HMRC Aim To Improve Efficiency

As part of this week’s spending review the government announced a 15% cut to HMRC. This means their current budget of £3.5bn will fall to £3.2bn over the next 4 years. They have however, received a boost of £900m, allocated to address tax evasion problems.

It is estimated that as much as £14bn is lost through tax evasion, avoidance and fraud each year, so this boost will help HMRC to claw back some of these losses. As part of this boost, £100m has been pledged in order to directly improve the PAYE system.

There have been proposals recently about changes to the PAYE system, with HMRC keen to introduce a centralised system; however this has been heavily criticised. This system would see workers who change jobs on a regular basis, such as contractors and freelancers, more vulnerable to tax code errors and so they would end up paying too much or too little tax.

Just last year (2009/10) HMRC collected £238m too much, and £132m too little tax from workers due to PAYE errors. In order to prevent future mistakes like this, they will use the £900m boost to improve efficiency. The cutbacks will also be made by making savings through the use of new technology and selecting better IT contracts.