction of £4.6 billion in cash and cash equivalents

A significant element of the cash and cash equivalents balance as at 31 March 2022 included monies previously drawn down to fund the COVID-19 support scheme payments, which was used for 2022 to 2023 ‘business as usual’ spending rather than these monies being drawn down separately. Cash balances are swept into the exchequer pyramid at the close of each business day, by Government Banking Service, to prevent the risk of financial loss.

HMRC’s key risks

To protect public money and ensure we achieve our strategic objectives, we have identified 9 key risks. By managing these risks, we ensure that we protect and maximise our assets, modernise our IT estate, continue to deliver an improved experience for our customers and manage the delivery of our change portfolio.

A director general sponsors and owns each risk on behalf of our Executive Committee. This section details our position up to 31 March 2023, showing how a risk might impact our strategic objectives, the risk trend, and our progress in managing it. Each risk assessment is our best estimate based on the probability of the risk occurring and the impact if it did.

Key risk 1	Risk Exposure Assessment	Strategic objectives	Risk Trend
Capacity, Capability, and Engagement – We may not achieve high levels of business performance if our workforce lacks the necessary skills, capability and working experiences to enable our organisation to thrive.	AMBER – Probability: High, Impact: Medium	Make HMRC a great place to work, Collect the right tax and pay out the right financial support	The risk is stable and has neither improved nor worsened

To manage the risk to our capacity, capability and engagement resulting from staff strikes and sensitive employee relations, we put in place business continuity plans. Having continued delivering our commitments in the Race Equality Action Plan in 2022 to 2023 we are now working to address senior representation across our workforce. We have implemented changes to our working arrangements and terms and conditions, ensuring colleagues have increased choice and flexibility in how, where and when they work, subject to business need. This reduces our capacity and capability risks by ensuring colleagues are working effectively and efficiently. This flexibility also contributes to increasing engagement amongst colleagues by improving our employment offer. We are piloting a leadership core learning offer, and have a Manager Development Programme up and running, which can accommodate 2,500 managers each year.

Key risk 2	Strategic objectives	Risk Exposure Assessment	Risk Trend
HMRC Security – Failure to operate our security processes and controls or manage our infrastructure and vulnerabilities effectively may expose our customers, people and assets to harm or misuse.	Collect the right tax and pay out the right financial support, Maintain taxpayers’ consent through fair treatment and protect society from harm, Make it easy to get tax right and hard to bend or break the rules, Support wider government economic aims through a resilient, agile tax administration system	RED – Probability: High, Impact: Very High	The risk has incrementally improved

Our security risk is currently red as we move away from the challenges of legacy technologies, employing a balanced programme of remediation and strategic change to strengthen and enhance our portfolio of security controls. Our Enterprise Security Programme will improve our cyber security capabilities alongside other programmes such as Securing our Technical Future and Critical Platform Transformation. Our insider risk threat assessments reduce risks originating from within HMRC. We are conducting staff awareness initiatives such as ‘Hacking the Human’ (warning of the dangers of social engineering) and ‘Think Before you Click’ (to reduce phishing incidents), designed to reduce our vulnerability to external threats.

Key risk 3	Strategic objectives	Risk Exposure Assessment	Risk Trend
Exploiting Information – Failure to effectively exploit our data effectively could result in reduced revenue collection, tax gap widening and/or weaker customer service by failing to build analytical capability.	Collect the right tax and pay out the right financial support, Make it easy to get tax right and hard to bend or break the rules	RED – Probability: Medium, Impact: High	The risk is stable and has neither improved nor worsened

We exploit data at scale in order to deliver our services to customers and ensure we collect additional tax revenues to fund vital public services. However, we face significant and ongoing issues with our capability to exploit data and these constrain our productivity, effectiveness and efficiency, which means that this risk is currently rated red. We have made significant progress in re-hosting our technical services, moving priority data and services from our legacy data centres to modern, resilient, cloud platforms, and improvements in recruiting and training analysts, however we continue to have a range of different technologies and approaches across our technology estate so the root causes of this risk remain and it is stable. Treating these causes is expensive, complex, and requires further IT and transformation capacity, all of which remain constrained. As at the end of March 2023, we have identified further actions required to address this risk, which will form a delivery roadmap for implementation through our major transformation programmes.

Key risk 4	Strategic objectives	Risk Exposure Assessment	Risk Trend
External Perception / Loss of Trust – Our stakeholders may view us as ineffective, inefficient or as not impartial, leading to weaker compliance and a potential increase in the tax gap.	Collect the right tax and pay out the right financial support, Maintain taxpayers’ consent through fair treatment and protect society from harm	AMBER – Probability: Low, Impact: High	The risk is stable and has neither improved nor worsened

This risk is rated amber and currently stable. We have broadened our insight into the drivers of trust, compiling a knowledge base that contains both internal and external evidence, and established a framework for how we will measure trust in the future. This year we refreshed our ‘Tax avoidance – don’t get caught out’ awareness campaign, which helps contractors who work through an agency or umbrella company to understand their pay arrangements, so they are discouraged from engaging in tax avoidance and don’t get unexpected tax bills from us. We also delivered the ‘Help for Households’ campaign to build customer awareness of the reliefs and benefits to which they are entitled. Our Professional Standards Committee continues to be a forum for critical challenge, including considering how our actions could affect trust in the tax system and public perception of fairness.

Key risk 5	Strategic objectives	Risk Exposure Assessment	Risk Trend
Customer Experience – We may fail to make customer experience improvements in line with our objectives. This would lead to us not fulfilling our vision to be a trusted, modern tax and customs department, with reduced compliance and lower satisfaction levels.	Make it easy to get tax right and hard to bend or break the rules, Collect the right tax and pay out the right financial support	RED – Probability: Medium, Impact: High	The risk is stable and has neither improved nor worsened

Until we see a measurable increase in customer experience across all our services, our customer experience risk will remain red. As we make more services accessible digitally between 2023 and 2025, we expect increased customer satisfaction. Many customers already use HMRC digital services, with high customer satisfaction scores. This will help to move the risk towards tolerance. We have made progress in 2022 to 2023, including the launch of updated customer design standards to ensure that change in HMRC delivers against Charter standards. We also completed a national rollout of a new telephony platform to improve customer and colleague experience.

Key risk 6	Strategic objectives	Risk Exposure Assessment	Risk Trend
Data Protection – Failing to comply with data protection laws in line with the Information Commissioner’s Office (ICO) Accountability Framework may lead to a legal breach, leaving us unable to protect customer and staff personal data to the legally required level, nor help staff and customers carry out their rights under data protection law.	Collect the right tax and pay out the right financial support, Maintain taxpayers’ consent through fair treatment and protect society from harm, Make it easy to get tax right and hard to bend or break the rules, Support wider government economic aims through a resilient, agile tax administration system	RED – Probability: High, Impact: Very High	The risk has incrementally improved

Our data protection risk is currently rated red but we continue to make strong progress. We use the Information Commissioner’s Office Accountability Framework, which helps organisations to minimise risks associated with processing personal data and has defined target standards. During this financial year, we significantly improved data management for 59 systems, preventing unauthorised access to systems and applications and improving our ability to delete, suppress or stop processing personal data if required. We delivered a Supplier Assurance Regime that ensures our partners meet data protection and security expectations. We continue to roll out training to all staff and have improved our subject access request response times. At the end of March 2023, we completed all actions to address our highest priority areas, reducing the likelihood of this risk occurring and the potential impact. We are now monitoring our data protection compliance and highlighting possible weaknesses to identify and address them early.

Key risk 7	Strategic objectives	Risk Exposure Assessment	Risk Trend
Delivering our Change Portfolio – The programmes within our change portfolio may fail to deliver the outcomes and associated benefits we agreed to as part of the government’s Spending Review 2021. This, in turn, may harm our ability to deliver the ambitions set out in our strategic roadmaps.	Collect the right tax and pay out the right financial support, Make it easy to get tax right and hard to bend or break the rules	RED – Probability: Very High, Impact: High	The risk is stable and has neither improved nor worsened

This risk is rated red because there has been slippage on the delivery of some of our major programmes that seek to improve the resilience and security of our technical infrastructure, draw on industry leading analytics technology, and make the filing of tax returns via software easier, fairer, and less prone to error. Our key challenge was having the capacity to deliver this ambitious portfolio of change – as a result, we need to focus available capacity and funding on strategic priorities and potentially defer some delivery to future years. This will be managed through well-established portfolio management functions in HMRC.

Key risk 8	Strategic objectives	Risk Exposure Assessment	Risk Trend
Funding and Affordability – We may be unable to deliver our strategic objectives or operate within our budget.	Support wider government economic aims through a resilient, agile tax administration system, Make it easy to get tax right and hard to bend or break the rules, Collect the right tax and pay out the right financial support, Maintain taxpayers’ consent through fair treatment and protect society from harm	AMBER – Probability: Medium, Impact: Medium	The risk is stable and has neither improved nor worsened

Our funding and affordability risk reduced from Red to Amber following the 2021 Spending Review settlement. Our plans depend heavily on delivering stretching efficiency challenges. However, inflation has driven up the cost of our operations, and more people have been brought into the tax system and into more complex areas, placing greater demand on our operations. In our response to the HM Treasury Efficiency and Savings Review in January 2023 we detailed plans to reduce low value demand for our services and drive a shift to digital services. This revised approach depends on even more ambitious savings initiatives, which we will manage closely.

Key risk 9	Strategic objectives	Risk Exposure Assessment	Risk Trend
Technology Resilience and Reliability – A major IT failure or security breach that results from the current condition of HMRC’s IT infrastructure could harm our business operations permanently or temporarily, depending on the incident’s severity.	Collect the right tax and pay out the right financial support, Maintain taxpayers’ consent through fair treatment and protect society from harm, Make it easy to get tax right and hard to bend or break the rules, Support wider government economic aims through a resilient, agile tax administration system	RED – Probability: High, Impact: High	The risk has incrementally improved

This risk is red due to continued reliance on old and ageing IT systems with an increased risk of inability to meet operational needs. In the 2021 Spending Review, we secured funding to modernise our IT estate and strengthen our IT infrastructure, security and data governance. Our Securing our Technical Future Programme has migrated 62% of services from our legacy data centres so far, as we move to new hosting platforms. Our Data Protection Remediation Programme identified 105 high priority systems potentially posing data security risks. Activities to remove or minimise these risks continue, with security enhancements completed for 59 systems at the end of March 2023. We have already improved our cyber security by introducing ‘multi-factor authentication’ and we are enhancing and developing identity verification services that limit criminal use of stolen data. In addition, our Artificial Intelligence initiative is detecting fraud patterns and improving user journeys.

Jim Harra
Accounting Officer
6 July 2023