A new report from the National Audit Office says that HMRC raised £8.5bn from its investigations into cases of serious tax evasion.
The NAO report says that although the Revenue has taken significant steps towards achieving value for money, there is still plenty of scope for further improvement.
The report, entitled Managing Civil Tax Investigations, documents the structure of HMRC, its working processes and the performance of its specialist investigations and compliance directorates. The majority of these teams are local subsidiaries of the main enforcement team and they conduct the majority of the civil investigations into cases of suspected tax evasion.
Over the last couple of years, the directorates have generated increased returns with reduced resources but HMRC could go further by better understanding the relative costs and returns of its enforcement activities. A better understanding into the impact of its investigations would help the Revenue decide how best to deploy resources in order to get the maximum effect.
The investigation teams generated £8.5bn in the year 2009-10, an increase of just under 50% from 2007-08. Over the same period, expenditure was reduced by 10% to £567m.
The average penalty from fraud cases in 2009-10, was 21% of the tax owed. 28% of these cases resulted in a fine of less than 10% and out of those cases, 50% resulted in no penalty being imposed.
The target time for investigations was 18 months, but the average time taken was well above that at 25 months. 25% of cases were within the target range but 15% took over three years to complete.
HMRC is aware that there are some short-comings and plans to refine its approach to the allocation of budgets and resources. It is currently rolling out a case management system in order to gather more detailed management information.
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