Corporate report

HMRC's annual report and accounts 2023 to 2024: Our accountability

Published 30 July 2024

Governance statement

Foreword by Dame Jayne-Anne Gadhia, HMRC’s Non-Executive Chair

This year, HMRC has delivered its core purpose against an increasingly challenging backdrop of financial pressures and rising customer demand. While in this context the department has not been able to give the customer service levels we want to achieve, we have nevertheless generated a record £843.4 billion in tax revenue (a 3.6% increase), including an increase in the amount of revenue collected and protected that would have otherwise been lost to the Exchequer through error, carelessness or deliberate non-compliance.

HMRC deals with over 36 million individual taxpayers and over 5 million businesses – and the majority interact with the system successfully to pay the right tax at the right time. But maintaining good customer experience is vital to the successful functioning of the tax and customs system overall.

Together, the Board and Executive want to achieve high levels of satisfaction for all our customers. Getting this right requires us to balance the development of modern, convenient online services – which is what most customers want and expect – with constant training and development of customer service agents, so we can still be there to support customers who need help from speaking to an adviser. This year, it has been vital to take a step back to see how all of this adds up in terms of public trust in HMRC - and what the Executive can do to protect this trust and deliver the best possible service to our customers.

As Chair of the HMRC Board I know how seriously this challenge is being taken by the Executive team and I am satisfied that HMRC is focused on the right issues and priorities. I am also pleased with the way the Board has continued to provide advice, challenge, scrutiny and assurance to an open, honest and engaged Executive throughout the year.

During 2023 to 2024, the Board’s main areas of focus have been:

• providing assurance to HMRC’s business planning and testing its strategies
• scrutinising HMRC’s resilience and security arrangements
• challenging how HMRC is managing public trust and confidence in both the department and wider tax system

In May, the Board established a new Transformation Committee to oversee the department’s wide-ranging and complex transformation agenda. This has provided us with direct line of sight on specific high-risk change programmes and enabled us to test how change is being delivered against HMRC’s strategy. The Committee has become a valuable space to bring together the Board and Executive team, recognising our collective responsibility in delivering effective, long-term change.

In accordance with the Code of Good Practice, the Board undertook its annual effectiveness review. We continue to find that as a Board we have good coverage of the breadth of activity across HMRC and its transformation agenda, not only through the Board itself but also through our sub-committees.

My non-executive colleagues on the Board have taken a constructive approach to working with the Executive throughout the year. We welcomed Susie Warran-Smith to our non-executive team, who has brought a fresh perspective to the Board on how the tax system interacts with small businesses.

We also said farewell to Juliette Scott after 6 years of service on the Board. I am grateful to Juliette for her diligent chairing of our Customer Experience Committee, which has provided valuable advice and guidance on the way HMRC engages with customers as it grows and enhances its range of digital and online services. Jen Tippin has kindly taken over as chair of this Committee and it remains crucial to ensuring oversight of customer-related issues.

Elsewhere, the Board has drawn assurance on the organisational health of HMRC through its sub-committees. This has included the Nominations Committee which has supported the Executive on robust succession planning, and the Audit and Risk Committee’s continued focus on strengthening HMRC’s risk and control environment.

I look forward to continuing to work with the department as it carries on delivering and developing its strategy in 2024 to 2025.

Dame Jayne-Anne Gadhia
Lead Non-Executive Director, and Chair of the HMRC Board

HMRC’s non-executive directors board members (end of March 2024)

Dame Jayne-Anne Gadhia
Lead Non-Executive

David Cooper
Committees: Performance, Transformation

Patricia Gallan
Committees: People, Performance, Professional Standards, Nominations, Transformation

Michael Hearty
Committees: Audit and Risk, Performance, Transformation, Customer Experience

Paul Morton
Committees: Audit and Risk, Performance, Professional Standards, Transformation

Jennifer Tippin
Committees: Performance, People, Transformation, Customer Experience

Susie Warran-Smith
Committees: Customer Experience, Transformation, Performance

Non-executive and sub-committee members (end of March 2024)

Elizabeth Fullerton-Rome
Committees: Audit and Risk

Tom Taylor
Committees: Audit and Risk

HMRC’s Executive Committee members (end of March 2024)

Sir Jim Harra KCB
Commissioner for Revenue and Customs, Chief Executive and First Permanent Secretary, Principal Accounting Officer, and member of the Board

Angela MacDonald
Commissioner for Revenue and Customs, Deputy Chief Executive and Second Permanent Secretary and member of the Board

Jonathan Athow
Commissioner for Revenue and Customs, Director General Customer Strategy and Tax Design

Carol Bristow
Commissioner for Revenue and Customs, Director General Borders and Trade

Penny Ciniewicz
Commissioner for Revenue and Customs, Director General Customer Compliance

Alan Evans
General Counsel and Director General, Solicitor’s Office and Legal Services

Justin Holliday
Commissioner for Revenue and Customs, Chief Finance Officer, Tax Assurance Commissioner and member of the Board

Myrtle Lloyd
Commissioner for Revenue and Customs, Director General Customer Services

Suzanne Newton
Director General for Transformation

Andrew Pemberton
Director of Communications and Guidance

Lucy Pink
Director of HMRC Strategies

Daljit Rehal
Chief Digital Information Officer

Jonathan Russell
Chief Executive of the Valuation Office Agency

Esther Wallington
Chief People Officer

Our governance arrangements

This statement sets out our governance, risk management and internal control arrangements for the financial year 1 April 2023 to 31 March 2024 and up to the date of approval of the Annual Report and Accounts, in accordance with HM Treasury guidance.

Ministerial arrangements

HMRC is a department established by the Commissioners for Revenue and Customs Act 2005. This gives legal powers and responsibilities for managing the tax and customs system to the Commissioners for Revenue and Customs, appointed by the King. Our status is intended to ensure that administration of the tax system is fair, impartial and does not bring political decision-making into individual taxpayer affairs. In 2023 to 2024 the Chancellor delegated responsibility for overseeing HMRC to the Financial Secretary to the Treasury (1 April 2023 to 13 November) Victoria Atkins MP and (13 November 2023 to 4 July 2024) Nigel Huddleston MP. From 9 July 2024 to the present day, James Murray MP, the Exchequer Secretary to the Treasury has responsibility for overseeing HMRC.

The commissioners run the tax and customs system under the general direction of ministers, who set the department’s budgets, targets and priorities, agree its operational strategies and oversee its performance.

The Exchequer Secretary to the Treasury is now the sponsoring departmental minister responsible for HMRC.

We work in partnership with HM Treasury to advise ministers on developing and delivering tax policy. HM Treasury leads on strategic policy development, supported by HMRC. HMRC leads on policy maintenance and delivery, supported by HM Treasury. This policy partnership covers taxes and duties, National Insurance, tax credits and Child Benefit, for which HMRC has administrative responsibility.

Commissioners for Revenue and Customs

The commissioners are responsible for collecting and managing revenue and payments and managing tax credits. They conduct business according to the Commissioners for Revenue and Customs Act 2005 and are entitled to appoint officers of Revenue and Customs, who must comply with their directions. In 2023 to 2024, we had 7 commissioners – Sir Jim Harra, Angela MacDonald, Justin Holliday, Penny Ciniewicz, Myrtle Lloyd, Jonathan Athow, Carol Bristow (from 8 January 2024) and Joanna Rowland (until 7 January 2024).

First and Second Permanent Secretaries

Our First Permanent Secretary and Chief Executive, Sir Jim Harra, is HMRC’s Principal Accounting Officer. He is responsible for delivering our strategy and is accountable to Parliament for managing our resources. He chairs the Executive Committee (ExCom) and is a member of HMRC’s Board. Our Second Permanent Secretary and Deputy Chief Executive is Angela MacDonald.

Tax Assurance Commissioner

The Tax Assurance Commissioner (TAC) has an explicit challenge role and provides assurance in HMRC’s largest and most sensitive disputes, and a sample of smaller cases. Justin Holliday is the current TAC. Decisions about how to resolve our largest and most sensitive cases are considered by a panel of 3 commissioners, usually chaired by the TAC, who reports publicly each year in the annual Tax Assurance Commissioner’s report.

Non-executive directors

Non-executive directors bring external experience and expertise to HMRC, providing advice, challenge and scrutiny. They support the effectiveness of programme boards for our most significant transformation programmes. Dame Jayne-Anne Gadhia is our Lead Non-Executive Director and chairs the HMRC Board. She meets regularly with other non-executive directors and the First Permanent Secretary. She liaises with lead non-executive directors across government and develops and appraises non-executives as effective board members.

Our governance committee structure

HMRC has 2 top-level governance committees, which are HMRC Board and HMRC Executive Committee (ExCom). This framework enables our ExCom and sub-committees to make decisions effectively and transparently, with appropriate support, challenge and assurance from our non-executives. The Board and its sub-committees provide an advisory role.

Figure 28: HMRC Committee structure during 2023 to 2024

HMRC Board and sub-committees

HMRC Board

The Board focused on improving customer service performance and enhancing public perception and trust in HMRC, as well as cyber security and technical remediation, assuring departmental business planning, and testing HMRC’s strategies. The Board is chaired by Jayne-Anne Gadhia and met 11 times in 2023 to 2024.

Board effectiveness

The Board conducts a thorough review of its effectiveness each year, through individual discussions and a Cabinet Office questionnaire. The review enables the Board to assess progress against recommendations from previous reviews and to ensure there is continuous improvement in the Board’s effectiveness and impact. This year most agreed the Board was operating more effectively than 12 months ago, and Board members highlighted the establishment of the Transformation Committee (May 2023) as a positive step. It was felt that over the past year the Executive Committee have listened to the Board and reacted accordingly, and the Transformation Committee was highlighted to have helped improve the delivery ability of HMRC. However, to improve its effectiveness the Board agreed that the agendas of committees and Board could be better aligned, and more could be done to ensure timely and clear information sharing across them.

HMRC Board sub-committees

Audit and Risk Committee

The Audit and Risk Committee oversaw production and assured the integrity of HMRC’s 2023 to 2024 Annual Report and Accounts, as well as the 2022 to 2023 accounts for the National Insurance Fund for Great Britain, the National Insurance Fund for Northern Ireland, and the Account of Duties Collected in the Isle of Man. The committee provided advice and assurance on the annual assessments of risk, controls and governance made by ExCom and received assurance from the Valuation Office Agency’s Audit Risk and Assurance Committee. It monitored the integrity of the financial statements and assured the adequacy of governance, risk management and control frameworks. It is chaired by Michael Hearty and met 7 times in 2023 to 2024.

Customer Experience Committee

Chaired by Jennifer Tippin (since November 2023), and prior to this Juliette Scott, the Customer Experience Committee met formally 6 times and continues to monitor and assess HMRC’s performance against its Charter standards. Discussions focused on guiding and constructively challenging HMRC to become an increasingly ‘digital first’ organisation as well as providing valuable insight to inform HMRC’s approach to developing regime ownership, handling complaints and managing supply and demand against the speed of change.

Nominations Committee

The Nominations Committee scrutinised succession planning and the management of senior-level talent, performance, and reward. The Committee is chaired by Jayne-Anne Gadhia, and it met twice in 2023 to 2024.

People Committee

The People Committee discussed progress being made against HMRC’s great place to work strategic objective, people strategy, learning transformation and strategic workforce planning, to consider how HMRC’s workforce responds to changing customer demand and ensuring the right tax gets paid. It is chaired by Patricia Gallan, and they met 4 times in 2023 to 2024.

Performance Committee

The Performance Committee provided challenge and assurance to the Chief Executive and Executive team by scrutinising HMRC’s performance and delivery, both against its business plan and wider strategy and in the context of specific projects and issues. It also reviewed HMRC’s security arrangements and top tier risks. The Committee is chaired by Jayne-Anne Gadhia and met 8 times in 2023 to 2024.

Transformation Committee

The Transformation Committee was set up in May 2023 to provide support and assurance to the board and the executive team by scrutinising departmental change delivery against key transformation delivery priorities and HMRC’s strategy. It discussed major programmes including Making Tax Digital, Single Trade Window and Protect Connect, and it considered the overall transformation narrative and progress. The Committee is chaired by Jayne-Anne Gadhia and met 9 times in 2023 to 2024.

Executive Committee and sub-committees

ExCom

Executive Committee (ExCom) oversees progress towards the achievement of HMRC’s short-and long-term performance and transformation objectives, monitors delivery of significant programmes, and manages the department’s most significant risks. Every month, ExCom considered HMRC’s performance against key performance indicators. In 2023 to 2024, ExCom scrutinised and agreed HMRC’s business planning process and agreed the department’s approach to pay and reward. It also reviewed HMRC’s communications and guidance plans, compliance plans, the approach to intermediaries and people priorities.

ExCom sub-committees

Change Investment and Design Committee

The Change Investment and Design Committee approved our biggest business cases. The committee also developed, supported and assured design principles and standards for use across HMRC. It was chaired by Justin Holliday and Jonathan Athow and met 11 times in 2023 to 2024.

Making Tax Digital Executive Oversight Group

The Making Tax Digital Executive Oversight Group provided collective oversight of Making Tax Digital’s progress against agreed individual and collective ExCom accountabilities for MTD in accordance with the programme’s integrated plan. It also provided an escalation route beyond the Programme Board to address blockers where appropriate. It is chaired by Angela MacDonald and met 4 times in 2023 to 2024.

Professional Standards Committee

The Professional Standards Committee discussed a range of topics, considering how they could impact public perceptions of trust, fairness and transparency. The Committee welcomed external voices to present the themes of perceptions of fairness from the view of low-income taxpayers, digital transformation and responsible taxation. They also explored how use of Artificial Intelligence could impact trust in HMRC alongside discussions on how HMRC builds internal trust among colleagues and protects the tax system by preventing harm where possible. It is chaired by Jonathan Athow and met 4 times in 2023 to 2024.

Summaries of this year’s meetings can be found on GOV.UK.

Strategy Committee

The Strategy Committee provides stewardship of HMRC’s strategy and how it is implemented across the department. In 2023 to 2024, the committee steered developments of core strands of the Tax Administration Strategy and wider priority business planning, as well as HMRC’s approach to Intermediaries. It also approved a new security strategy and strengthened the sustainability strategy. The committee is chaired by Jonathan Athow and met 11 times during 2023 to 2024.

Read more about HMRC’s governance on GOV.UK.

Table 7: Meeting attendance by executive and non-executive directors

	Date started or left role	Board (11)	ARC (7)	Perf. Ctte (8)	People Ctte (4)	NC (2)	TC (9)	CEC (6)	ExCom (26)
NEDs Board Members
Dame Jayne-Anne Gadhia		10		8		2	9
Patricia Gallan		11		8	4	2	8
Michael Hearty		8	5	4			6	3
Susie Warran-Smith	1 October 2023 (joined)	5		5			4	1
Paul Morton		10	7	8			8
Juliette Scott	22 November 2023 (left)	8		5			6	5
David Cooper		11		8			9
Jennifer Tippin		10		6	3		8	2
NEDs Committee Members
Elizabeth Fullerton-Rome			7
Tom Taylor			6
Executives
Sir Jim Harra KCB		11	2	7		2	9		23
Angela MacDonald		10		5			8	5	20
Jonathan Athow							7	5	16
Carol Bristow							9		21
Penny Ciniewicz					3		8		22
Alan Evans							7		21
Justin Holliday		9	7	8			8		25
Myrtle Lloyd					4		8	5	21
Suzanne Newton					4		9	1	26
Andrew Pemberton							8	3	25
Lucy Pink							8		24
Daljit Rehal							8		20
Joanna Rowland	7 January 2024 (left)						6	4	15
Jonathan Russell		1					2		16
Esther Wallington					4	2	9		17

Our conflict of interest policy

Within our policies on conduct, we have a ‘conflict of interest’ policy which is aligned to the Civil Service Management Code (section 4.3). This applies to all employees and non-executive directors. The policy explains what a conflict of interest is, and provides information on declaring, recording and managing outside interests.

A conflict of interest will arise when personal interests, activities or relationships may potentially interfere, or be perceived to interfere, with business decisions, may compromise the ability to remain fair and objective, or may result in a personal gain or advantage.

Individuals are responsible for notifying their managers of any conflicts. The relevant manager or business area must determine whether there is in fact a conflict (actual, potential or perceived) and what mitigating action is to be taken, and the manager is responsible for recording this information. If the individual moves to another team or business area, they must assess whether a new notification needs to be made in relation to the new role.

In high-risk areas, conflicts are recorded on a register, which is maintained at a business unit level.

Senior Civil Service (SCS) colleagues are required to complete an annual declaration of interest via a central register which is held securely by SCS HR team. The information required for the register is a high-level record of the conversations already held with line managers to confirm that declarations of interest are up to date and includes nil returns. All SCS in HMRC were asked to complete their annual declaration of interest in December 2023 and HMRC is fully compliant with the Civil Service HR guidance. The form covers the whole period from 1 April 2023 until 31 March 2024. Therefore, if there are any changes after the form is completed, a new entry must be submitted, which can be completed at any time during the year.

HMRC Board members and non-executive members are required to declare real and potential conflicts of interest on appointment and to notify of any arising during their term. This is in accordance with The Code of Good Practice para 4.15.

A comprehensive list of Board members’ interests (both executive and non-executive) are reported on GOV.UK.

SCS outside remuneration as at 31 March 2024, agreed through the process of declaration and management of outside interests, is reported on GOV.UK in accordance with The Code of Good Practice 2017 para 4.15 and HM Treasury Public Expenditure System (PES) guidance paras 19.4 and 19.8.

Business Appointment Rules

In compliance with Business Appointment Rules (BAR), we are transparent in the advice given to individual applications for senior staff and publish details on a quarterly basis on GOV.UK. The BAR Governance Group provides central oversight of full Senior Civil Service (SCS) BAR applications and considers data on SCS leavers where no BAR application is required.

In April 2022, HMRC introduced a new BAR assurance tool and governance panel, to help the SCS community to identify whether a full BAR application is needed when leaving HMRC. It also provides data to support the Audit and Risk Committee in their oversight role monitoring HMRC’s application of the rules, who receive a quarterly paper on business appointment rules.

Statistics cover the period 1 April 2023 to 31 March 2024:

Table 8: Statistics on the application of business appointment rules

	SCS Population	For AA-G6 population
Number of exits from Crown Service (civil servants and special advisers)	25	3,190
Number of exits where Business Appointment Rules (BAR) applications were required	14	101
Number of exits where BAR conditions were set	14	18
Any enforcement actions the department has taken relating to breaches of the rules in the preceding year	1	No detail available

In 2023 a supplementary tool was launched for delegated grades, which helps colleagues identify where a BAR application must be made and makes it easier for BAR applications to be associated with their central employee record.

Read advice regarding specific business appointments on GOV.UK.

Risk management and assurance

Our approach to risk management

HMRC has a well-established culture of managing risks, aligned with HM Treasury’s guidance – ‘The Orange Book’. The Performance Analysis section highlights some specific identified risks and explains how we are managing them and details the progress made in managing risks relating to climate change. This section outlines our approach to managing risks across HMRC over the reporting period.

We manage 2 main types of risk:

1. Process risks: these are risks to the efficient operation of our processes. We continue to develop our control framework to better manage risks associated with our operational processes. To make sure these process controls are effective, they are regularly reviewed and assured during the reporting period.

2. Strategic risks: these are risks to the management of HMRC and delivery of our strategic objectives. The Executive Committee (ExCom) and HMRC Board, inclusive of Audit and Risk Committee members scrutinise these risks through regular reporting and participation in deep dive sessions. We manage these risks across all levels of HMRC, from decision making on individual cases to delivering large-scale change and strategic policy making.

Our risk and control framework

We continually review and refine how we manage risk, so we can understand and keep improving the effectiveness of our strategic delivery, processes and controls. This includes identifying and delivering work to bring and keep HMRC’s risk and control framework in line with the May 2023 Orange Book updates.

Our Chief Risk, Control and Financial Accountant has oversight for management assurance activity including the disciplines of governance, risk, and control. Alignment of these activities across HMRC is helping us to create a unified view of our risks and controls and to streamline activity. The Chief Risk, Control and Financial Accountant, supported by the HMRC Risk and Control Board, will help ExCom to further improve our risk and control framework, contributing to more effective and efficient processes that support the delivery of our strategic objectives.

Our risk and control framework is based on the ‘Three Lines Model’. This assurance model facilitates the effective management of risk throughout the reporting period, by clearly defining roles and activities for front-line operations, internal assurance, and independent assurance; and by supporting regular monitoring, reviewing and assurance. The front-line operates controls to mitigate risks to delivery and internal assurance provides management with confidence that the controls in place are effective. An independent view of the overall effectiveness of controls including our internal assurance is provided by Internal Audit and external bodies.

These activities provide the Accounting Officer, ExCom and the Board with assurance about the delivery of HMRC’s overall strategy and objectives.

Figure 29: HMRC’s Three Lines Model

Our risk and control framework covers:

• governance: ensuring that authorities and accountabilities are clear, appropriate strategies and plans are in place and our success in operating the control framework is reflected in the annual governance statements
• process management: taking the necessary action to ensure our processes are effective, efficient, well-controlled and easy for our customers and staff to use
• risk management: identifying, assessing, managing and reporting the risks to the delivery of our objectives
• controls: embedding effective controls in our business processes to ensure objectives are met and any risks reduced
• management assurance: assuring the controls in place are sufficient and operating as intended, and taking the necessary action to address any weaknesses
• independent assurance: getting internal and external audit to challenge or confirm the effectiveness of our control framework
• data: ensuring that the data on which our business relies is secure and accurate

The Executive Committee will establish an Executive Risk and Control Committee chaired by the Second Permanent Secretary in the beginning of 2024 to 2025. The committee will focus on risks and control issues that are enterprise wide, have wide ranging impacts and have no single natural owner. This cross-cutting approach will give these types of risks and control issues the right level of oversight and management. In support of this committee the Chief Risk, Control and Financial Accountant chairs the HMRC Process, Risk and Control Board. The Board focuses on improving risk management capability and the underpinning processes of all aspects within the risk and control framework.

Our corporate governance arrangements have continued to evolve during the year. An organisation of HMRC’s size and complexity will always have multiple risks to manage at any one time. The governance arrangements in place throughout 2023 to 2024 have been sufficient to continue managing risks effectively.

Compliance with the code of good practice

HMRC’s compliance with the ‘Corporate governance in the central government departments code of good practice 2017’ has been assessed. The code focuses on governance arrangements for ministerial departments. While there are elements which are not directly relevant to HMRC due to our statutory framework and status, we comply with the spirit and principles of the code and by incorporating this and other strategies, good governance is achieved in HMRC.

Read the Corporate governance in the central government departments code of good practice 2017 on GOV.UK.

Human rights

We have procedures in place to ensure that all our policies and legislation are compliant with the Human Rights Act. Our approach is underpinned by understanding our customers and their needs, treating everyone with respect, recognising that we have privileged access to information (and need to protect that information), and behaving professionally with integrity.

Recommendations made by external scrutiny bodies

We monitor the implementation of recommendations by external scrutiny bodies including the National Audit Office (NAO), Public Accounts Committee (PAC) and Infrastructure Projects Authority. In the 2023 to 2024 financial year, we received PAC recommendations from the following inquiries that our Accounting Officer provided evidence to.

Table 9: Committee of Public Accounts inquiries, reports and responses

Inquiry and hearing date	Government response
Digital Services Tax – Hearing: 8 December 2022 – Report published: 5 April 2023	Published 22 June 2023
Managing tax compliance following the pandemic – Hearing: 26 January 2023 – Report published: 3 May 2023	Published 17 July 2023
Child Trust Funds – Hearing: 18 May 2023 – Report published: 26 July 2023	Published 14 September 2023
Progress with making tax digital – Hearing: 19 June 2023 – Report published: 24 November 2023	Published 15 February 2024
HMRC Standard Report 2022-23 – Hearing: 14 December 2023 – Report published: 28 February 2024	Published 25 April 2024

We accepted or partially accepted 12 recommendations from NAO value for money reports published after April 2023, and accepted 14 recommendations from the NAO management letter 2022 to 2023, subdivided into 22 sub-components, of which 4 were implemented by 1 April 2024. We also implemented 126 recommendations from the Infrastructure and Projects Authority.

Further detail on the status of all NAO recommendations the department has accepted since April 2019 can be found via the NAO recommendations tracker.

Statement of Accounting Officer’s Responsibilities

How we prepare the accounts

HMRC is responsible for collecting the majority of the UK’s tax revenue, including Income Tax for the Scottish and Welsh governments, and its financial information is reported in 2 separate accounts.

Trust Statement

The Trust Statement reports the revenues, expenditures, assets and liabilities related to the taxes and duties receivable and payable for the financial year. The majority of taxes and duties are accounted for on an accruals basis. As agreed with HM Treasury, some tax elements are accounted for on a partial accruals basis, or cash basis where not enough information is known to accrue fully and reliably for the revenue.

The HM Treasury ‘Accounts Direction’, issued under section 2 of the Exchequer and Audit Departments Act 1921, requires HMRC to prepare the Trust Statement to give a true and fair view of the state of affairs of the collection and allocation of taxes and duties, the revenue and expenditure, and cash flows for the financial year.

Resource Accounts

The Resource Accounts report the costs of running HMRC, including making payments of Child Benefit, corporation tax reliefs, personal tax credits and other payments to customers reportable to Parliament via HMRC’s Supply Estimate. The Valuation Office Agency (VOA) is consolidated into the Resource Accounts. The Resource Accounts are prepared on an accruals basis.

The HM Treasury ‘Accounts Direction’, issued under the Government Resources and Accounts Act (GRAA) 2000, requires HMRC to prepare consolidated Resource Accounts to give a true and fair view of the state of affairs of HMRC and the departmental group and of the income and expenditure, Statement of Financial Position and cash flows of the departmental group for the financial year.

Principal Accounting Officer’s responsibilities

HM Treasury has appointed me, as HMRC’s Chief Executive, to be Principal Accounting Officer of HMRC and VOA, with overall responsibility for preparing the Trust Statement and Resource Accounts and for providing them to the Comptroller and Auditor General. In preparing these accounts, I am required to comply with the requirements of the Government Financial Reporting Manual and in particular to:

• observe the Accounts Directions issued by HM Treasury, including the relevant accounting standards and disclosure requirements, applying suitable accounting policies on a consistent basis
• ensure that HMRC has in place appropriate and reliable systems and procedures to carry out the consolidation process
• make judgements and estimates on a reasonable basis, including those judgements involved in consolidating the accounting information provided by the Valuation Office Agency
• state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts
• prepare the accounts on a going concern basis

As Principal Accounting Officer, I take personal responsibility for the annual report and accounts and confirm that I have judged it to be fair, balanced and understandable.

Accounting Officers for the Resource Accounts

For the financial year 2023 to 2024, I, Sir Jim Harra, was the Principal Accounting Officer.

Jonathan Russell, Chief Executive of the Valuation Office Agency, was an Additional Accounting Officer and was accountable for the parts of HMRC’s accounts relating to specified lines of the Estimate and the associated assets, liabilities and cash flows. This appointment does not detract from my overall responsibility for the department’s accounts.

The allocation of Accounting Officer responsibilities in the department was as follows:

• Estimate sections A, C-K and N-R: Sir Jim Harra, Chief Executive and Permanent Secretary
• Estimate sections B, L and M: Jonathan Russell, Chief Executive of the Valuation Office Agency

As Accounting Officer of HMRC I am responsible, through the use of appropriate systems and controls, for ensuring that any grants we make to our sponsored bodies are applied for the purposes intended. I also ensure that such expenditure and the other income and expenditure of the sponsored bodies are properly accounted for, for the purposes of consolidation within the Resource Accounts. As Accounting Officer, I am accountable for the use, including the regularity and propriety, of the grants received and the other income and expenditure of the sponsored bodies.

My responsibilities as Accounting Officer - which include the propriety and regularity of the public finances for which I am answerable, keeping proper records and safeguarding the assets of the department or non-departmental public body for which I am responsible – are set out in Managing Public Money, published by HM Treasury.

Auditors

As the Accounting Officer, I have taken all the necessary steps to make myself aware of any relevant audit information and to establish that the auditors are aware of that information. As far as I am aware, there is no relevant audit information of which the auditors are unaware.

Principal Accounting Officer’s Report

HMRC’s Chief Executive, Sir Jim Harra, has been appointed by HM Treasury as Principal Accounting Officer for HMRC. In this report, he reviews the effectiveness of the governance, risk management and internal controls in place for our accounts. This report also contains the elements required for HMRC’s Accounting Officer System Statement.

Financial responsibilities within HMRC

As HMRC’s Principal Accounting Officer, I delegate financial authority to each of HMRC’s directors general through annual letters of delegation (issued by my Chief Finance Officer) to manage the budget for their business areas within agreed financial limits and Managing Public Money guidelines. The directors general are supported by their finance directors and finance business partners. They cascade delegations of the financial authorities within their business areas, at each stage setting the limits of financial authority and our policy requirements.

This Scheme of Delegations is supported by our financial control framework, which ensures that we adhere to financial control standards in all our financial processes. The HMRC Risk and Control Board oversees the development and administration of our control standards, ensuring that financial risks are managed effectively and efficiently through proportionate risk-based controls. The effectiveness of the controls is subject to regular specialist financial control assurance review, and independent review by Internal Audit and the NAO.

Statements and reports made by Executive Committee (ExCom) members

Each member of ExCom provides an annual governance statement, setting out the control framework arrangements (governance, risk, control, assurance, process and data) in their business areas. These statements are reviewed by Internal Audit Control Board and the Corporate Risk Team, as well as teams that lead on different aspects of our control framework. HMRC’s Audit and Risk Committee draws on the statements, alongside other sources of evidence, to provide overall assurance to the Accounting Officer and the Board.

The Tax Assurance Commissioner prepares a tax assurance report.

Additional Accounting Officers

I receive assurance from HMRC’s Additional Accounting Officers:

• Jonathan Russell has responsibility for Valuation Office Agency (VOA) administration
• Jonathan Athow has responsibility for the Scottish and Welsh rates of Income Tax
• Justin Holliday has responsibility for the account of duties attributable to the Isle of Man
• Patrick Whittome (until 31 August 2023) and Alison Bexfield (from 1 September 2023) have responsibility for the administration of R.N. Limited

The VOA provides a separate governance statement and I take assurance from this and from the review which underpins it.

National Insurance funds

There are 2 National Insurance Funds: one for Great Britain and one for Northern Ireland. Each Fund has its own financial statements, including a governance statement, which I sign separately. Many of the activities relating to the transactions of the 2 Funds are carried out by other departments and agencies (for example, Department for Work and Pensions in Great Britain and Department for Communities in Northern Ireland), and I receive letters of assurance from the accounting officers of each of these entities every year.

Quality assurance

We have developed a departmental framework and central guidance to underpin quality assurance of business-critical analytical models (BCMs). BCMs are our most important analytical models. They affect HMRC or government decisions of significant financial scale, play a key role in fulfilling HMRC’s business plan, or underpin high profile publications. We maintain a register of these models, consistent with recommendations from the 2013 MacPherson review. We have approximately 100 BCMs on the register. This number changes because the register is regularly updated.

Management and quality assurance of the analytical models are monitored in our annual review of BCMs, which is assessed by the Audit and Risk Committee (ARC). The quality assurance framework is promoted through regular training. We also have a team which independently reviews a sample of BCMs, to provide assurance and share best practice.

We continue to develop our assurance of BCMs by further improving model and quality assurance documentation and increasing the number of independent reviews of BCMs. These developments align with actions from ARC and recommendations set out by the NAO in their Financial Modelling in Government report (published January 2022).

Read the MacPherson review of government models on GOV.UK.

Read the NAO Financial Modelling in Government report.

Internal audit

The Director of Internal Audit’s opinion to me, as Principal Accounting Officer and the Board is limited assurance that HMRC has an adequate and effective framework for governance, risk management and internal control. HMRC’s risk exposure has remained high throughout 2023 to 2024, both operationally and in change delivery.

• Risk Management:
  Our opinions for risk management are generally comparable to last year with 80% of audits providing a positive opinion. Risks are largely understood, and the risk management arrangements generally adequate at business group level to support HMRC in dealing with these challenges. Developments to corporate risk management arrangements included strategy development, improved risk reporting and better tooling. These improvements are however at a relatively early stage, and it is difficult to gain a consolidated view of the HMRC’s risk landscape and overall exposure. Embedding improved tooling will improve this and aid consistency in future years. At business group level, although there are differences between arrangements, I am satisfied that processes are in place for the effective identification, assessment and monitoring of delivery risks, albeit in 20% of our audits we identified the need for better system design to help mitigate risk. Risk exposure is unlikely to reduce in the short-to-medium-term. Significant risks to funding, efficiency, modernisation of IT and security systems, and delivering change require highly effective risk management arrangements. Funding and capacity pressures will increasingly be a limiting factor and there is a need for HMRC to further exploit efficiency opportunities. Whilst significant levels of efficiencies have been realised they remain behind target, with substantial current and future risks to their achievement.

• Governance:
  Governance of the organisation was broadly effective with 84% of our audits providing a positive opinion for governance, a 4 percentage point improvement on 2022 to 2023. At assignment level, individual audit results improved in relation to accountability and ownership, reliability and integrity of management information and monitoring and assurance. HMRC has multiple layers of governance that are generally well supported by adequate management information. However, enterprise understanding and reporting of the second line of defence remains largely linear, with opportunities for better alignment, efficiency and coverage yet to be realised. Additionally, despite some improvement, we have again identified the need for HMRC to better clarify senior accountabilities, particularly for areas of the control framework where controls, policies and procedures are set by one part of the organisation but applied elsewhere. HMRC should ensure that accountability for operation and assurance of controls is overtly clear for all key components of its control framework, particularly given the governance changes planned for 2024 to 2025.

• Internal Control:
  At departmental level, audit results for control effectiveness saw a 6 percentage point improvement on last year, which continues the positive trend of recent years. This trajectory reflects the leadership commitment to understand and improve the underlying control framework and generally good performance in implementing audit actions. Positively, application and compliance of control saw a 10 percentage point uplift although I note a divergence between the more positive results for operational controls comparative to corporate controls. In 23% of audits, we found weaknesses in relation to the achievement of objectives and the percentage of negative audit opinions overall was comparable to last year at 26%. For around 40% of limited audits reports we followed-up in-year we were unable to lift the audit opinion. There remain significant control weaknesses that limit my overall opinion, some of which require longer-term fixes or system changes. Delivery of improved control against many of these has been slow because they are either cross-cutting, difficult and/or legacy issues for which there are no easy fixes. In particular, parts of the IT estate are adversely impacted by long-standing issues, with a commensurate impact on control design, efficiency and effectiveness. In-year reprioritisation against a number of these issues has pushed remediation further to the right.

Personal data-related incidents

All government departments are required to publish information about any serious data-related incidents, which must be reported to the Information Commissioner (ICO). A summary of these incidents is shown in Table 10.

Table 10: Summary of protected personal data-related incidents reported to the Information Commissioner’s Office

Nature of incident	Number of breaches 2023-24	Number of breaches 2022-23
Personal information used to make changes to customer records on HMRC systems without authorisation	6	2
Loss of inadequately protected electronic equipment, devices or paper documents from secured government premises	3	2
Loss of inadequately protected electronic equipment, devices or paper documents from outside secured government premises	2	1
Insecure disposal of inadequately protected electronic equipment, devices or paper documents	0	0
Unauthorised disclosure	14	11
Other	4	2

We have notified the ICO of 29 instances of unauthorised disclosure during 2023 to 2024 (2022 to 2023: 18). The number of customers potentially affected by these ICO notifiable incidents is 35,645 (2022 to 2023: 10,209). This figure could still change over time, as new information becomes available as a result of further enquiries and ongoing security incident investigations.

The number of unauthorised disclosure incidents reported to the ICO increased in 2023 to 2024 due to continued enhanced General Data Protection Regulation (GDPR) awareness across the department. We take all these incidents seriously and are acting to address them.

We have used the lessons learned from these incidents to review and strengthen our customer identity and authentication processes. Protecting customer data is important to us and we continually monitor our processes to prevent recurrences. We are also delivering enhanced data security, governance and reporting across HMRC.

Other protected personal data-related incidents

Incidents which did not require reporting to the Information Commissioner are recorded centrally within HMRC. The overall number of centrally recorded incidents (particularly unauthorised disclosure) has reduced significantly.

The number of centrally-managed security incidents impacting on protected personal data in HMRC reduced from 3 (2022 to 2023) to 1 in 2023 to 2024. The number of customers potentially affected by these incidents was 10 (2022 to 2023: 27). The figures quoted for the number of customers affected can change over time, as new information becomes available due to further enquiries and ongoing security incident investigations.

Government functional standards statement

UK Government Functional Standards set expectations for improved and consistent ways for functions to work across government. This includes the planning, delivery, and assurance of functional work as well as support for continuous improvement and professional development. HMRC fully supports the embedding of functional standards. In line with HM Treasury/Cabinet Office requirements, over the reporting period 2022 to 2023, all HMRC functional leads completed a self-assessment of how well they are meeting the requirements of their functional standard. Recognising the benefits, HMRC’s Executive Committee commissioned further self-assessments over the reporting period 2023 to 2024. Following both sets of self-assessments, areas for improvement were identified and have been built into business plans. Internal Audit reviews of each function are underway which will further strengthen our alignment with the relevant standards.

Home Responsibilities Protection

Home Responsibilities Protection (HRP) was a scheme in operation from 1978 to 2010 to reduce the number of qualifying years of National Insurance (NI) contributions a person with caring responsibilities needed to receive a full pension. HRP was later replaced by National Insurance credits from 2010.

A review of State Pensions by the Department for Work and Pensions (DWP) identified historical issues with the recording of HRP on people’s NI records.

In the last year we have continued to work with the DWP and the Department for Communities in Northern Ireland to determine the approach, volumes and resources required to correct NI records and State Pension entitlement. Work to correct records is overseen by a Cross Department Oversight Group for National Insurance across HMRC and DWP. HMRC began writing to potentially affected people in Autumn 2023 encouraging them to make a claim for HRP if relevant. As of 31 March 2024, we have written to 137,405 people identified as potentially affected, above State Pension age.

HMRC started a proactive external communications campaign from Spring 2024 following the publication of a Written Ministerial Statement. HMRC and DWP are working with a range of key organisations and other government departments to reach and support people, to establish their eligibility and if appropriate, make a claim for HRP. HMRC’s strategy includes a GOV.UK-housed toolkit to support organisations with key messaging and social media assets that organisations can feature, to ensure consistent, supportive messaging. To amplify messages HMRC and DWP are working closely with press and media. The effectiveness of the campaign will be evaluated on a monthly basis and adapted where appropriate.

Further detail can be found in the DWP Annual Report and Accounts 2023 to 2024.

Control challenges in financial year 2023 to 2024

Over the past year, we have actively managed the following issues that posed a risk to delivery of our core work.

Tax credits error and fraud

The Comptroller and Auditor General has qualified his opinion on HMRC’s Resource Account for payments that we make that are not in accordance with Parliamentary intent, due to error and fraud in personal tax credits. Tax credits are being replaced by Universal Credit, so opportunities to resolve this issue through major system, product or process changes are significantly limited.

The error and fraud overpayment rate has reduced from the high levels of 8.9% seen in financial year 2008 to 2009, hitting an all-time low of 4.4% in financial year 2014 to 2015. HMRC has maintained the levels of error and fraud within an established range of 4.4 to 5.5% in every year since 2012 to 2013. Ministers retained the target to restrict error and fraud to no more than 5% of entitlement for 2018 to 2019 and 2019 to 2020 but, in line with other HMRC metrics during the COVID-19 pandemic, we did not set an error and fraud target for 2020 to 2021 or 2021 to 2022.

The level of error and fraud is impacted by the migration to Universal Credit and continued pressures on error and fraud compliance resourcing.

The central estimate of the error and fraud overpayment rate is estimated to be 4.7% (£365 million) for 2023 to 2024. This is unchanged from the estimate of 4.7% (£415 million) for 2022 to 2023. These estimates are derived using a new projection methodology following the decision to cease the random enquiry programme as tax credits caseloads reduce. Our last sample-based estimate for 2021 to 2022 is 4.5% (£480 million), down from the initially published £510 million following correction of a minor weighting error.

HMRC’s accounts have been qualified since the inception of tax credits. We expect the qualification of the accounts to continue, as error and fraud will remain a significant issue until the closure of tax credits.

Corporation Tax research and development tax relief error and fraud

The Comptroller and Auditor General has qualified his opinion on HMRC’s Resource Account to include error and fraud in Corporation Tax research and development (R&D) tax reliefs. This is the second year the small and medium enterprise (SME) scheme estimate has been prepared using the results of a random enquiry programme. The first modelled estimate for 2021 to 2022 has been revised as results from the random enquiry programme now includes claims received in 2021 to 2022.

The overall estimate of the level of error and fraud in 2021 to 2022 is 17.6% (£1.34 billion) of the estimated cost of the reliefs. The level of error and fraud in 2021 to 2022 is 25.8% (£1.20 billion) for the SME scheme and 4.6% (£0.13 billion) for the RDEC (Research and Development expenditure credit) scheme. The overall rate of error and fraud in total R&D expenditure across the SME and RDEC schemes for 2021 to 2022 is not statistically different from 2020 to 2021. The rate is higher than previous reported modelled estimates for 2021 to 2022 and reflects significant methodological improvements to the SME estimate introduced for the 2022 to 2023 Annual Report and Accounts.

The previous modelled estimates for 2021 to 2022 were based on assumptions using limited information from claims selected for risk-based compliance enquiries and were made before results from a random enquiry programme were available. The previous illustrative estimate assumed that claims which were not selected for enquiry had lower levels of error and fraud. As a result of the increase in the SME estimate, the error and fraud rate applied to the element of the RDEC scheme claimed by SMEs has also increased the overall estimate of error and fraud within the RDEC scheme. The random enquiry programme has shown that the assumptions for the SME estimate were previously underestimating the true rate and value of error and fraud. Compliance yield and monies paid out to criminal attacks and not recovered are included within the final estimate. HMRC have implemented a number of measures to tackle error and fraud. For illustrative purposes we have considered the possible error and fraud position for 2023 to 2024 expenditure to take account of legislative changes and operational measures. The legislative changes include rate changes, extending relief to data and cloud computing costs and the mandation of digital claims requiring additional information (including pre-notification of some claims). We estimate that the policy and operational measures that have been implemented have reduced error and fraud for expenditure in 2023 to 2024 to an overall level of 7.8%.

Child Benefit error and fraud

The Comptroller and Auditor General has qualified his opinion on HMRC’s Resource Account for payments that we make that are not in accordance with Parliamentary intent, due to error and fraud in Child Benefit. This is the first year that HMRC’s Resource Account has been qualified due to levels of error and fraud in Child Benefit.

From 2023 to 2024 HMRC have improved the way they calculate error and fraud in Child Benefit payments in response to recommendations made by the NAO. As part of the methodology changes, HMRC have moved from an annual to a monthly sampling approach, making it easier to assess the duration of any error and fraud. Estimates under the new methodology are therefore not directly comparable to previous years. The methodology improvements have seen higher values of error and fraud associated with non-compliant cases, whereas the numbers of awards in error and fraud have not increased.

The central estimate of the error and fraud overpayment rate is 1.6% (£200 million) for 2023 to 2024.

HMRC has strong controls for restricting error and fraud for new claims. Our compliance strategy is primarily focused on addressing subsequent changes in circumstance that go unreported, with additional data sources being acquired from other government departments to improve detection rates. For example, to identify changes related to a young person’s further education status or when customers are no longer resident in the UK. In addition, HMRC are exploiting the new Child Benefit digital service to ensure timely interaction with customers and increased customer self-reporting.

Accountability relationships with arm’s length bodies

HMRC has 2 arm’s length bodies: Valuation Office Agency (VOA), an executive agency of HMRC, and R.N. Limited. I am satisfied that each of these has systems in place which meet appropriate standards of governance, decision-making and financial management.

Figure 30: HMRC accountability system

Valuation Office Agency (VOA)

The VOA is an executive agency of HMRC and provides valuations and property advice to the government and local authorities in England, Scotland and Wales. The VOA receives its funding to undertake valuations for local taxation and benefits purposes from HMRC through the Parliamentary supply process. It also recovers elements of its expenditure from other government departments where it has provided valuation services.

Performance monitoring

Jonathan Russell is the VOA’s Chief Executive and Accounting Officer. He is also a member of HMRC’s Executive Committee (ExCom).

HMRC’s ExCom performance hub and transformation performance pack include VOA data, and assurance is provided by HMRC’s Internal Audit function.

HMRC has a dedicated sponsor team for the VOA and ExCom sponsor, Justin Holliday. The team has a good understanding of the VOA and provides me with an update ahead of VOA Board meetings. I am content that our oversight is working well. I hold quarterly Business Reviews with Jonathan Russell, and he attends the HMRC Board at least once a year and other specific meetings upon request.

Accountability for spending

Jonathan Russell is accountable to Parliament for the propriety and regularity of the public finance within his charge, meeting the requirements of Managing Public Money, HM Treasury and Cabinet Office guidance, Public Accounts Committee and other Parliamentary select committees or authorities. As Principal Accounting Officer, I am accountable for ensuring a high standard of financial management by strategic oversight of the VOA.

R.N. Ltd

R.N. Ltd is a private company limited by shares held by the Treasury Solicitor on trust for the HMRC Commissioners. R.N. Ltd acts as a nominee for the commissioners and the company holds charges over assets that secure tax debts owing to HMRC. It holds registered title over assets assigned to HMRC in settlement of tax liabilities. R.N. Ltd had 4 directors on 31 March 2024. The Accounting Officer is Alison Bexfield, HMRC Chief Risk, Control and Financial Accountant, who has authority delegated by the HMRC Commissioners to give directions to the Treasury Solicitor on the shareholding of R.N. Ltd.

There is a formal agreement between HMRC and R.N. Ltd and ExCom-level sponsorship from Justin Holliday. R.N. Ltd has no employees. The Accounting Assurance and Reporting Team within HMRC’s Risk, Control and Financial Accounting directorate provides case work administration, accounts production and secretarial services. The running costs of R.N. Ltd are met by HMRC.

Performance monitoring

The R.N. Ltd Board meets quarterly. All Board meetings discuss strategy and monitor the success of R.N.’s strategies as well as any associated risks. The Accounting Assurance and Reporting team monitors the risks and provides regular updates to the R.N. Ltd Board.

Accountability for spending

R.N. Ltd has no specific budget. The value of the assets over which the company holds charges and has title assigned amounts to £11 million (Voluntary Legal Charges £7.2 million and Funding Bonds/ Shares £3.8 million). These assets are excluded from the R.N. Ltd balance sheet, as the company holds these in a nominee capacity. In addition to preparing the accounts for R.N. Ltd, the HMRC Accounting Assurance and Reporting team also keeps a register for R.N. Ltd where all controls are listed and monitored.

Revenue and Customs Digital Technology Services Limited (RCDTS Ltd)

Prior to 2023 to 2024 RCDTS Ltd was a non-profit making company wholly controlled by and operated for HMRC which supplied the department with IT services up until March 2023. The services RCDTS Ltd provided are now provided by a mixture of HMRC and third parties. It was a separate legal entity with an arm’s length relationship with HMRC, and its Board had 7 directors, all employed by HMRC. On 1 April 2023 the company transferred its remaining assets and liabilities to HMRC; it was dissolved in January 2024.

Other organisations

Entrust is an organisation that regulates the Landfill Communities Fund (a tax credit scheme enabling landfill operators to fund environmental bodies to undertake specified environmental projects). A levy on contributions to environmental bodies, set annually by HMRC and announced at Budget, funds Entrust. Entrust is not an arm’s length body of HMRC but has a close relationship with HMRC similar to other bodies.

Accountability for major contracts and outsourced services

The scope of this section is limited to major contracts and outsourced services. In 2023 to 2024, HMRC provided grant schemes in accordance with relevant guidelines to the charity sector who provide advice and assistance to vulnerable clients on their financial affairs (including tax affairs) operated by third parties.

HMRC has several major contracts that are significant in ensuring that it can deliver its core services. Our IT services are supported through contracts with Capgemini, Fujitsu and Equal Experts valued approximately at £766 million in total, each year.

IT contracts

HMRC continues to deliver better value from using well-established performance measures and competing work on a regular basis using a variety of different routes to market. A new framework has been introduced to improve cost, capability and capacity. Our digital transformation continues which allows a move to lower cost and highly resilient cloud data storage services.

The expenditure values for the IT contracts for HMRC’s 2023 to 2024 Resource Accounts are as follows:

• IT Public Private Partnership contract (PPP) payments: £60.8 million
• IT services and consumables: £1,011.7 million
• Total: £1,072.5 million

Facilities Management and Security contracts

HMRC’s current Facilities Management contracts will expire on 30 April 2025 and we are currently in the process of tendering our ongoing requirements. The current 6 regional based contracts will be replaced by 2 Facilities Management contracts on a national geographic basis (East and West) which will provide all of our facilities management requirements. These contracts will be awarded on a 5-year term at a combined contract value of £208 million.

A new National Security Services contract has been re-procured, awarded for 5 years at a value of £14 million per annum which commenced in June 2024.

These contracts support and underpin our operational delivery at our Regional Centres and Specialist Sites (including Valuation Office Agency sites) and give the department contractual resilience across the UK.

Conclusion

Based on the review outlined above, I conclude that HMRC has a sound system of governance, risk management and internal control that supports the department’s aims and objectives for 2023 to 2024.

Sir Jim Harra KCB
Accounting Officer
26 July 2024

Tax Assurance Commissioner’s report

Foreword

As HMRC’s Tax Assurance Commissioner (TAC), I’m proud that HMRC remained focused on resolving tax disputes fairly and consistently this year. Alongside a panel of Commissioners, I see first-hand the largest and most sensitive tax cases, and a sample of smaller cases. Together, we provide a key challenge role on settlement decisions. I’m pleased with the assurance we have provided and the opportunities we have identified to improve how HMRC manages and resolves tax disputes. This year, we faced increased scrutiny of our approach to litigation, long-running enquiries and our support for vulnerable customers. We are focused on getting things right for customers and my report sets out some of the checks and balances in place to help us do this.

This year the Code of Governance for Resolving Tax Disputes was updated and published on GOV.UK to improve transparency around our dispute resolution processes. We also published the remits for the Tax Dispute Resolution Board and the Customer Compliance Group Dispute Resolution Board, demonstrating how we carry out effective governance on HMRC’s most significant tax disputes.

We have made progress in improving customer experience and understanding of dispute resolution, embedding our Compliance Professional Standards by publishing them on GOV.UK, delivering awareness sessions for customers and their advisors, as well as internal training for our compliance teams. We also delivered external awareness sessions on consistent application of our Litigation and Settlement Strategy (LSS), building on our recent programme of internal training to improve understanding of how to apply the LSS.

I’m encouraged by the results from this year’s Tax Settlement Assurance Programme (TSAP) which show a gradual improvement in our compliance performance against our policy, legal and customer service standards and increase trust and transparency. However, I recognise there is room for improvement and feedback has been provided to managers on areas of weakness. An area of particular focus is tackling delays in concluding cases. In 2024 to 2025 we will explore strengthening the TSAP by using our Compliance Professional Standards more fully as our benchmark for measuring performance.

I am confident that HMRC colleagues will continue working to improve standards over the coming year, contributing to building trust in HMRC’s administration of the tax system.

Read our code of governance for resolving tax disputes on GOV.UK.

Read our professional standards for compliance on GOV.UK.

Justin Holliday
Tax Assurance Commissioner and Chief Finance Officer

Our approach to tax disputes

The HMRC Charter defines the standard of service and behaviour that customers should expect when dealing with us. We are committed to meeting our Charter commitments and improving our customer experience. We closely monitor performance against our standards and take steps to implement further improvements where necessary. We try to support our customers to fufil their tax obligations without the need for a dispute.

We do this in several ways, including designing a framework of policy and guidance to help customers navigate the tax system and resolve issues at first contact whether using digital or traditional channels. It’s everyone’s responsibility to get their tax right and for the vast majority who do this, our approach is to provide support through educational material and responsive customer service.

However, we know there will be occasions where customers disagree with us on the amount of tax that is due. We seek to resolve any dispute as quickly and cost-effectively as possible, in accordance with the law, our Litigation and Settlement Strategy and our ‘Code of Governance for resolving tax disputes’. The majority of disputes are resolved by agreement. Where we cannot reach an agreement, there are several options that a customer or HMRC can take to agree a resolution, including mediation through Alternative Dispute Resolution (ADR). ADR is a flexible process which can be used by HMRC and customers to resolve disputes at any stage of a compliance check. Where HMRC and a customer are unable to reach a resolution, a customer can request a statutory review and/or ask an independent tax tribunal to determine the dispute.

HMRC’s policy for dealing with most tax disputes involving fraud is to follow the cost-effective civil fraud investigation procedures wherever appropriate. We will respond robustly to those who try to cheat or attack the tax system. We reserve our criminal investigation powers for cases where HMRC needs to send a strong deterrent message, or where the conduct involved is such that only a criminal sanction is appropriate.

Read HMRC’s Code of governance for resolving tax disputes on GOV.UK.

Read HMRC’s criminal investigation policy on GOV.UK.

Read HMRC’s Charter on GOV.UK.

How we resolve tax disputes

We resolve most tax disputes by agreement with customers. Customers can authorise someone else to deal with the matter on their behalf throughout the entire dispute process, such as an accountant, friend or a relative.

Our Litigation and Settlement Strategy (LSS) is the framework within which we resolve tax disputes through civil law processes and procedures in accordance with the law. It applies whether the dispute is resolved by agreement with the customer or through litigation. We aim to apply the law fairly and consistently to secure the best practicable return for the Exchequer.

We resolve disputes according to the facts and circumstances of each case, and always in line with current law. We consider a number of factors when deciding whether to pursue a tax dispute through to litigation but generally HMRC only pursues a dispute where we believe that we will secure the best return for the Exchequer and that we would be successful in litigation.

We ensure that both the substance of any decision leading to resolution of the dispute and the way that resolution is put into effect are fully in accordance with the law.

Governing the resolution of disputes

The role of the Tax Assurance Commissioner (TAC) was first introduced in 2012, as part of a package of measures to strengthen HMRC’s governance and assurance of tax disputes. The TAC has ultimate responsibility for civil dispute governance across HMRC, and for the Litigation and Settlement Strategy (LSS). They provide assurance and transparency to Parliament and the public that HMRC handles disputes in a fair and even handed manner.

The TAC has no involvement in the management of the tax affairs of specific customers and no line management responsibility for caseworkers, maintaining a clear separation of responsibilities. The majority of case resolution decisions are taken by caseworkers with the oversight of their managers and, where relevant, advice from specialists. A sample of cases is checked through our Tax Settlement Assurance Programme to assure how cases are managed and disputes resolved. The TAC chairs a panel of 3 HMRC Commissioners who make decisions on the largest and most sensitive cases, as well as a sample of smaller cases.

Read HMRC’s Litigation and Settlement Strategy on GOV.UK.

All decisions to resolve disputes are overseen and agreed by line managers. Where tax at risk on a dispute exceeds £5 million (non-Large Business customers) or £15 million (Large Business customers), referral to a dispute resolution board is required, as set out in HMRC’s code of governance for resolving tax disputes.

Read HMRC’s Code of governance for resolving tax disputes on GOV.UK.

Figure 31: Summary of TAC oversight dispute resolution governance

In this year’s report, the tables showing referrals to the dispute resolution governance boards have been updated to separately identify outcomes where customers maintained their original filing position and those where they moved away from their original filing position following HMRC intervention. This more clearly illustrates HMRC’s compliance approach. The previous year’s data has been restated in the same format for comparison purposes.

In addition, the tables have also been updated to show the number of disputes referred to those boards, rather than the number of referrals. As a referral to a dispute governance board may be made up of a number of disputes involving the same customer, this change more clearly illustrates how dispute resolution governance is carried out in HMRC. The previous year’s data has been restated using the new methodology for comparison purposes.

The data from this year shows that total referrals to the commissioners decreased from 66 (2022 to 2023) to 48 (2023 to 2024). There was also a reduction in the number of taxpayer’s revised proposals accepted from 28 (2022 to 2023) to 15 (2023 to 2024). Most disputes referred to the commissioners are complex and can be made up of a number of issues. The variance in the data shown in the table below is due to fluctuations in the complexity, timing, and flow of cases to the dispute resolution governance boards year on year. Only a small number of disputes are referred to the commissioners, most disputes are settled following line manager approval and by agreement with customers.

Table 11: HMRC Commissioners: outcome of referrals

	2023-24	2022-23 (note 1)
Total number of meetings held (including via correspondence)	17	22
Total referrals to the commissioners	48	66
Reason for referrals
£100m plus tax or £500m adjustment	31	40
Decisions on sensitive case or risk	4	9
Decisions on sample cases	11	11
Penalty only referrals	2	2
Director referral	-	2
Direct re-referral following remittance for further work	0	2
Outcome of referral
Taxpayer’s filed position accepted	3	15
Taxpayer’s revised proposal accepted	15	28
Taxpayer’s position rejected	28	19
Remitted for further work	-	2

Note 1: Last year’s figures using new methodology.

Table 12: Tax Dispute Resolution Board: outcome of referrals

	2023-24	2022-23 (note 1)
Total referrals to TDRB	46	58
Referred to Commissioners
Taxpayer’s filed position accepted	2	11
Taxpayer’s revised proposal accepted	13	26
Taxpayer’s position rejected	22	17
Penalty only referral	3	2
Total referred to Commissioners	40	56
Not referred
Remitted for further work	3	1
Guidance provided	-	-
Decision taken by TDRB under its remit	3	1
Total not referred to Commissioners	6	2

Note 1: Last year’s figures using new methodology.

Table 13: The Customer Compliance Group Dispute Resolution Board: outcome of the total referrals to the CCG DRB

	2023-24	2022-23 (note 1)
Total referrals to CCG DRB	92	102
Taxpayer’s filed position accepted	13	21
Taxpayer’s revised proposal accepted	24	33
Taxpayer’s position rejected	38	42
Penalty only referral	13	2
Board remitted for further work before re-referral	4	4
Total	92	102
Of which: Sample cases referred to commissioners	12	11

Note 1: Last year’s figures using new methodology.

Issues governance

We have governance processes in place to determine our approach to issues that affect multiple taxpayers in a consistent and even-handed manner. In general, policy and compliance teams refer issues to the Anti-Avoidance Board (AAB) for avoidance issues and to the Contentious Issues Panel (CIP) for other issues. Both these bodies include senior operational, legal and policy experts.

During 2023 to 2024:

• the CIP met on 6 occasions and considered 8 issues (6 occasions and 7 issues in 2022 to 2023) involving Personal tax, Business tax and VAT
• the AAB met on 7 occasions and considered 10 issues (5 occasions and 8 issues in 2022 to 2023)

No issues were referred to the commissioners from the CIP (one issue was referred to the commissioners in 2022 to 2023). No issues were referred to the commissioners from the AAB (no issues referred to the commissioners in 2022 to 2023).

General Anti-Abuse Rule (GAAR) and GAAR Advisory Panel

The purpose of the GAAR is to discourage taxpayers from entering into abusive arrangements, and to deter the promotion and enabling of such arrangements. The GAAR Advisory Panel is an independent body made up of experts with legal, accountancy and commercial backgrounds. It provides an opinion on whether tax arrangements are unreasonable.

We are legally required to consider the opinions issued by the advisory panel in reaching a final decision on whether to use the GAAR to address the tax advantage arising from the arrangements, or whether to apply penalties to enablers who facilitated the use of those arrangements. Courts must also take into account the panel’s opinion if the tax arrangements are considered by them. The panel’s opinions are published on GOV.UK to help taxpayers recognise abusive tax avoidance schemes.

In 2023 to 2024 the panel provided an opinion in 1 case (6 in financial year 2022 to 2023). The opinion of the panel was that entering into and carrying out the arrangements was not a reasonable course of action. During 2023 to 2024 we reviewed our reporting processes and identified a small number of opinion notices had been duplicated within the data. This issue has now been rectified and the cumulative number of notices issued has been adjusted.

Since 2018, we have issued over 5,500 GAAR opinion notices (applying GAAR Advisory Panel opinions) to taxpayers who have used these arrangements. Taxpayers have the right to appeal against any adjustments made under the GAAR and any penalties that may be due if their case is settled under the GAAR.

Read more about the GAAR on GOV.UK.

Ensuring a standard approach to penalties for inaccuracy and failure to notify

chargeability

We charge our customers inaccuracy penalties when we find that they have filed an inaccurate tax return, claim or document, and the inaccuracy occurred because of careless or deliberate behaviour on their part. We charge our customers failure to notify penalties when we find that they have not told HMRC about a new liability to tax or other duties, and do not have a reasonable excuse for not doing so.

We work hard to ensure consistency in our decisions to charge these penalties. We do this by maintaining effective controls to make sure decisions are considered and authorised at the appropriate level, taking into account both the size and complexity of the tax at stake and the corresponding penalty.

We control penalty decision-making through line manager authorisation checks and specific governance boards for the most complex cases. We use networks of senior tax professionals to support our caseworkers with advice and assurance.

Alternative Dispute Resolution (ADR)

ADR in HMRC is a dispute resolution process which involves an impartial and neutral HMRC mediator actively assisting parties to work towards resolving a tax dispute outside of the tribunal or court. In some cases, ADR can be used to progress a case by assisting the parties during the course of an enquiry to overcome an area of disagreement which is inhibiting progress.

Figure 32: ADR Process in HMRC

Most ADR applications are submitted once we have made a decision on the amount of tax due and the customer has appealed – but it is possible to consider ADR at any point during a compliance check. Customers can apply for ADR via telephone or online through GOV.UK. We have set up an internal route for HMRC caseworkers to apply directly for ADR which will only be accepted with the customer’s agreement. The mediator will decide within 30 days of receiving the application whether the case is suitable for ADR.

The types of case which are out of scope for ADR can be found in the published ADR guidance on GOV.UK. These are usually cases where ADR cannot add value to the dispute because for example legal precedent is set and there is no apparent scope for HMRC to amend the decision. If the mediator has concerns about whether the case is suitable for ADR or whether ADR can add value, the case is referred to an internal governance panel for consideration.

Read HMRC’s ADR Guidance on GOV.UK.

If we agree to enter into ADR, the mediator will work with the HMRC caseworker and the customer to try to resolve the dispute. The mediator will aim to conclude the process within 4 months. The parties in dispute have ultimate control over the decision on whether to settle.

ADR continues to have a positive impact on over 80% of the cases which are accepted into the process. In this instance, positive impact means that the case has been progressed, either by fully or partially resolving the dispute, or by clarifying both sides’ positions and enabling them to make an informed decision on how to move forward. The majority of mediations take place via video which helps provide greater operational flexibility and reduce costs.

Table 14: Alternative dispute referrals

	2023-24	2022-23
Total applications for ADR (either side can propose ADR)	1,309	1,013
Cases accepted into ADR	512	411
Cases rejected by governance panels	334	279
Cases rejected as being Out of Scope	326	268
Cases withdrawn by applicant	66	38
Cases awaiting triage decision	71	17
Total	1,309	1,013
Cases closed	367 (note 1)	376
Of which: Cases resolved	307 (note 1)	326
Percentage of cases resolved	83.7%	86.7%
Live cases	225	149

Note 1: This figure includes applications from a previous tax year.

Reviews and appeals

If a customer disputes an appealable tax decision, they can request a statutory review of the decision and/or appeal to the independent tax tribunal. Reviews usually settle disputes and are quicker and more cost-effective than appeals. It can therefore be beneficial to customers to seek a review in the first instance. If a customer requests a review and does not agree with the outcome, they can still make an appeal to the tribunal.

Reviews

All HMRC reviews are principally overseen by tax, legal or accountancy professionals working in our Solicitor’s Office and Legal Services (SOLS) group. To ensure an objective and impartial review service, HMRC ensures that these officers were not involved in the original decision.

The statutory review process provides an additional opportunity to resolve disputes without the need for tribunal proceedings. The statutory review process checks whether the decision is in line with legislation and technical guidance, policy, and practice. The review is also an opportunity to provide feedback internally to HMRC caseworkers and improve decision making.

We carry out the review ensuring:

• a transparent review of decisions
• quality and consistency in our review conclusions
• even-handed dealing with taxpayers at review
• as many disputes as possible are resolved without tribunal proceedings

Table 15: Overview of outcomes of reviews

Statutory reviews of automated penalties and default surcharge (note 1)	2023-24	2022-23
Dealt with in the year	50,881	36,423
HMRC original decision upheld	13,245	11,234
HMRC decision varied	1,760	4,118
HMRC decision cancelled	35,876	21,071
Percentage where original HMRC decision was upheld	26%	31%
All other reviews
Dealt with in the year	5,226	4,252
HMRC original decision upheld	3,729	3,208
HMRC decision varied	930	671
HMRC decision cancelled	567	373
Percentage where original HMRC decision was upheld	71%	75%
All Statutory Reviews
Dealt with in the year	56,107	40,675
HMRC original decision upheld	16,974	14,442
HMRC decision varied	2,690	4,789
HMRC decision cancelled	36,443	21,444
Percentage where original HMRC decision was upheld	30%	36%
Percentage dealt with where the taxpayer was not represented by an agent	85%	93%

Note 1: In 2023 to 2024, HMRC issued 7,197,643 automated penalties and default surcharges (2022 to 2023: 7,749,547).

Appeals

Where a customer chooses to appeal a tax decision it will normally be to the First-tier Tribunal (FTT). Where a customer disputes the lawfulness of a decision then they may also request a Judicial Review (JR). A request for JR will normally be made to the High Court. Most appeals are settled between the customer and HMRC without requiring the tribunal or court to hear the appeal but where agreement cannot be reached the tribunal or court will schedule a hearing to listen to both sides of the argument before issuing their judgment. If either the customer or HMRC are dissatisfied with the judgement, then they can seek to appeal against it to a higher jurisdiction. The tribunals and courts are independent of both HMRC and the customer.

Table 16: Overview of tax appeals

	2023-24	2022-23
New appeals made to the FTT	12,668	12,332
Appeals in progress	47,250	39,500
Of which have been stood over	41,750	34,000
Settled appeals (by formal hearing or by agreement before the hearing)	7,885	7,081
Tax protected	£3.3bn	£14.3bn
Decided appeals	1,590	2,104
Success rate for decided appeals	87.4%	91.8%

There were 41,750 appeals stood over (2022 to 2023: 34,000). This was generally, where HMRC and the customer have agreed to put the appeal on hold while waiting for a decision in a related lead case that is being litigated.

Tax protected is an estimate of the tax at risk in litigation where HMRC has successfully defended its decisions. This will vary from year to year depending on the timing and nature of the litigation. If a specific appeal is challenging an aspect of law that would have implications for a large number of cases, then the tax protected figure will include an estimate of this wider tax at risk. Tax protected in any year is usually a reflection of a small number of cases that have a large amount of tax at stake.

The success rate recorded in table 17 below is calculated as the percentage of hearings where the decision is in our favour or substantive elements of our case succeeded.

Table 17: Data relating to decided appeals

	First-tier Tribunal (2023-24)	Upper Tribunal (2023-24)	High Court (2023-24)	Court of Appeal (2023-24)	Supreme Court (2023-24)	First-tier Tribunal (2022-23)	Upper Tribunal (2022-23)	High Court (2022-23)	Court of Appeal (2022-23)	Supreme Court (2022-23)
Total	1,500	57	12	16	5	2,021	51	1	25	6
Decision for HMRC	1,219	42	10	12	3	1,811	36	1	23	6
Decision where substantive elements of HMRC’s case succeeded	99	4	-	-	-	54	1	-	-	-
Decision for customer	182	11	2	4	2	156	14	-	2	-
HMRC success rate	88%	81%	83%	75%	60%	92%	73%	100%	92%	100%

Tax Settlement Assurance Programme

Since 2013, under the Tax Settlement Assurance Programme (TSAP), a specialist team which is independent of operational casework has reviewed a sample of settled civil compliance cases to test whether we have met our own case quality standards and correctly governed decisions relating to disputes. This includes testing adherence to the standards we have committed to under our Charter and to our core internal processes. We do this as part of our overall assurance programme to help drive continuous improvement in our management of tax disputes.

In 2023 to 2024, the TSAP reviewed 400 settled cases. The same number of cases were reviewed in the last 2 years using the same methodology, which affords for a good comparison over the last 3 years. The cases reviewed provide robust evidence of casework compliance across each directorate and tax regime. Internal Audit has positively validated the Assurance Team’s methodology and results.

We test 9 standards in our case sample, and the chart below shows themed result averages with a comparison to the last 2 years. The themes represent the life cycle of a case, including financial impact for the customer and HMRC to fulfil its enquiry obligations. We are then able to take an average across all themes to provide a composite indicator. The comparison to 2022 to 2023 shows improvements in 5 themes, a consistent result in 3 themes and a decline in one theme. Overall, there is a 3% improvement in performance. There has been a continued uplift in performance across the 3-year period, with a 6% improvement since current testing parameters commenced in 2021 to 2022.

Figure 33: Three-year summary of theme scoring for 2021 to 22 to 2023 to 24

Building on results reported last year, HMRC has demonstrated continued improvement in recording accurately the financial outcomes of compliance casework, broken down as Cash Collected, Revenue Loss Prevented and Future Revenue Benefit. However, there remains room for improvement in some areas that have a direct impact on customer experience.

For example, addressing delay is a priority area for improvement. HMRC has established a work programme, focused on addressing the causes of delay and implementing measures to reduce the time it takes to bring cases to resolution. We are also working with representative bodies, to understand better the impact of delay on our customers and are using that insight to develop and deliver enhanced awareness session across our compliance teams.

We are also addressing a number of identified shortcomings in the application of our email policy with caseworkers not always obtaining explicit consent before communicating with customers by email. We have strengthened our guidance and reinforced to caseworkers the importance of correctly applying our email policy.

The following summary shows the results at individual case level. These do not equate to the overall percentage compliance rate shown above due to the averaging both within and across the 9 themes:

• Overall, 24% (94/400) of the cases reviewed met or exceeded all our required governance and quality standards
• 66% (265/400) fell short of our governance and quality standards, however with no financial impact on the customer
• 10% (41/400) fell short of our governance and quality standards with a customer financial impact. Of the 41 cases, 22 were identified where the customer had paid too much tax. Corrective activity has since started, and we check to ensure appropriate actions are completed

In July 2020, we launched a single set of Compliance Professional Standards (CPS), aligned to the HMRC Charter. This aims to improve the quality of our performance overall by enhancing the professionalism of our compliance casework, including strengthening our controls and assurance activities. The CPS provide the focus for our training and for building capability, and we use them to measure and evaluate the quality of our performance, including how responsive we are to our customers. Since 2021 to 2022, we have been assurance testing our casework against the CPS alongside TSAP.

In July 2023 we published the CPS on GOV.UK, giving our customers greater visibility of the standards they should expect from us. In 2024 to 2025, we are looking to implement a new scoring framework that will initially run alongside our current TSAP scoring methodology with a view to publishing the results from the new framework in 2025 to 2026. This new approach will measure the effectiveness of our compliance quality by reference to the numbers of cases meeting the required quality standard, as well as the 9 themes currently used.

Read HMRC’s Compliance Professional Standards.

Finally, a small number of the largest risks require governance at a dispute resolution board (the remits of the Dispute Resolution Boards are summarised in the relevant section of the TAC report). The TSAP monitors whether cases have been decided through the correct governance board. Where cases do not require a referral to a formal case governance board, the TSAP confirms whether the settlement was authorised at the appropriate level. For 2023 to 2024 our checks have revealed that 100% (8/8 cases) were referred to the relevant board at the appropriate time.

Table 18: Three-year annual comparison of governance and authorisation

Year	2021-22	2022-23	2023-24
Settlement authorised at appropriate level	97% (222 out of 229 cases)	91% (116 out of 128 cases)	94% (88 out of 94 cases)
Correct governance followed, where required	100% (9 out of 9 cases)	80% (4 out of 5 cases)	100% (8 out of 8 cases)

Staff and remuneration report

This report provides details on the size and shape of our workforce and the cost of our staff and leadership team.

HMRC is proud to reflect the nation we serve. As the UK’s third largest government department we employ almost 65,000 full-time equivalent (FTE) employees from all backgrounds and walks of life, working in towns and cities across the UK. In our workplaces you can expect to find customer service advisers and compliance caseworkers but also experts in data, digital technology, policy, finance and the law, along with other highly skilled professionals who make up our corporate service teams.

Staff numbers

As an operational department, we need the right number of people in the right places to serve our customers and deliver our objectives.

Our departmental group, including the Valuation Office Agency (VOA), had 64,875 full-time equivalent (FTE) employees at the end of financial year 2023 to 2024. This included 61,186 in HMRC and 3,689 in VOA. These figures exclude contingent labour which was 1,785 for HMRC and 124 for VOA as of 31 March 2024.

Recruitment

This year we recruited 3,882 full-time equivalent roles to ensure we have the skills we need in our key strategic locations. This included 3,564 in HMRC, and 318 in VOA. We recruited 535 FTE from other government departments.

Leavers and exits

In 2023 to 2024, 5,578 full-time equivalent employees either left HMRC’s departmental group, including transfers to other government departments, or retired. This included 5,154 (8.3% turnover) in HMRC, and 424 (10.8% turnover) in VOA.

Average number of full-time equivalent persons employed

The table below gives the average number of FTE for 2022 to 2023.

Table 19: Average number of full-time equivalent persons employed

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

	Operational permanently employed staff	Capital (note 1) permanently employed staff	Operational others	Capital (note 1) others	2023-24 Total	2022-23 Total
Core department	61,326	397	451	-	62,174	63,233
Valuation Office Agency	3,426	-	253	-	3,679	3,740
Revenue and Customs Digital Technology Services Limited	-	-	-	-	-	648
Departmental group total	64,752	397	704	-	65.853	67,621

Note 1: Capital relates to staff building capital assets.

Staff costs

Our staff costs figures only include officials. The salary of the minister who has responsibility for HM Revenue and Customs is paid out of central funds and can be found in the Resource Accounts of HM Treasury.

Table 20: The costs of people employed during the year and reconciliation from total net costs to ‘Staff and Related’ costs in the SoCNE (£m)

	Permanently employed staff	Others	2023-24
£m	2022-23 £m
Wages and salaries	2,588.7	22.5	2,611.2	2,449.4
Social security costs (note 1)	281.0	1.4	282.4	268.0
Other pension costs	650.3	4.3	654.6	631.2
Sub Total	3,520.0	28.2	3,548.2	3,348.6
Less recoveries in respect of outward secondments	(4.6)	-	(4.6)	(4.8)
Total net costs	3,515.4	28.2	3,543.6	3,343.8
Recoveries in respect of outward secondments			4.6	4.8
Less net costs charged to capital budgets			(69.5)	(62.2)
Travel, subsistence and hospitality			40.4	42.0
Recruitment and training			28.7	31.4
Early severance schemes			3.8	(3.4)
Staff and related costs in Consolidated Statement of Comprehensive Net Expenditure			3,551.6	3,356.4

Note 1: Social security costs include the Apprenticeship Levy which is £13 million for 2023 to 2024 (2022 to 2023: £12.2 million).

Civil Service Pensions

Alongside their salary, a Civil Service pension is one of the most important benefits available to HMRC employees. It provides financial security and options when an employee retires, as well as benefits for their family and loved ones.

HMRC group

Pension benefits are provided through the Civil Service pension arrangements. The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS), known as “alpha”, are unfunded multi-employer defined benefit schemes. Our share of underlying assets and liabilities is not identifiable. The scheme actuary valued the PCSPS as at 31 March 2020. More details are in the resource accounts of the Cabinet Office.

Read more on Civil Service pension arrangements.

For 2023 to 2024, employers’ contributions of £649.2 million were payable to the PCSPS (2022 to 2023: £625.2 million) at one of 4 rates in the range 26.6% to 30.3% of pensionable earnings, based on salary bands.

The scheme actuary usually reviews employer contributions every 4 years, following a full scheme valuation (excluding 2020 due to the public service pension schemes consultation). Contribution rates are set to meet the cost of benefits accruing during 2023 to 2024, which will be paid when the member retires - it does not represent the cost of benefits paid during this period to existing pensioners. Pensions payable under classic, premium, classic plus, nuvos and alpha are increased annually in line with pensions increase legislation.

Partnership Pensions

Employees can open a partnership pension account, which is a stakeholder pension with an employer contribution. Employer contributions of £5 million (£4.4 million in 2022 to 2023) were paid to one or more of the 3 appointed stakeholder pension providers. The size of employer contributions depends on the age of the employee/member and ranged from 8% to 14.75% of pensionable earnings.

Employers also match the rate of employee contributions up to a maximum of 3% of their pensionable earnings. In addition, employer contributions of £0.2 million (2022 to 2023: £0.2 million), 0.5% of pensionable pay, were payable to the PCSPS to cover the future cost of providing lump sum benefits on death in service or ill health retirement of these employees. Contributions due to the partnership pension provider at the reporting date were nil. Contributions prepaid at that date were nil.

In 2023 to 2024, 47 individuals (2022 to 2023: 43 individuals) retired early on ill-health grounds; the total additional accrued pension liabilities in the year amounted to £0.3 million (2022 to 2023: £0.3 million).

Valuation Office Agency

A number of Valuation Office Agency’s (VOA) employees are members of the Local Government Pension Scheme. Contributions into this scheme for 2023 to 2024 were £0.3 million (2022 to 2023: £0.6 million).

Read full information about the VOA employee contributions in the VOA annual report and accounts and read details of the salary and pension benefits for HMRC’s Executive Committee in section ‘Remuneration report for Senior Civil Servants’.

Exit packages

We pay redundancy and other departure costs in accordance with the provisions of the Civil Service Compensation Scheme, a statutory scheme under the Superannuation Act 1972. Exit costs are accounted for in full in the year in which the obligation becomes binding on HMRC. Where the department has agreed early retirements, those costs in excess of obligations usually met by the Civil Service Pension Scheme, are met by the department. Ill-health retirement costs are met by the pension scheme and are not included in the table.

The cost of early retirements reflects the excess cost of any payment due to the individual on retirement and, in certain circumstances, the cost associated with the increase in future liability to pay pension.

Read full details about the Valuation Office Agency (VOA) staff exit packages in the VOA annual report and accounts.

Table 21: Exit packages 2023 to 2024 (note 1)

Exit package cost band	Number of compulsory redundancies 2023-24	Number of compulsory redundancies 2022-23	Number of other departures agreed 2023-24	Number of other departures agreed
2022-23	Total number of exit packages by cost band 2023-24	Total number of exit packages by cost band 2022-23
<£10,000	-	-	8	6	8	6
£10,000 - £25,000	-	1	5	22	5	23
£25,000 - £50,000	-	-	9	58	9	58
£50,000 - £100,000	-	-	4	47	4	47
£100,000+	-	-	1	22	1	22
Total number of exit packages by type	-	1	27	155	27	156
Of which:
Core department and agency	-	1	27	155	27	156
Total resource cost (£000s)	-	14	816	8,745	816	8,759

Note 1: The prior year figures in the 2022 to 2023 have been adjusted above to account for instances where individuals’ final costs changed from the original estimate after the date of submission of the accounts.

People off-payroll

HMRC has reviewed all relevant off-payroll engagements during the financial year 2023 to 2024. Where engagements have been within the scope of the off-payroll (IR35) legislation, both worker and the paying agency have been advised of this determination meaning appropriate deductions are made at source from payments made in respect of the engagement. We confirm that no tax liabilities have been incurred or penalties imposed due to any failure to comply with IR35 legislation.

The tables below provide details of the off-payroll engagements for 2023 to 2024, including those from the Valuation Office Agency (VOA).

Table 22: Temporary off-payroll worker engagements as of 31 March 2024, earning £245 a day or greater

	HMRC	VOA
Number of existing engagements as of 31 March 2024	410	3
Of which:
Number that have existed for less than one year at time of reporting	150	3
Number that have existed for between one and 2 years at time of reporting	138	-
Number that have existed for between 2 and 3 years at time of reporting	42	-
Number that have existed for between 3 and 4 years at time of reporting	24	-
Number that have existed for 4 or more years at time of reporting	56	-

Table 23: All temporary off-payroll workers engaged at any point during the year ended 31 March 2024, earning £245 per day or greater (note 1)

	HMRC	VOA
Number of off-payroll workers engaged during the year ended 31 March 2024	766	7
Of which:
Not subject to off-payroll legislation	727	7
Subject to off-payroll legislation and determined as in-scope of IR35	39	-
Subject to off-payroll legislation and determined as out-of-scope of IR35	-	-
Number of engagements reassessed for compliance or assurance purposes during the year	748	-
Of which: Number of engagements that saw a change to IR35 status following review	-	-

Note 1: Including engagements through umbrella companies.

Table 24: Board members and/or senior officials with significant financial responsibility, between 1 April 2023 and 31 March 2024

	HMRC	VOA
Number of off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, during the financial year	-	-
Total number of such individuals, including both on payroll and off-payroll engagements	82	6

Consultancy and temporary employees

We engage agency workers to support demand peaks of operational work and contingent labour to resolve other temporary specialist capacity gaps (together these are temporary employees). We only use professional service providers to help with specialist work, including consultancy. We limit this to when we do not have the necessary skills internally, or where an independent external expert opinion on a complex issue is required. For 2023 to 2024, external consultancy has supported programmes for service excellence and tax transformation.

We robustly control expenditure on consultancy via commercial governance procedures, but this has increased from £2.6 million (excluding VOA) in financial year 2022 to 2023 to £7.5 million (excluding VOA) in financial year 2023 to 2024, equating to 0.3% (VOA 2.7%) of our annual expenditure. We also continue to follow Cabinet Office guidelines to reduce the use of consultancy across central government.

Table 25: Consultancy and contingent labour expenditure in accordance with HM Treasury definitions (£m) (note 1)

	Consultancy 2023-24	Contingent labour 2023-24	Consultancy 2022-23	Contingent labour 2022-23
HMRC	7.5	152.3	2.6	184.4
VOA	6.5	1.3	2.3	2.4
RCDTS	-	-	-	8.2

Note 1: HMRC report contingent labour as part of contracted out services.

Trade Union Facility Time Allocation

Trade Union Facility Time is time off for employees who are Trade Union (TU) representatives to carry out their TU roles. TU roles may be duties or activities. Representatives are entitled to paid time off to carry out TU duties. They are not entitled to paid time off for TU activities - but an employer can choose to pay for time off for those activities.

HMRC recognises the Public and Commercial Services Union (PCS) and the Association of Revenue and Customs (ARC, a specialist section of the FDA specifically for HMRC) for collective bargaining and staff representation. VOA recognises Prospect and the Public and Commercial Services Union (PCS).

Table 26: Total number of employees who were relevant union officials during 2023 to 2024

	Core department and agencies total
Relevant union officials
Number of Trade Union representatives employed	823
Percentage of time spent on facility time
Working hours each representative spent on facility time
0% of working hours	165
1-50% of working hours	657
51-99% of working hours (note 1)	1
Percentage of paybill spent on facility time
Paybill refers to the total number of employees, not union representatives only
Total cost of facility time (£)	£2,040,621
Total paybill (£)	£3,529,928,012
Facility time as a % of paybill	0.06%

Note 1: In exceptional circumstances HMRC will allow more than 50% of working hours for facility time.

We have nothing to disclose or report in respect of the proportion of facility time spent on paid trade union activities.

Further disclosure required for the Trade Union (Facility Time Publication Requirements) Regulations 2017 can be found on GOV.UK.

Remuneration report for Senior Civil Servants

The government is committed to building a Senior Civil Service (SCS) that reflects the nation it serves and that can recruit and retain specialist skills while continuing to grow world class capability. This report contains information about HMRC’s senior employees and covers our policies on salaries, bonuses and benefits in kind, as well as performance assessment and contract termination.

Remuneration policy

The Senior Civil Service is made up of senior leaders employed across government, with a common framework of terms and conditions. SCS pay and conditions are not delegated to individual departments. Our SCS performance management system is governed by the Cabinet Office and recommendations on SCS pay are provided by the Independent Review Body on Senior Salaries in an annual report to the Prime Minister. The government responds to its recommendations, and the Cabinet Office sets out the approach departments must follow in SCS pay guidance. In line with Cabinet Office guidance, SCS pay and non-consolidated awards at HMRC are then decided by the Executive Committee.

SCS employee numbers and approved posts

As of the 31 March 2024, we have 546 SCS employees made up of 523 HMRC and 23 VOA SCS employees. The total number of SCS approved posts was 550, made up of 528 HMRC and 22 VOA SCS posts. This figure includes both filled, vacant and job shared posts.

Table 27: HMRC Senior Civil Service (SCS) employee numbers comparison

	Number at 31 March 2024	Number at 31 March 2023	Percentage change
Permanent Secretary	2	2	0%
SCS3	9	10	-10%
SCS2	70	68	3%
SCS1	429	423	1%
On loan/ secondment	13	10	30%
Total	523	513	2%

SCS structure and recruitment

There are 3 levels of SCS below the posts of Permanent Secretary: Director General, Director and Deputy Director. These are underpinned by a job evaluation which assesses the demands of each job relative to others. A total of 73 HMRC and VOA SCS posts were advertised last year. Qualified individuals from both within and outside the Civil Service were appointed through level moves and promotions.

SCS performance

The performance of deputy directors and directors is moderated by directors general and the Executive Committee signs-off the overall departmental year-end performance group distribution. Performance for directors general are moderated by the Permanent Secretaries with advice from an independent observer. Performance and pay arrangements for Permanent Secretaries are managed by Cabinet Office.

Senior Civil Service base pay awards

For 2023 to 2024 departments were permitted to make awards of 5.5% and a further 1% for anomalies. This meant that for 1 April 2023, we implemented the following elements, as set out in the Cabinet Office guidance:

• increase to the minimum salary for all SCS pay ranges: £75,000 (SCS1); £97,000 (SCS2); and £127,000 (SCS3)
• an across-the-board increase for all SCS of 5.5%
• an ‘HMRC anomaly minimum’, targeting people who are paid at the bottom of the pay ranges, increasing pay to: £83,500 (SCS1); £106,500 (SCS2); and £139,500 (SCS3)
• in-year non-consolidated performance bonuses for exceptional performance during 2023 to 2024 to colleagues in accordance with the criteria set out in the Cabinet Office guidance
• base pay awards were paid to all performers

Senior Civil Service non-consolidated performance awards

Exceptional performance against objectives is rewarded through non-consolidated end-of-year and in-year performance awards. In line with Cabinet Office guidance, non-consolidated end of year and in-year performance awards are funded from an agreed allocation of 3.3% of the SCS basic paybill and subject to a pay control limit of £17,500.

• end of year non-consolidated performance awards of £7,000/£5,000 (SCS1 Exceeding/High Performing), £9,000/£7,000 (SCS2 Exceeding/High Performing), and £12,000/£10,000 (SCS3 Exceeding/High Performing) were paid to 194 ‘Exceeding/High Performing’ colleagues on 1 April 2023, for the 2022 to 2023 performance year
• in-year awards ranging from £250 to £3,000 have been paid to 302 SCS members based on performance from April 2023 to the end of March 2024
• awards that are above and beyond the control limit of £17,500 are agreed in non-standard contracts, in line with the HM Treasury senior pay approval process. Non-consolidated performance award decisions are monitored to guard against bias or discrimination

Policy on notice periods and termination payments for the Senior Civil Service

We follow standard policy for SCS notice periods and termination payments in the Civil Service Management Code.

Service contracts

There is a legal requirement that all Civil Service appointments must be made on merit, and on the basis of fair and open competition. Recruitment principles published by the Civil Service Commission explain the limited circumstances when other appointments can be made.

Executive members hold open-ended appointments, unless otherwise stated in the governance statement. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service compensation scheme. No compensation payments were made to Executive Committee members during 2023 to 2024.

Read Civil Service Commission recruitment principles.

Executive Committee (ExCom) and non-executive members remuneration and pension benefits

The following table provides details of salaries and pension entitlements of the department’s most senior officials. Details of job roles and terms of appointment can be found above.

Table 28: Senior officials’ single total figure of remuneration and pension benefits

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

Senior officials	Salary (full year equivalent) (£000) 2023-24	Salary (full year equivalent) (£000) 2022-23	Bonus payments (£000) 2023-24	Bonus payments (£000) 2022-23	Benefits in kind (to the nearest £100) 2023-24	Benefits in kind (to the nearest £100) 2022-23	Pension benefits (to the nearest £000) 2023-24	Pension benefits (to the nearest £000) 2022-23	Total (£000) 2023-24 (note 5)	Total (£000) 2022-23
Sir Jim Harra KCB	195-200	185–190	5-10	-	300	200	- (note 3)	-	205-210	185-190
Angela MacDonald	165-170	150–155	-	-	-	-	- (note 3)	59	165-170	210-215
Penny Ciniewicz	150-155	140-145	0-5	-	300	100	- (note 4)	-	150-155	140-145
Alan Evans	150-155	140-145	5-10	10-15	-	-	- (note 3)	-3	160-165	150-155
Justin Holliday	175-180	165-170	-	-	200	100	- (note 3)	-10	175-180	155-160
Myrtle Lloyd	135-140	130–135	-	-	-	-	- (note 3)	22	135-140	150-155
Joanna Rowland (note 1)	130-135 (155-160)	145–150	-	-	-	-	- (note 3)	14	130-135	155-160
Daljit Rehal	210-215	200-205	50-55	40-45	-	-	- (note 3)	78	265-270	320-325
Jonathan Russell	135-140	130-135	0-5	0-5	-	-	- (note 3)	-	140-145	130-135
Carol Bristow	135-140	105-110 (120-125)	0-5	10-15	300	200	- (note 3)	49	140-145	170-175
Esther Wallington (note 2)	110-115	110-115	-	-	100	-	- (note 3)	45	110-115	155-160
Jonathan Athow	135-140	130-135	5-10	0-5	200	200	- (note 3)	-	145-150	130-135
Suzanne Newton	135-140	10-15 (120-125)	10-15	-	300	-	- (note 3)	2	150-155	15-20
Andrew Pemberton	135-140	-	5-10	-	-	-	- (note 3)	-	145-150	-
Lucy Pink	105-110	-	5-10	-	100	-	- (note 3)	-	110-115	-

Notes:

1. Left ExCom on 7 January 2024.
2. The full-time equivalent salary is £145,000-£150,000 (2022 to 2023: £140,000-£145,000). Esther worked part-time hours 0.7 FTE until August 2023. Since September 2023 she worked 0.8 FTE.
3. Pension information for 2023 to 2024 has been delayed.
4. Opted out of pension scheme.
5. Total for 2023 to 2024 does not include delayed pension benefit information.

Accrued pension benefits for directors are not included in this table for 2023 to 2024 due to an exceptional delay by the civil service pensions administrator in the calculation of these figures following the application of the public service pension Remedy.

Read more on the application of the public service pension Remedy on GOV.UK.

Explanatory notes for tables 28 and 29

Salary

Salary covers both pensionable and non-pensionable amounts and includes gross salary, overtime, recruitment and retention allowances, reserved rights to other allowances and any other allowance that is subject to UK taxation.

Bonus payments

Bonus payments are paid while serving on ExCom for exceptional work in the performance year. Year-end performance awards are based on performance achieved in post(s) held in the previous year and are made as part of the performance and pay award process. Bonus payments are considered non-consolidated pay awards.

Benefits in kind

The monetary value of benefits in kind covers any benefits provided by HMRC and treated as taxable, such as hospitality provided at external development events.

Pension benefits

Pension Benefits accrued are calculated as follows:

Real increase in pension x 20

add Real increase in any lump sum

less Contributions made by the individual

= The value of pension benefits accrued during the period

The real increases exclude increases due to inflation or any increases or decreases due to the transfer of pension rights. The value of pension benefits can vary from year to year, due to things like the date that an individual joined or left, or an individual receiving a higher pay increase in one year to another.

Non-executive directors’ single total figure of remuneration

The fees of the external appointees, which include any other allowance that is subject to UK taxation, are detailed below.

Table 29: Non-executive directors’ single total figure of remuneration

Senior officials	Fees (full year equivalent) (£000)  2023-24	Fees (full year equivalent) (£000) 2022-23	Benefits in kind (to the nearest £100) 2023-24	Benefits in kind (to the nearest £100) 2022-23	Total (£000) 2023-24	Total (£000) 2022-23
Dame Jayne-Anne Gadhia	25-30	25-30	–	–	25-30	25-30
David Cooper	20-25	20-25	–	–	20-25	20-25
Patricia Gallan	20-25	20-25	–	–	20-25	20-25
Michael Hearty	25-30	25-30	–	–	25-30	25-30
Susie Warran-Smith (note 1)	10-15 (20-25)	–	–	–	10-15	-
Paul Morton	15-20	15-20	–	–	15-20	15-20
Juliette Scott (note 2)	10-15 (20-25)	20-25	–	–	10-15	20-25
Elizabeth Fullerton-Rome	15-20	15-20	–	–	15-20	15-20
Thomas Taylor	15-20	15-20	–	–	15-20	15-20
Jennifer Tippin	20-25	0-5 (15-20)	-	–	20-25	0-5

Notes:

1. Joined the department on 2 October 2023.
2. Left the department on 22 November 2023.

Fair pay

Reporting bodies are required to disclose the relationship between the remuneration of the highest-paid director in their organisation and the lower quartile, median and upper quartile remuneration of the organisation’s workforce.

The banded remuneration of the highest-paid director in HMRC and VOA in the financial year 2023 to 2024 was £265,000 to £270,000 (2022 to 2023, £240,000 to £245,000). This was 7.31 times (2022 to 2023, 7.44) the median remuneration of the workforce, which was £36,612 (2022 to 2023, £32,603).

In 2022 to 2023 and 2023 to 2024 no employees received remuneration in excess of the highest paid director. Remuneration ranged from £24,247 to £270,000 (2022 to 2023 £22,524 to £245,000).

Total remuneration includes salary, non-consolidated performance-related pay and benefits-in-kind. It does not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.

Total remuneration also includes the one-off non-consolidated and non-pensionable payment of £1,500 made to eligible employees in 2023, as set out in the Addendum to the Pay Remit Guidance for delegated grades.

Note: This section has been subject to external audit.

Table 30a: Pay ratio

	2023-24	2022-23 (note 1)
25th percentile pay ratio	10.32	10.46
Median pay ratio	7.31	7.44
75th percentile pay ratio	5.90	5.75

Note 1: Prior year figures have been restated.

Table 30b: Total pay and benefits and salary component for the employees at the 25th percentile, median and 75th percentile

	2023-24	2022-23 (note 1)
25th percentile pay – Total pay and benefits	£25,910	£23,189
25th percentile pay – Salary components	£24,330	£22,524
Median pay – Total pay and benefits	£36,612	£32,603
Median pay – Salary component	£35,092	£32,583
75th percentile pay – Total pay and benefits	£45,349	£42,144
75th percentile pay – Salary component	£42,898	£42,144

Note 1: Prior year figures have been restated.

In 2023 to 2024 the total value of the pay award was 5% in accordance with the Civil Service Pay guidance 2023. The Civil Service pay guidance for 2023 included a discretionary additional award of 0.5% (of the paybill) for staff considered to be in lower pay grades. HMRC has used the discretion available to target the entire 0.5% to Administrative Assistant, Assistant Officer and Officer grades. In 2023 to 2024 the highest paid directors’ total remuneration increased by 10.3%. These factors have resulted in the ratio between the 75th percentile and the highest paid director increasing slightly during 2023 to 2024.

Table 30c: Annual percentage change in remuneration of directors and employees from prior year

2022-23 to 2023-24	Salary and allowances	Performance pay and bonus payable	Total remuneration
Highest paid director	4.9%	23.5%	10.3%
Employees	9.5%	29.2%	9.6%

The table above shows the percentage change in both the highest paid director and employees salary and allowances, performance pay and bonuses payable and non-cash benefits between 2022 to 2023 and 2023 to 2024.

Sir Jim Harra KCB
Accounting Officer
26 July 2024

Parliamentary Accountability

Consolidated Statement of Outturn Against Parliamentary Supply (SOPS)

In addition to the primary statements prepared under International Financial Reporting Standards (IFRS), the Government Financial Reporting Manual requires us to prepare a Statement of Outturn against Parliamentary Supply (SOPS) and supporting notes.

The SOPS is a key accountability statement that shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provision (for resource and capital purposes) and cash (drawn primarily from the Consolidated Fund), that Parliament gives statutory authority for entities to utilise. The Estimate details supply and is voted on by Parliament at the start of the financial year.

Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts will receive a qualified opinion.

The format of the SOPS mirrors the Supply Estimates, published on gov.uk, to enable comparability between what Parliament approves and the final outturn.

The SOPS contain a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn won’t exactly tie to cash spent) and administration.

The supporting notes detail the following: Outturn by Estimate line, providing a more detailed breakdown (note 1); a reconciliation of outturn to net operating expenditure in the Consolidated Statement of Comprehensive Net Expenditure (CSoCNE), to tie the SOPS to the financial statements (note 2); a reconciliation of outturn to net cash requirement (note 3); and, an analysis of income payable to the Consolidated Fund (note 4).

The SOPS and Estimates are compiled against the budgeting framework, which is similar to IFRS. An understanding of the budgeting framework and an explanation of key terms is provided in the financial review section of the Performance Analysis section of the Annual Report. Further information on the Public Spending Framework and the reasons why budgeting rules are different to IFRS can also be found in chapter 1 of the Consolidated Budgeting Guidance, available on GOV.UK.

The SOPS provides a detailed view of financial performance, in a form that is voted on and recognised by Parliament. The financial review, in the Performance analysis section of the Annual Report provides a summarised discussion of outturn against estimate and functions as an introduction to the SOPS disclosures.

Table 31: Summary of Resource and Capital outturn

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

Type of spend	SOPS note	Estimate Voted (note 1) (2023-24) £000	Estimate Non-voted (2023-24) £000	Estimate Total (2023-24) £000	Outturn Voted (note 1) (2023-24) £000	Outturn Non-voted (2023-24) £000	Outturn Total (2023-24) £000	Outturn vs. Estimate, saving Voted (note 1) (2023-24) £000	Outturn vs. Estimate, saving Total (2023-24) £000	Outturn vs. Estimate, Total Outturn (2022-23) £000
Departmental Expenditure Limit
– Resource	1.1	6,460,934	233,000	6,693,934	6,224,514	277,222	6,501,736	236,420	192,198	6,328,621
– Capital	1.2	751,178	-	751,178	725,117	-	725,117	26,061	26,061	556,400
Total		7,212,112	233,000	7,445,112	6,949,631	277,222	7,226,853	262,481	218,259	6,885,021
Annually Managed Expenditure
– Resource	1.1	14,327,021	22,032,528	36,359,549	13,913,965	19,360,496	33,274,461	413,056	3,085,088	33,930,249
– Capital	1.2	20,109	-	20,109	2	-	2	20,107	20,107	1
Total		14,347,130	22,032,528	36,379,658	13,913,967	19,360,496	33,274,463	433,163	3,105,195	33,930,250
Total		21,559,242	22,265,528	43,824,770	20,863,598	19,637,718	40,501,316	695,644	3,323,454	40,815,271
Of which:
Total resource	1.1	20,787,955	22,265,528	43,053,483	20,138,479	19,637,718	39,776,197	649,476	3,277,286	40,258,870
Total capital	1.2	771,287	-	771,287	725,119	-	725,119	46,168	46,168	556,401
Total budget expenditure		21,559,242	22,265,528	43,824,770	20,863,598	19,637,718	40,501,316	695,644	3,323,454	40,815,271
Non-budget expenditure		200,000	-	200,000	-	-	-	200,000	200,000	-
Total budget and non-budget		21,759,242	22,265,528	44,024,770	20,863,598	19,637,718	40,501,316	895,644	3,523,454	40,815,271

Some figures cover the voted control limits voted by Parliament. Refer to the Supply Estimates guidance manual, available on GOV.UK, for detail on the control limits voted by Parliament.

	SOPS note	Estimate	Outturn	Outturn vs Estimate, saving 2023-24 £000	Total Outturn 2022-23 £000
Net cash requirement	3	21,432,638	20,628,323	804,315	18,816,467
	SOPS note	Estimate	Outturn	Outturn vs Estimate, saving 2023-24 £000	Total Outturn 2022-23 £000
Administration costs	1.1	1,100,918	982,812	118,106	1,003,125

Although not a separate voted limit, any breach of the administration budget will also result in an excess vote.

The department has Prior Period Adjustments (PPAs) arising from a refinement in the application of HMRC’s IFRS16 subleasing policy which results in an increase in the number of operating subleases and a corresponding reduction in finance subleases. It is proper for the department to seek parliamentary authority for the provision that should have been sought previously. In 2023 to 2024, the following such PPAs have been made, which have been included within voted Supply in the Estimate.

PPA description - IFRS 16 sub-leasing policy

Resource/ Capital	DEL/AME	Amount/ £000
Resource	DEL	(5,857)
Capital	DEL	40,794

The above PPA outturn values are what would have been 2022 to 2023 budgetary consequences under our current application of IFRS 16 subleasing policy. These values are encompassed in what has been presented as 2023 to 2024 opening balance adjustments evident in Consolidated Statement of Changes in Taxpayers’ Equity, note 5 and note 7.1.

These figures exclude permitted, non-budget transactions which form part of the leased asset calculations on adoption of the standard from 1 April 2023.

Notes to the Statement of Outturn against Parliamentary Supply

SOPS 1. Outturn detail, by Estimate Line

We are required to ensure that our expenditure remains within the voted limits set by Parliament. This note provides details of how we performed against each line of the Estimate.

Voted expenditure includes the costs of running HMRC as well as Cost of Living Payments made in the Financial Year. It also includes payments to individuals for social benefits, payments in lieu of tax relief and certain rates payments, shown as line L, made by the Valuation Office Agency.

HMRC also makes payments for which the funding is not subject to the vote system. This non-voted expenditure mainly relates to certain corporation tax reliefs, other reliefs including personal tax credits and our costs related to the National Insurance Fund.

HM Treasury requires us to further analyse our income and expenditure between administration, which relates to running the department (for example: human resources, finance, estates management) and programme, which relates to delivering our frontline services (for example: parts of HMRC that interact directly with our customers).

The following tables record our actual outturn expenditure for Departmental Expenditure Limit (DEL) and Annually Managed Expenditure (AME), voted and non-voted, against the limits set by Parliament for each line of the Estimate. SOPS 1.1 (table 32) provides analysis of resource expenditure and SOPS 1.2 (table 33) capital expenditure.

Full information about the Valuation Office Agency activities can be found within their accounts.

SOPS 1.1 Analysis of resource outturn by Estimate line

Table 32: Analysis of resource outturn by Estimate line

Due to the amount of data presented, only part of the table below is visible. Please use the scollbar at the bottom of the table to view all the columns.

Type of spend (Resource)	Estimate Net Total (2023-24) £000	Outturn Administration Gross (2023-24) £000	Outturn Administration Income (2023-24) £000	Outturn Administration Net (2023-24) £000	Outturn Programme Gross (2023-24) £000	Outturn Programme Income (2023-24) £000	Outturn Programme Net (2023-24) £000	Outturn Net Total (2023-24) £000	Outturn vs Estimate: saving/(excess) (2023-24) £000	Outturn Total (2022-23) £000
Spending in Departmental Expenditure Limit
Voted:
A HMRC administration	5,480,327	1,007,966	(89,116)	918,850	4,574,880	(222,529)	4,352,351	5,271,201	209,126	5,199,284
B VOA administration	185,607	-	-	-	241,674	(58,365)	183,309	183,309	2,298	132,548
C Utilised provisions	35,000	-	-	-	10,004	-	10,004	10,004	24,996	19,614
D Cost of Living	760,000	-	-	-	760,000	-	760,000	760,000	-	717,872
COVID-19 (note 1)	–	–	–	–	–	–	–	–	–	(110)
Total voted	6,460,934	1,007,966	(89,116)	918,850	5,586,558	(280,894)	5,305,664	6,224,514	236,420	6,069,208
Non-voted:
E National Insurance Fund	233,000	63,962	-	63,962	213,260	-	213,260	277,222	(44,222)	259,413
Total non-voted	233,000	63,962	-	63,962	213,260	-	213,260	277,222	(44,222)	259,413
Total spending in Departmental Expenditure Limit	6,693,934	1,071,928	(89,116)	982,812	5,799,818	(280,894)	5,518,924	6,501,736	192,198	6,328,621
Spending in Annually Managed Expenditure
Voted:
F Child Benefit	12,896,922	-	-	-	12,510,146	-	12,510,146	12,510,146	386,776	11,595,575
G Tax-Free Childcare	631,640	-	-	-	635,340	-	635,340	635,340	(3,700)	494,401
H Providing payments in lieu of tax relief to certain bodies	156,329	-	-	-	173,626	-	173,626	173,626	(17,297)	7,973
I Lifetime ISA	500,595	-	-	-	499,125	-	499,125	499,125	1,470	436,809
J Help to Save	46,387	-	-	-	51,654	-	51,654	51,654	(5,267)	53,202
K HMRC administration	20,000	-	-	-	(3,987)	-	(3,987)	(3,987)	23,987	33,808
L VOA payments of Local Authority rates	87,818	-	-	-	88,938	(5,200)	83,738	83,738	4,080	64,199
M VOA administration	2,000	-	-	-	853	-	853	853	1,147	1,082
N Utilised provisions	(20,000)	-	-	-	(14,730)	-	(14,730)	(14,730)	(5,270)	(19,615)
O COVID-19 (Note 1)	5,330	-	-	-	(21,800)	-	(21,800)	(21,800)	27,130	(132,476)
Total voted	14,327,021	-	-	-	13,919,165	(5,200)	13,913,965	13,913,965	413,056	12,534,958
Non-voted:
P Personal tax credits	8,768,082	-	-	-	7,307,214	-	7,307,214	7,307,214	1,460,868	8,834,945
Q Other reliefs and allowances	13,264,446	-	-	-	12,053,282	-	12,053,282	12,053,282	1,211,164	12,560,346
Total non-voted	22,032,528	-	-	-	19,360,496	-	19,360,496	19,360,496	2,672,032	21,395,291
Total spending in Annually Managed Expenditure	36,359,549	-	-	-	33,279,661	(5,200)	33,274,461	33,274,461	3,085,088	33,930,249
Non-budget spending voted:
R Prior period adjustment	200,000	-	-	-	-	-	-	-	200,000	-
Total non-budget expenditure	200,000	-	-	-	-	-	-	-	200,000	-
Total voted	20,987,955	1,007,966	(89,116)	918,850	19,505,723	(286,094)	19,219,629	20,138,479	849,476	18,604,166
Total non-voted	22,265,528	63,962	-	63,962	19,573,756	-	19,573,756	19,637,718	2,627,810	21,654,704
Total	43,253,483	1,071,928	(89,116)	982,812	39,079,479	(286,094)	38,793,385	39,776,197	3,477,286	40,258,870

Some figures are the amounts that comprise the Group’s consolidation position but have been separately identified in alignment with the Estimate and Internal Governance.

Note 1: Repayments of COVID-19 support schemes received and reported in the Resource Accounts exceeded expenditure for the financial year 2023 to 2024.

Find full information about VOA payments of local authority rates.

SOPS 1.2 Analysis of capital outturn by Estimate line

Table 33: Analysis of capital outturn by Estimate line

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

Type of spend (Capital)	Estimate Net Total (2023-24) £000	Outturn Gross (2023-24) £000	Outturn Income (2023-24) £000	Outturn Net Total (2023-24) £000	Outturn vs Estimate: saving/(excess) (2023-24) £000	Outturn Total (2022-23) £000
Spending in Departmental Expenditure Limit
Voted:
A HMRC administration	715,282	771,192	(75,439)	695,753	19,529	524,552
B VOA administration	35,896	34,306	(4,942)	29,364	6,532	31,848
C Utilised provisions	–	–	–	–	–	–
D Cost of Living	–	–	–	–	–	–
Total voted	751,178	805,498	(80,381)	725,117	26,061	556,400
Non-voted:
E National Insurance Fund	–	–	–	–	–	–
Total non-voted	–	–	–	–	–	–
Total spending in Departmental Expenditure Limit	751,178	805,498	(80,381)	725,117	26,061	556,400
Spending in Annually Managed Expenditure
Voted:
F Child Benefit	-	2	–	2	(2)	1
G Tax-Free Childcare	–	–	–	–	–	–
H Providing payments in lieu of tax relief to certain bodies	–	–	–	–	–	–
I Lifetime ISA	–	–	–	–	–	–
J Help to Save	–	–	–	–	–	–
K HMRC administration	20,109	–	–	–	20,109	–
L VOA payments of Local Authority rates	–	–	–	–	–	–
M VOA administration	–	–	–	–	–	–
N Utilised provisions	–	–	–	–	–	–
O COVID-19	–	–	–	–	–	–
Total voted	20,109	2	-	2	20,107	1
Non-voted:
P Personal tax credits (note 1)	–	166,679	(166,679)	–	–	–
Q Other reliefs and allowances	–	–	–	–	–	–
Total non-voted	–	166,679	(166,679)	–	–	–
Total spending in Annually Managed Expenditure	20,109	166,681	(166,679)	2	20,107	1
Total voted	771,287	805,500	(80,381)	725,119	46,168	556,401
Total non-voted	–	166,679	(166,679)	–	–	–
Total	771,287	972,179	(247,060)	725,119	46,168	556,401

Some figures are the amounts that comprise the Group’s consolidation position but have been separately identified in alignment with the Estimate and Internal Governance.

Note 1: The transfer of personal tax credit receivables balance to DWP results in Capital Grant in Kind entries that net to nil.

SOPS 2. Reconciliation of outturn to net operating expenditure

As noted in the introduction to the SOPS, outturn and the Estimates are compiled against the budgeting framework, which is similar to, but different from, IFRS. Therefore, this reconciliation bridges the resource outturn to net operating expenditure, linking the SOPS to the financial statements.

Table 34: Reconciliation of net resource outturn to net operating expenditure

	Reference	Outturn (2023-24) £000	Outturn (2022-23) £000
Statement of Parliamentary Supply: Total resource outturn
Departmental Expenditure Limit	SOPS 1.1	6,501,736	6,328,621
Annually Managed Expenditure	SOPS 1.1	33,274,461	33,930,249
		39,776,197	40,258,870
Excluded from SOPS total resource outturn:
Expenditure:
Transfer of personal tax credits receivables to DWP		166,679	146,843
Expenditure meeting ESA10 R&D Criteria		2,057	-
Child Benefit (Child Trust Fund)	SOPS 1.2	2	1
Non-current asset costs outside of budgeting		5,287	7,366
Income:
Grant capital income and non-current assets received		(49,292)	(488)
Payable to the Consolidated Fund	SOPS 4	(850)	(268)
		123,883	153,454
Excluded from Consolidated Statement of Comprehensive Net Expenditure (CSoCNE) net operating expenditure:
Expenditure:
Service concession arrangements liability repayment		(6,877)	(8,396)
		(6,877)	(8,396)
Consolidated Statement of Comprehensive Net Expenditure: Net operating expenditure		39,893,203	40,403,928

Explanation of reconciling items

Transfer of personal tax credits receivables to Department for Work and Pensions (DWP)

The receivable balance relating to customers who have made a valid claim to Universal Credit, now administered by DWP.

Expenditure meeting ESA10 R&D Criteria

This represents expenditure that does not meet the criteria for capitalisation under IFRS but satisfies the ESA10 definition of R&D and is therefore treated as expenditure in the Statement of Comprehensive Net Expenditure, but as capital within budgets.

Non-current asset costs outside of budgeting and service concession arrangements

The department has capitalised certain properties that were sold to private sector contractors and subsequently leased back under a Private Finance Initiative (PFI) contract as leases under IFRIC 12 – Service Concession Arrangements. Budgetary treatment for these arrangements is determined in accordance with national accounts methodology to ensure that budgets reflect the fiscal impacts of the transactions.

Grant capital income and non-current assets received

The value of a non-current asset received from Department of Transport by way of a Capital Grant in Kind. This relates to the provision of a unified shared service across HMRC, Department for Transport and Department for Levelling Up, Housing and Communities.

Income payable to the Consolidated Fund

Income that is either in excess of limits included in the voted estimates or is outside the scope of what is allowed to be retained. For these reasons, this income is excluded from the SOPS.

SOPS 3. Reconciliation of net resource outturn to net cash requirement

The net cash requirement calculation only applies to core department and agency. As noted in the introduction to the SOPS, the outturn and Estimates are compiled against the budgeting framework, not on a cash basis. Therefore, this statement reconciles the resource and capital outturn to the net cash requirement.

Table 35: Reconciliation of net resource outturn to net cash requirement

	SOPS note	Estimate £000	Outturn £000	Outturn compared to Estimate: saving/ (excess) £000
Resource outturn	1.1	43,253,483	39,776,197	3,477,286
Capital outturn	1.2	771,287	725,119	46,168
Remove arm’s length bodies resource and capital		-	-	-
Accruals to cash adjustments:
Remove non-cash items:
Depreciation and amortisation		(701,297)	(530,655)	(170,642)
New provisions and adjustments to existing provisions		(22,000)	14,252	(36,252)
Prior period adjustments		(200,000)	-	(200,000)
Other non-cash items		-	(33,763)	33,763
Reflect movement in working balances:
Increase/(decrease) in inventories		-	537	(537)
Increase/(decrease) in receivables		162,391	83,443	78,948
(Increase)/decrease in payables		414,302	(9,765)	424,067
Use of provisions		20,000	14,730	5,270
Other adjustments:
Remove non-voted budget items:
Funded outside the vote		(22,265,528)	(19,637,718)	(2,627,810)
Lease liability repayment		–	191,014	(191,014)
Other		–	34,932	(34,932)
Net cash requirement		21,432,638	20,628,323	804,315

SOPS 4. Income payable to the Consolidated Fund

SOPS 4.1 Analysis of income payable to the Consolidated Fund

In addition to income retained by us, the following income is payable to the Consolidated Fund. This is income which is outside the ambit of the Supply Estimate and is required to be paid over to HM Treasury.

Table 36: Analysis of income payable to the Consolidated Fund

	Reference	Outturn 2023-24 Accruals £000	Outturn 2023-24 Cash basis £000	Outturn 2022-23 Accruals £000	Outturn 2022-23 Cash basis £000
Income outside the ambit of the Estimate	SOPS 2	850	850	268	268
[Excess] cash surrenderable to the Consolidated Fund		-	-	-	-
Total amount payable to the Consolidated Fund		850	850	268	268

SOPS 4.2 Consolidated Fund income

Consolidated Fund income shown in SOPS note 4.1 above does not include any amounts collected by the department where it was acting as agent of the Consolidated Fund rather than as principal.

Losses and special payments

These losses and special payments relate to the running of the departmental group.

Losses statement

Losses are made up of remissions and write-offs. Remissions are generated by the process used to identify and separate money owed to HMRC which we have decided not to pursue – for example, on the grounds of value for money. Write-offs is the term used to describe money owed to HMRC that was considered to be irrecoverable – for example, because there were no practical means for pursuing it.

Table 37: Losses statement

	2023-24 Core department and agency cases	2023-24 Core department and agency £m	2023-24 Departmental group cases	2023-24 Departmental group £m	2022-23 Core department and agency cases	2022-23 Core department and agency £m	2022-23 Departmental group cases	2022-23 Departmental group £m
Covid schemes
Self Employed Income Support Scheme	-	-	-	-	1	-	1	-
Personal Tax remissions and write-offs (note 1 and 2)	619,591	352.6	619,591	352.6	597,947	181.3	597,947	181.3
Child Benefit remissions and write-offs (note 2 and 3)	49,975	8.7	49,975	8.7	40,729	8.6	40,729	8.6
Exchange rate losses (note 3)	21	-	21	-	29	0.1	29	0.1
Others (note 3)	363	-	363	-	253	(0.9)	253	(0.9)
Total	669,950	361.3	669,950	361.3	638,959	189.1	638,959	189.1

In 2023 to 2024 £352.6 million of personal tax credit debt was remitted/written off as it was uncollectable (2022 to 2023 £181.3 million).

In 2023 to 2024 the department wrote off £8.7 million of Child Benefit debt that was uncollectable (2022 to 2023 £8.6 million).

There were no individual cases of more than £300,000.

Notes:

1. Personal tax credits remissions and write-offs were previously reported on separate lines, comparatives have been combined.
2. The significant increase in personal tax credits remissions and write offs is due to a bulk write off exercise undertaken during 2023 to 2024.
3. The monetary sum of these cases in 2023 to 2024 is immaterial.

Special payments

These include compensation and ex-gratia payments in respect of personal injury, damage to property and those which result from the department’s redress policy. For further information on reporting requirements please see guidance in Managing Public Money, Annex 4.13.

Table 38: Special payments

	Core department and agency cases (2023-24)	Core department and agency £m (2023-24)	Departmental group cases (2023-24)	Departmental group £m (2023-24)	Core department and agency cases (2022-23)	Core department and agency £m (2022-23)	Departmental group cases (2022-23)	Departmental group £m (2022-23)
Payments and accruals (note 1)	16,656	3.2	16,656	3.2	18,519	4.4	18,519	4.4

Note 1: The number of cases in the comparative for 2022 to 2023 has been updated from that published.

Severance payments are included within special payments shown above. These are paid under certain circumstances to employees, contractors, and others outside of normal statutory or contractual requirements, when leaving employment in the public service, whether they resign, are dismissed, or reach an agreed termination of contract. For 2023 to 2024, we made 6 payments totalling £63,750 (2022 to 2023 10 payments totalling £348,090) in respect of severance cases. The highest payment was £23,000 (2022 to 2023 £196,000) and the lowest payment was £3,000 (2022 to 2023 £590). The median payment was £9,375 (2022 to 2023 £16,750).

There were no individual cases of more than £300,000.

Fees and charges

The fees and charges table lists the services HMRC provides to external and public sector customers where the full cost to HMRC exceeds £10 million. This includes services hosted by HMRC on behalf of other government departments as HMRC has the required infrastructure. In accordance with HM Treasury guidance in Managing Public Money, it is HMRC’s financial objective to recover the full cost of each service unless otherwise stated. Disclosed in the table for each service is the income received, the full cost incurred and the amount of any surplus or deficit between the income received and full cost charged. Surpluses and deficits can arise for a number of reasons, including demand fluctuations or variations to HMRC costs during the year.

Income received by the department which is not disclosed in this note amounts to £198.8 million and as this figure is not material to the accounts the department has not published a separate income note.

Table 39: Analysis of income where full cost exceeds £10 million

	2023-24 £m income	2023-24 £m full cost	2023-24 £m surplus/(deficit)	2022-23 £m income	2022-23 £m full cost	2022-23 £m surplus/(deficit)
Fees and charges raised by the Valuation Office Agency (VOA)
District valuer services	23.2	20.9	2.3	17.1	16.7	0.4
Business rates and Council Tax	17.1	16.1	1.0	12.8	12.5	0.3
Fees and charges raised by the core department
Memorandum of Terms of Occupation (MoTO) (note 1)	46.7	46.7	-	38.6	38.6	-
National Minimum Wage	30.6	30.6	-	27.8	27.8	-
Economic Crime Supervision (note 2)	23.5	28.0	(4.5)	26.9	26.6	0.3
UK Border Agency	11.5	11.5	-	11.5	11.5	-
30 hour childcare services (note 3)	13.9	13.9	-	11.7	9.5	2.2
Total	166.5	167.7	(1.2)	146.4	143.2	3.2

Notes:

1. MoTO is when there is an agreement between 2 or more Crown Bodies which allows for them to share the costs of occupying a building or part of a building. The income and full cost shown above is where HMRC is the major occupier of a building and has recharged the costs to other Crown Bodies who also occupy the buildings. The comparatives have been restated to remove the transactions between bodies within the departmental group.

2. This was formerly called Anti-Money Laundering Service.

3. This was formerly called Tax-Free Childcare. Previously the amounts were less than £10 million and were therefore not published.

Remote contingent liabilities

In addition to contingent liabilities reported within the meaning of IAS 37, the department also reports liabilities for which the likelihood of a transfer of economic benefit in settlement is too remote to meet the definition of contingent liability.

The department has the following quantifiable remote contingent liabilities.

Table 40: Indemnities

	1 April 2023 £m	Increase in year £m	Liabilities crystallised in year £m	Obligation expired in year £m	31 March 2024 £m	Amount reported to Parliament by departmental
Minute £m
Indemnities	56.3	12.3	-	(34.8)	33.8	-

Managing Public Money requires that the full potential costs of indemnified contracts be reported to Parliament.

Reconciliation of contingent liabilities included in the supply estimate to the Resource Accounts

Quantifiable Contingent Liabilities:

Description of Contingent Liabilities	Supply Estimate (£000)	Amount disclosed in Resource Accounts (£000)	Variance (Estimate vs amount disclosed in Resource Accounts, £000)
Legal claims	145,000	129,200	15,800
Guaranteed costs	700	700	-
Other	118,400	126,600	(8,200)
Valuation Office Agency	620	720	100

Unquantifiable Contingent Liabilities: The department has no unquantifiable Contingent Liabilities

Sir Jim Harra KCB
Accounting Officer
26 July 2024