Corporate report

HMRC performance update: Spending Review 2015

Published 4 June 2020

The Spending Review and Autumn Statement 2015 (SR15) set out the budgetary settlement for HM Revenue and Customs (HMRC) for the financial years 2016 to 2017 to 2019 to 2020 and the reforms and measures we had to deliver. This report provides an update on progress against our key commitments during the SR15 period, as set out in our Single Departmental Plan:

• Bearing down on avoidance and evasion: £800 million investment for additional work to tackle evasion and non-compliance in the tax system. HMRC committed to raise an additional £5 billion a year by 2019 to 2020 through tackling tax avoidance and aggressive tax planning, evasion and non-compliance, and by addressing imbalances in the tax system
• Transforming tax and payments for our customers: £1.3 billion was reinvested to transform HMRC into one of the most digitally advanced tax administrations in the world, with access to digital tax accounts for all small businesses and individuals by 2016 to 2017, delivering an additional £480 million of tax revenue by 2020 to 2021 and sustainable efficiencies
• Making sustainable resource savings: £717 million of sustainable resource savings a year by 2019 to 2020, achieving £1.9 billion cumulative savings over the spending review period, representing a headline 21% reduction in baseline resource costs, delivered through digitisation of tax collection and a smaller but more highly skilled workforce

The scale of our transformation plans have been ambitious, and we’ve come a long way in making the changes we set out to achieve – but we’ve faced problems and challenges along the way and we haven’t achieved everything we wanted to yet.

There are a number of reasons for this. Some of our assumptions were over-ambitious, and our original plans pushed the limits of what we were able to do, in terms of technology and capacity, in the timeframe we wanted. Preparations for Brexit placed additional new demands on our project delivery capacity, and we simply didn’t have the resources to do everything we had planned.

As a result, in 2017 and 2018, we undertook structured prioritisation exercises, so we could focus on our most vital transformation projects, reduce costs and release capacity for other urgent priorities. It meant closing some projects and pausing or deferring certain aspects of Making Tax Digital (MTD) for individual customers, such as pre-population of data, Simple Assessment and further development on Personal Tax Accounts, as well as non-critical elements of other programmes and cancelling Compliance for the Future.

Note: All 2019 to 2020 are provisional management information and subject to change. Final figures will be published in our 2019 to 2020 Annual Report and Accounts.

1. Bearing down on avoidance and evasion

HMRC has a strong record collecting or protecting billions of pounds that would have otherwise been lost to the UK through fraud, tax avoidance, evasion and non-compliance.

Compliance yield targets are set annually and we have exceeded our annual compliance yield targets each year of the SR15 period. In 2019 to 2020, we exceeded our compliance yield target by £2.5 billion.

Compliance yield targets and outturn, tax year 2016 to 2017 to tax year 2019 to 2020 (£ billion):

Tax year	2016-17	2017-18	2018-19	2019-20
Compliance yield target	27.0	28.0	30.0	34.5
Compliance yield outturn	28.9	30.3	34.1	37.0

Our £34.5 billion compliance yield target for 2019 to 2020 includes the commitment we made at Summer Budget 2015 to raise an additional £5 billion a year on 2015 to 2016 by 2019 to 2020 by tackling tax avoidance and aggressive tax planning, evasion and non-compliance. We have met this commitment through a combination of the package of measures announced at Summer Budget 2015, which have secured an additional £4.4 billion, and over-delivery in our other compliance activity.

Exchequer Impact of the Summer Budget 2015 package (£ million):

Tax year	2016-17	2017-18	2018-19	2019-20
Exchequer Impact [1]	990	1,945	3,565	4,390

Notes

1. The £5 billion commitment is the impact on the Exchequer rather than an amount of compliance yield.

2. Transforming tax and payments for our customers

At the March 2015 Budget the government committed to transform the tax system over the Parliament by introducing simple, secure and personalised digital tax accounts, removing the need for annual tax returns. The intention was that this would give individuals and businesses a more convenient real-time view of their tax affairs, providing them with greater certainty about the tax they owe.

As part of the next steps in delivering this ambition, the spending review and Autumn Statement announced additional investment of £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. These reforms aimed to deliver the biggest transformation of the tax system in a generation, making it more effective, efficient and easier for taxpayers.

This programme is central to helping our customers get tax right. It’s about enabling more customers to move towards digital record-keeping – for example, by using approved software that links directly to our systems, so we can automate the process of tax calculation, reduce the scope for error, and ultimately replace the current time-consuming method of completing a tax return.

Our long-term vision is to have a single record for each customer, so we can provide a fully joined-up customer experience across all their tax affairs, and collect revenue due with even greater accuracy and fairness.

Since December 2015 we have provided individuals with their own Personal Tax Account and increased functionality year-on-year. Tax accounts give individuals, businesses and their authorised agents a more convenient real-time view of their tax affairs, providing them with greater certainty about the tax they owe and payments they are due to receive.

Take up of the Personal Tax Account has been very strong, as can be seen in the table below, and now more than 22 million individuals have a Personal Tax Account.

Number of Personal Tax Accounts, tax year 2016 to 2017 to tax year 2019 to 2020 (million):

Tax year	2016-17	2017-18	2018-19	2019-20
Personal Tax Account	9.4	15.0	19.1	22.6

As part of SR15 we committed to deliver £920 million of Additional Tax Revenue (ATR) by the end of 2020 to 2021 from our digital transformation. This commitment was revised down to £480 million in 2017, following the government announcement of changes to mandation for businesses filing their VAT returns online.

By the end of 2019 to 2020, we have realised £223 million of ATR from our MTD initiatives, meaning we are ahead of planned forecast against the overall £480 million commitment by the end of 2020 to 2021.

MTD ATR, outturn v commitment, tax year 2016 to 2017 to tax year 2019 to 2020 (£ million):

Tax year	2016-17	2017-18	2018-19	2019-20	Total
Initial SR15 commitment	0	0	10	300	310
Revised SR15 commitment	0	0	0	195	195
Outturn Making Tax Digital for Business (MTDB)	0	0	0	115	115
Outturn Making Tax Digital for Individuals (MTDI)	1.5	32	30	45	108.5
Total MTD outturn	1.5	32	30	160	223.5

Notes

1. The SR15 HMRC ATR commitment period is to 2020 to 2021. The table above contains performance against commitment to 2019 to 2020 for MTD as a whole, including both MTDB and MTDI

3. Sustainable resource savings

We committed to deliver sustainable resource savings of £717 million a year by the end of 2019 to 2020, amounting to a total of £1.9 billion in cumulative efficiency savings over Spending Review 2015. This was achieved through both our business as usual activities and the transformation portfolio, which includes the digitisation of the tax collection system.

The table below shows that we have achieved £693 million sustainable resource savings. Over the SR15 period, we have achieved cumulative savings of £1.93 billion, exceeding the cumulative £1.9 billion target.

Resource savings, tax year 2016 to 2017 to tax year 2019 to 2020 (£ million):

Tax year	2016-17	2017-18	2018-19	2019-20
Total sustainable resource savings target	203	380	566	717
Total sustainable resource savings outturn	181	410	576	693
One-Off savings	73
Total cumulative outturn	254	663	1,239	1,932