The Office for Statistics Regulation has confirmed it is to review the quality-assurance principles and processes HM Revenue and Customs uses for its data after a double-counting error added almost £7bn to its Corporation Tax receipt statistics over much of the last decade.
Director general for regulation Ed Humpherson said HMRC had invited the watchdog to give an independent assessment of the department’s quality-management approach and identify areas of improvement after the “significant error” emerged earlier this year.
While the error – revealed by HMRC in September – has not resulted in any financial loss to the nation's coffers, it did mean that Corporation Tax receipts statistics reflected a figure that grew to become £4bn higher than it should be in 2018-19.
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Humpherson said HMRC’s most recent set of Corporation Tax statistics, published in September, had corrected the data and noted that the actual figures reported in HMRC’s accounts remained the same.
“We know that HMRC very much regrets this error, and we are pleased to help you take a proactive approach to improving quality management processes across your statistics,” he wrote in a letter to HMRC chief statistician Sean Whellams this week.
“We intend that our final recommendations will be forward looking and focus on improvements HMRC can make to help avoid issues in the future.
“The review will consider: existing quality assurance (QA) processes and current improvement plans within the Knowledge, Analysis and Intelligence (KAI) directorate of HMRC; how QA of official statistics works in practice within KAI; the processes in place for handling errors and managing risk during statistical production; and the levels of risk of different sources of error in KAI’s statistical production processes.”
In a letter to Public Accounts Committee chair Meg Hillier in September, then-HMRC second permanent secretary Jim Harra said Corporation Tax statistics needed to take account of Corporation Tax Credits – which are reliefs designed to encourage various activities.
Harra, who is now the department’s perm sec, said the credits either reduced a company’s liability to corporation tax or made a payment to the firm and that the value of the credits was added to the payments received.
“Quality assurance checks have identified some double counting of credit values when using internal financial data in the statistical production process,” he said.
“The scale of the revisions varies between years. The revised Corporation Tax receipts figures published today are £650m lower in 2011-12, £2.3bn lower in 2017-18, and £4bn lower in 2018-19.”
Harra insisted it remained the case that onshore Corporation Tax receipts, including the Bank Surcharge, had risen significantly in recent years “with growth of 50% between 2011-12 and 2018-19”.
However, he accepted that the revisions affected the Office for National Statistics’ estimate of Public Sector Net Borrowing, which draws on the gross Corporation Tax receipts statistics.
HMRC spokesperson said the department very much regretted the statistical error and reiterated that it did not affect the amount of tax paid by companies and received by HMRC.
“A review has been launched into the analytical and quality assurance processes used to generate HMRC’s published statistics,” they said.
The latest Corporation Tax statistics from HMRC detail £55.1bn worth of receipts in 2018-19.