£1.9bn tax error

HM Revenue and Customs has come under fire from the National Audit Office, and from an influential committee of MPs, for exaggerating its performance in squeezing more revenue out of tax avoiders.

In a report on the tax office's 2013-14 accounts the head of the National Audit Office, Amyas Morse, said he was concerned "that an error of as much as £1.9 billion in HMRC's baseline calculation led it to report the trend in its performance in a way that inadvertently exaggerated the improvement since 2010-11".

The error did not affect the amount of tax collected but made it appear that tax compliance targets had been exceeded by a significant margin.

Margaret Hodge, the Labour MP who chairs the House of Commons Public Accounts Committee has called HMRC officials in to give evidence later this month.

She said, "It is truly depressing that HMRC's failure to take appropriate action has led to its unwittingly misleading Ministers, Parliament and the taxpayer".

There are a lot of red faces at the Revenue, where I understand officials are "penitent" at the shambles over targets.

HMRC has said: "We regret an historic error made in 2011 when we wrongly calculated the baseline against which our performance was measured. 

"We have corrected this error and even against the corrected baseline we have still exceeded our targets. We will work closely with the NAO to prevent this happening again."