HMRC saves £126m with online tax system, but is urged to do more

The government has saved £126m thanks to the use of an online tax filing system at HM Revenue & Customs (HMRC), but could be missing out on further savings, according to a report by the National Audit Office (NAO).

The report said that, while the savings are notable, HMRC lacks an understanding of the cost difference between dealing with paper returns and online returns, and is unable to generate an entirely accurate figure of how much it is saving.

"The progress HMRC has achieved in expanding online filing represents a real achievement. The programme is on track to deliver to time and budget, 11.5 million customers are now filing online, and there is evidence that savings are being achieved as a result," the report said.

"HMRC does not, however, have sufficient understanding of the relative costs it incurs in online filing compared to filing of paper returns, or of the costs and benefits to customers."

As such, the NAO explained that it is unable to say definitively whether the system represents value for money.

"For these reasons it is not possible to conclude whether benefits are being maximised and value for money has been achieved. Significant improvement is needed in these areas to drive future development on an informed basis," the report said.

However, HMRC maintained that, while it accepts the NAO recommendations to improve its "understanding of the relative costs and benefits" of the system, the department does not believe this means that the system is unsuccessful.

"Although this programme may not be generating its full value for money potential yet, it will recoup the investment made and deliver ongoing savings in excess of £60m a year," HMRC said.

"On this basis, HMRC considers that the programme is already demonstrating value for money."

HMRC announced plans in July to reduce spending on IT services by £235m as part of a move to save £1.6bn over the next four years in ongoing government cost-cutting initiatives.