The taxman is currently undertaking 15 major transformation programmes and is facing additional pressures from Brexit and the Paradise Papers, the committee warned on Friday.
Committee chair Meg Hillier said: “HMRC’s transformation programme would have been less risky had it not attempted to do everything at the same time.
“What was already a precarious high-wire act is now being battered by the winds of Brexit, with potentially catastrophic consequences. Actions arising from allegations in the so-called Paradise Papers could also significantly increase the authority’s workload.”
No copy yet
However, conjecture about the resources needed to investigate the Paradise Papers could be a bit premature after a spokesperson from HMRC confirmed to Portfolio Adviser’s sister publication, International Adviser, that the UK taxman does not even have a copy of them yet.
Stolen in a hack of Bermuda-based law firm Appleby, the 13.4 million documents were distributed to news organisations around the world, including the BBC and UK newspaper the Guardian, both of which are being sued by Appleby.
The Revenue is trying to get a hold of a copy and is willing to pay for it if necessary, the spokesperson added. However, HMRC will never disclose how much was paid and to whom.
“Following the Paradise Papers leak, HMRC continues to look very closely at the information disclosed in the public domain, to see if it reveals anything new that could add to existing leads and investigations,” the spokesperson said.
Tough decision
The committee called on HMRC, together with HM Treasury, to make tough decisions on how it allocates limited resources to increase tax revenues, protect performance levels, prioritise its transformations and invest in measures to tackle tax evasion, fraud and error.
“We are particularly concerns about the impacts on the ordinary taxpayer from the growing challenges facing HMRC,” the committee said.
Hillier added: “There are serious, pressing challenges for HMRC, requiring swift and coordinated action in government. As a matter of urgency, the authority must set out a coherent plan and demonstrate it is fit for the future.”
HMRC response
The HMRC spokesperson said: “Since 2010, HMRC has secured an extra £160bn ($216bn, €180bn) by tackling tax avoidance, evasion and non-compliance, including £2.8bn from customers who tried to hide money abroad to avoid paying what they owe.
“The Autumn Budget also introduced new measures to further bear down on offshore evasion and avoidance. These include a requirement notification of offshore structures, and extending the number of years of back tax that HMRC can assess.”
With regard to Brexit, HMRC is “fully focused on making the UK’s exit from the EU a success”, the spokesperson added. “The Customs Declaration Service (CDS) is on track for delivery by January 2019 and has the capacity to deal with a significant increase in customs declarations at the border.”
Action plan
Among the eight recommendations the committee made to HMRC were:
HMRC should obtain the information from the ‘Paradise Papers’ as soon as possible, and report back by March 2018 to set out its response, including any additional revenue likely to be at stake.
The taxman should set target levels for reduction of the tax gap, including for the SME sector, and set out how HMRC will be more responsive to emerging risks.
In its recent report ‘Brexit and the future of Customs’, the committee recommended that HMRC report back to the committee by March 2018 with clear plans on how it will manage the many challenges it faces due to Brexit and its ongoing transformation programmes.
Building on this, HMRC should: update its original assumptions and amend its forecasts for its transformation programme, particularly those concerning customer demand for its various services; and set out the financial implications of this for the committee by April 2018.
