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Tax baseline is set too low after error

THE head of HM Revenue and Customs (HMRC) has apologised to MPs for an error which led tax officials wrongly to claim they were bringing in billions of pounds in additional tax revenue for the Exchequer.

The mistake, uncovered by Whitehall's spending watchdog the National Audit Office, meant that HMRC's performance targets for the amount of tax expected to be raised from 2010/11 onwards were set £1.9 billion a year lower than they should have been. Improvements in compliance levels in the two subsequent years were overstated as a result.

HMRC chief executive Lin Homer revealed the mistake in the agency's annual report and accounts last week, and apologised to MPs, saying she accepted responsibility for setting the baseline level for tax yield too low.

Ms Homer said: "I have made clear that when the NAO undertook their audit, we and they did find this error in the baseline.

Ms Homer said that the HMRC received £1 billion in additional Government funding in return for meeting its targets, but said this would have been achieved even if the baseline was not set too low.

HMRC had not received any extra money from the Government as a result of the mistake.

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