News - NAO report

Lean success

In a new report, HMRC Accuracy in processing income tax', to Parliament, the National Audit Office points out that HMRC accurately calculate the right amount of tax in 95% of income tax cases. HMRC subsequently correct errors they find or which are brought to their attention by the taxpayer. Consequently, the remaining errors resulted in an estimated £125 million of tax underpayments and £157 million in overpayments affecting around one million taxpayers during 2006-07.
Taxpayers with complicated tax affairs, such as people on pensions and those with several jobs and sources of income, are more likely to suffer from processing errors which can lead to both underpayments and overpayments of tax, according to the NAO. The average underpayment during 2006-07 was around £250 and the average overpayment around £290, although some errors can lead to unexpected demands for repayment of much larger sums.
Major causes of error are the increased complexity of processing work as people change jobs more frequently and the need to process certain cases manually. Accuracy rates vary significantly across local offices and some offices have achieved improvements by better targeting of workloads to staff skills; better management focus on accuracy; and more sharing of good practice.
The report also found that HMRC's projects to automate clerical processes have been successful in reducing levels of error, and it is managing its performance more effectively. Processing work is at the forefront of major changes in the department such as modernising IT systems and re-engineering of processing work through 'Lean' working which aims to increase accuracy rates and productivity, as well as to reduce costs. However, it is also interesting to note that in Appendix 5 'Monitoring of Lean performance', the lead time for dealing with post seems to have worsened considerably. At May 2006, it was around 11 days, while at April 2007 it has increased to over 40 days. Accuracy levels have not improved dramatically, showing approximately 75% in May 2006 and 80% in April 2007. In addition, staff focus groups have shown a need for better communications, management of performance and training.
Recommendations in the report include:

• HMRC developing an early warning system for emerging processing problems;
• separating out more complex cases for processing;
• developing staff training; and
• strengthening the help available for taxpayers affected by errors.

The report can be downloaded from www.nao.org.uk, hard copies, priced £13.50, can be obtained by calling The Stationery Office, tel: 0845 702 3474.

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