The National Audit Office (NAO) has published a report on HMRC’s annual report and accounts for 2015-16, in which it says that the department’s approach to programme transformation is credible, but that it must ensure public confidence in the online services being developed.

HMRC raised £536.8 billion of tax revenues this year, an increase of £19.1 billion (3.7%) on 2014-15 and paid out £40 billion in benefits and credits (approximately one-fifth of the government’s total benefit expenditure). The taxes that contributed to most of this increase were Income Tax and National Insurance Contributions which together increased by £10.3 billion (3.8%).

The other key performance indicator is HMRC’s “compliance yield”, which measures the effectiveness of its compliance and enforcement activities. This draws on a range of different measures of revenue generated or losses prevented, all of which involve a degree of estimation and uncertainty. HMRC’s estimate of compliance yield in 2015-16 was £26.6 billion against a target of £26.3 billion.

HMRC has also begun to implement its plans to transform how it administers tax with the aim of eventually having “the most digitally advanced tax system in the world”. The NAO highlights a failure to address previous over-optimism with regards to delivery targets, and reducing demand for telephone support service, as being among the key obstacles to transformation. According to the NAO’s findings, the current HMRC strategy is focused on a 16% reduction in staff, despite the fact that recovering the quality of its service to personal taxpayers came mostly through further recruitment of staff.

On top of this, ensuring public trust in the new systems was viewed by the NAO as a vital part of efforts to overhaul digital tax accounts, making certain that services are both easy to use and secure for individuals. According to the NAO “Most business customers will be required to update HMRC quarterly rather than annually about their tax affairs, and some may need to purchase new software that works with the new systems,” said the report. “Some businesses are sceptical of HMRC’s evaluations of the costs and benefits of previous changes to the tax system.”