Corporate report

HMRC's annual report and accounts 2024 to 2025: our accounts and annexes

Published 17 July 2025

Trust Statement 

Statement of Revenue, Other Income and Expenditure 

For the year ended 31 March	Note	2025 £bn	2024 £bn
Taxes and duties
Income Tax	2.1	309.4	286.2
Value Added Tax	2.2	178.5	165.5
Corporation Tax	2.3	89.6	89.6
Hydrocarbon oils duties	2.4	24.7	24.9
Stamp taxes	2.5	18.8	15.0
Capital Gains Tax	2.6	13.8	14.3
Alcohol duties	2.7	12.8	12.5
Insurance Premium Tax	2.8	9.3	8.1
Other taxes and duties	2.9	43.0	43.3
Total taxes and duties		699.9	659.4
Other revenue and income
National Insurance contributions	3.1	168.8	177.0
Student Loan recoveries	3.2	4.7	4.4
Fines and penalties	3.3	2.5	2.6
Total other revenue and income		176.0	184.0
Total revenue		875.9	843.4
Less expenditure
Impairment in-year expenditure	4.3	(2.3)	(9.1)
Revenue losses	4.4	(7.2)	(5.6)
Provisions in-year expenditure	6.1	(0.9)	(1.7)
Total expenditure		(10.4)	(16.4)
Less disbursements
National Insurance contributions paid and payable to the National Insurance Funds and National Health Services	3.1	(168.2)	(174.9)
Appropriation of revenue to Resource Account	3.4	(11.4)	(19.1)
Student Loan recoveries paid and payable to the Department for Education	3.2	(4.7)	(4.4)
Taxation paid to the Isle of Man	3.5	(0.3)	(0.3)
Total disbursements		(184.6)	(198.7)
Total expenditure and disbursements		(195.0)	(215.1)
Net revenue for the Consolidated Fund		680.9	628.3

There were no recognised gains or losses accounted for outside the above Statement of Revenue, Other Income and Expenditure. 

Statement of Financial Position 

For the year ended 31 March	Note	2025 £bn	2024 £bn
Non-current assets
Receivables falling due after one year	4	1.2	1.2
Current assets
Receivables	4	37.6	32.0
Accrued revenue receivable	4	146.2	144.3
Total current assets		183.8	176.3
Total assets		185.0	177.5
Current liabilities
Payables	5	(29.7)	(27.2)
Accrued revenue payable	5	(48.5)	(48.4)
Deferred revenue	5	(4.3)	(3.6)
Cash and cash equivalents	5	(1.3)	(1.1)
Total current liabilities		(83.8)	(80.3)
Assets less current liabilities		101.2	97.2
Non-current liabilities
Provision for liabilities	6	(8.2)	(8.3)
Total assets less total liabilities		93.0	88.9
Balance due to/(due from) Consolidated Fund account	7	93.0	88.9

John-Paul Marks
Accounting Officer 
15 July 2025 

Statement of Cash Flows 

For the year ended 31 March	2025 £bn	2024 £bn
Net revenue for the Consolidated Fund	680.9	628.3
(Increase) / decrease in non-cash assets	(7.5)	(5.6)
Increase / (decrease) in non-cash current liabilities	3.3	4.9
Increase / (decrease) in provision for liabilities	(0.1)	0.8
Net cash flow from operating activities	676.6	628.4
Less: Cash paid to the Consolidated Fund	(676.8)	(628.1)
Increase/(decrease) in cash and cash equivalents in this period	(0.2)	0.3
Net funds as at 1 April (opening cash and cash equivalents balance)	(1.1)	(1.4)
Net funds as at 31 March (closing cash and cash equivalents balance)	(1.3)	(1.1)

Notes to the Trust Statement 

Notes to the financial statements provide additional information required by statute and accounting standards to explain a particular feature of the financial statements. The notes also provide explanations and additional disclosure to assist readers’ understanding and interpretation of the financial statements. 

1. Statement of accounting policies 

1.1. Basis of preparation 

The Trust Statement is prepared in accordance with: 

• the accounts direction issued by HM Treasury under section 2 of the Exchequer and Audit Departments Act 1921 
• the 2024 to 2025 Financial Reporting Manual (FReM) issued by HM Treasury (HMT)
• International Financial Reporting Standards (IFRS) adapted or interpreted for the public sector context
• historical cost convention in accordance with the FReM, where assets are recorded at their original value
• accounting policies detailed in subsequent notes

The accounting policies have been developed by HMRC and have been reviewed during 2024 to 2025. These policies have been applied consistently in dealing with items considered material in relation to the accounts.  

HMRC is the UK’s tax authority, its core purpose being to collect the money that pays for the UK’s public services and provide people with financial support. This is enshrined in legislation (Section 5 of the Commissioners for Revenue and Customs Act 2005 states that the Commissioners are responsible for the collection and management of revenue) and is expected to continue indefinitely, with HMRC’s existence being fundamental to the financing of UK infrastructure and government operations. The Trust Statement is therefore prepared on a going concern basis.

The financial information presented is rounded to the nearest £0.1 billion, except for taxation due to the Isle of Man (note 3.5), revenue losses (note 4.4), and Certificates of Tax Deposit (note 8), which are rounded to the nearest £1 million, due to the much smaller amounts disclosed in these notes.

Basis of accounting

The majority of taxes and duties are accounted for on an accruals basis.

As agreed with HM Treasury the following elements are accounted for on a partial accrual basis as not enough information is known to reliably accrue for the revenue, hence there is no accrued revenue receivable estimate in the Statement of Financial Position:

• Corporation Tax for smaller companies that do not pay by instalments – note 2.3
• Capital Gains Tax reported via Self Assessment – note 2.6
• Inheritance Tax – note 2.9

 As agreed with HM Treasury the following elements and some repayments are accounted for on a cash basis:

• VAT Import One Stop Shop (IOSS) – VAT return information reported via IOSS is not available at the time of producing the accounts so this is recognised on a cash basis
• Stamp Duty – note 2.5
• National Insurance classes 1A and 1B – note 3.1
• Student Loans – note 3.2
• Interest on receivables – note 4.1

Accounting for these elements on a cash basis does not have a material impact on revenue.  

Significant accounting estimates

The preparation of the financial statements includes the use of estimates and assumptions. Although the estimates have been prepared using the best information available at the time of production, actual results may differ from those estimates. The significant accounting estimates with a risk of a material change to the carrying value within the next year in terms of IAS 1, ‘Presentation of Financial Statements’, are:

• Income Tax self assessment accrued revenue receivable – note 4.2.2
• Corporation Tax (Quarterly Instalment Payments) accrued revenue receivable – note 4.2.3
• tax receivable and accrued revenue receivable impairment – note 4.3
• provision for liabilities – note 6

1.2. Revenue recognition 

Taxes and duties are measured at the fair value of the consideration received or receivable net of repayments. Revenue is recognised as per the FReM, which is in accordance with International Financial Reporting Standard 15 with adaptations applied, as taxes and duties arise from statute and not a contract. Revenue is recognised when:

• a taxable event has occurred (these are described in note 2 for material taxes and duties),
• the revenue can be measured reliably, and
• it is probable that the economic benefits from the taxable event will flow to HMRC

Revenues are deemed to accrue evenly over the period for which they are due. 

1.3. The tax gap

The tax gap is not recognised or measured in the Trust Statement, in accordance with the requirements of the FReM. The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually collected.

Further information on the tax gap can be found in the section ‘Chief Executive’s Performance Report, closing the tax gap’.

2. Accounting policies and analysis 

2.1. Income Tax 

For the year ended 31 March	2025 £bn	2024 £bn
Pay As You Earn and other Income Tax	261.8	236.2
Self Assessment	46.4	49.4
Simple Assessment	1.2	0.6
Total	309.4	286.2

The taxable event for Income Tax (IT) is the earning of assessable income during the taxation period by the taxpayer. Accrued revenue for Self Assessment is required to be estimated, as tax returns reporting taxpayer liabilities are not filed until after the Trust Statement has been published. See note 4.2.2 for further information. 

The Self Assessment accrued revenue estimate was overestimated by £1.4 billion in 2022 to 2023 and £3.7 billion in 2023 to 2024. Underlying total revenue for Self Assessment based on actual outcomes is £2.3 billion lower for 2023 to 2024 and £3.7 billion higher for 2024 to 2025.

IT includes amounts collected on behalf of the Scottish and Welsh devolved administrations, further details of which are set out in note 12. 

2.2. Value Added Tax 

For the year ended 31 March	2025 £bn	2024 £bn
Gross revenue	287.4	277.7
Less: revenue repayable	(108.9)	(112.2)
Net revenue	178.5	165.5

The taxable event for Value Added Tax (VAT) is the supply of goods and services that attract VAT during the taxation period by the taxpayer. VAT is structured in such a manner that taxpayers are also entitled to claim repayments; hence a breakdown of gross revenue and repayments is disclosed. 

As noted last year, net revenue was negatively impacted in 2023 to 2024 by £2.4 billion due to the net accrued revenue actuals for 2022 to 2023 being lower than estimated and a £1.0 billion adjustment for suspended debt.

The actual net accrued revenue for 2023 to 2024 was £1.2 billion higher than the estimates included in accrued revenue receivable and payable for that year, consequently the underlying net revenue figure in 2023 to 2024 was £1.2 billion higher than reported and 2024 to 2025 underlying net revenue lower by a corresponding £1.2 billion.

2.3. Corporation Tax 

For the year ended 31 March	2025 £bn	2024 £bn
	£bn	£bn
Total	89.6	89.6

The taxable event for Corporation Tax (CT) is the earning of assessable profit during the taxation period by the taxpayer. The nature of CT legislation and our associated systems mean that accrued revenue is required to be estimated, as tax returns reporting taxpayer liabilities, reliefs or associated tax payments related to the taxation period are not filed until after the Trust Statement has been published. See note 4.2.3 for further information.

The accrued revenue estimate for 2022 to 2023 was underestimated by £1.0 billion, and for 2023 to 2024 was overestimated by £1.5 billion. Underlying total revenue based on actual outcomes is £2.5 billion lower for 2023 to 2024 and £1.5 billion higher for 2024 to 2025.

CT is accounted for on a partial accrual basis, as agreed with HM Treasury (see note 1.1), because not enough information is known to reliably accrue for the revenue for smaller companies that do not pay by instalments. There is no accrued revenue receivable estimate in the Statement of Financial Position for these smaller companies.

Estimates for some corporation tax reliefs (CTR), those where there is, or could be, a payable element in excess of negative taxation, are reported in the Resource Accounts. As per the FReM, £9.5 billion (£11.7 billion in 2023 to 2024) was recorded in the Trust Statement as revenue received and as a disbursement from the Trust Statement to the Resource Accounts to fund the CTR expenditure reported in the Resource Accounts. For further information see note 4.1.4 in the Resource Accounts.

2.4. Hydrocarbon oils duties 

For the year ended 31 March	2025 £bn	2024 £bn
Total	24.7	24.9

The taxable event for hydrocarbon oils duties is the date of production, date of import or movement of relevant goods out of a duty suspended regime (a regime where, under UK legislation, certain goods benefit from a temporary suspension or reduction of import duties). 

2.5. Stamp taxes 

For the year ended 31 March	2025 £bn	2024 £bn
Stamp Duty Land Tax	14.3	11.7
Stamp Duty Reserve Tax	3.1	2.3
Stamp Duty	1.3	0.9
Annual Tax on Enveloped Dwellings	0.1	0.1
Total	18.8	15.0

 The taxable event for:

• Stamp Duty Land Tax (SDLT) is the purchase of property
• Stamp Duty Reserve Tax and Stamp Duty is the purchase of shares. HMRC can only record Stamp Duty when a stamp is presented to HMRC and hence the duty is recognised on a cash basis (see note 1.1)
• Annual Tax on Enveloped Dwellings (ATED) is a company owning or part-owning a UK residential property valued at £500,000 or more during a chargeable period. ATED applies to a property that is a dwelling, if all or part of it is used, or could be used, as a residence

2.6. Capital Gains Tax

For the year ended 31 March	2025 £bn	2024 £bn
Total	13.8	14.3

The taxable event for Capital Gains Tax (CGT) is the disposal of a chargeable asset leading to a taxable gain.  

CGT receipts for UK residents are reported in the Trust Statement on a partial accrual basis and repayments are reported on a cash basis in the period the repayment is made (see note 1.1).  

2.7. Alcohol duties

For the year ended 31 March	2025 £bn	2024 £bn
Wine, cider and perry	4.9	4.8
Spirits	4.2	4.1
Beer	3.7	3.6
Total	12.8	12.5

The taxable event for alcohol duties is the date of production, date of import or date of movement of relevant goods out of a duty suspended regime (a regime where, under UK legislation, certain goods benefit from a temporary suspension or reduction of import duties). 

2.8. Insurance Premium Tax

For the year ended 31 March	2025 £bn	2024 £bn
	9.3	8.1

The taxable event for insurance premium tax is the date the premium is received by the insurer if they are operating the cash receipt method or the date the premium is due if the insurer is operating the special accounting scheme.

2.9. Other taxes and duties

For the year ended 31 March	Note	2025 £bn	2024 £bn
Inheritance Tax		8.2	7.4
Tobacco duties		7.9	9.0
Customs duties		4.9	4.5
Air Passenger Duty		4.2	3.9
Apprenticeship Levy		4.1	3.9
Betting and Gaming duties		3.7	3.4
Energy Profits Levy		3.3	2.5
Climate Change Levy		1.8	1.6
Bank Levy		1.1	1.3
Digital Services Tax		0.9	0.7
Bank Surcharge		0.7	1.6
Landfill Tax		0.7	0.5
Electricity Generator Levy	2.9.1	0.5	1.8
Aggregates Levy		0.4	0.4
Soft Drinks Industry Levy		0.3	0.4
Plastic Packaging Tax		0.2	0.3
Diverted Profits Tax		0.1	0.1
Residential Property Developer Tax		0.1	0.1
Petroleum Revenue Tax	2.9.2	(0.1)	(0.1)
Total		43.0	43.3

Details of taxes and duties are shown below where:

• taxes are reported in the Trust Statement for the first time
• accounting adjustments have materially impacted net revenue, and
• negative net revenue is reported

2.9.1. Electricity Generator Levy

The Electricity Generator Levy (EGL) is a temporary charge on exceptional receipts exceeding £10 million in an accounting period generated from the production of wholesale electricity. The levy is effective from 1 January 2023 to 31 March 2028. The taxable event for EGL is the earning of exceptional receipts during the taxation period by the taxpayer.

The legislation was granted Royal Assent at the beginning of 2023 to 2024. The 2023 to 2024 accounts contained an additional £0.4 billion of revenue recognised for accrued revenue receivable (ARR), for returns due in 2024 to 2025. The ARR recognised in 2024 to 2025 has reduced in line with electricity price assumptions, resulting in a £0.3 billion reduction to revenue. The residual decrease in revenue is due to the reduction in electricity prices.

2.9.2. Petroleum Revenue Tax

Petroleum Revenue Tax (PRT) is a ‘field-based’ tax charged on the profits arising from individual oil and gas fields that were approved for development before 16 March 1993. The rate of PRT was permanently set at 0% effective from 1 January 2016 but it has not been abolished so that losses (such as losses arising from decommissioning fields liable to PRT) can be carried back against past PRT payments, with HMRC making a provision for this. For further information on oil and gas field decommissioning costs, please see note 6.3. 

3. Other revenue, income and disbursements 

3.1. National Insurance contributions

For the year ended 31 March		2025 £bn	2024 £bn
National Insurance contributions
Class 1		165.2	172.4
Class 2		0.3	0.4
Class 4		3.3	4.2
Total National Insurance Contributions (NICs)		168.8	177.0
NIC expenditure		(0.6)	(2.1)
NICs due to NIF and NHS		168.2	174.9
Disbursements
National Insurance Fund Great Britain (NIF GB)		(129.9)	(137.7)
National Insurance Fund Northern Ireland (NIF NI)		(2.7)	(2.9)
National Health Services (NHS)		(35.6)	(34.3)
Total disbursements		(168.2)	(174.9)

National Insurance contributions (NICs) are collected by HMRC on behalf of the National Insurance Funds (NIF) of Great Britain and Northern Ireland and the National Health Services (NHS) for England, Wales, Scotland and Northern Ireland. They are payable to the NIF and the NHS when received and not when accrued. 

NICs class 3 voluntary contributions are accounted for in the National Insurance Fund accounts National Insurance Fund Accounts - GOV.UK (www.gov.uk).

NICs 1A and 1B information reported via P11D and P11D(b) forms is not available at the time of producing the accounts so these are recognised on a cash basis (see note 1.1).

NICs revenue has reduced compared to the same period last year due to a reduction in some employee rates Rates and allowances: National Insurance contributions - GOV.UK.

3.2. Student Loan recoveries

For the year ended 31 March	2025 £bn	2024 £bn
Student Loan recoveries	4.7	4.4
Student Loan recoveries paid and payable to the Department for Education	(4.7)	(4.4)
Net revenue	-	-

Student Loan repayments are collected on behalf of and paid to the Department for Education (DfE). The majority are collected through PAYE with an element collected through Self Assessment. Any difference between the amount of Student Loan repayments received and the cash paid to the DfE is shown as a payable (refer to note 5 – other taxes and duties).

3.3. Fines and penalties

For the year ended 31 March	2025 £bn	2024 £bn
Fines and penalties	2.5	2.6

This consists of income arising from the levying of tax fines and penalties.

Penalties relating to NICs are accounted for as NIC income and paid over to the National Insurance Fund.   

3.4. Appropriation of revenue to the Resource Accounts 

For the year ended 31 March	2025 £bn	2024 £bn
Corporation tax reliefs	9.5	11.7
Personal tax credits	1.9	7.4
Total appropriation of revenue to Resource Accounts	11.4	19.1

The expenditure relating to personal tax credits (PTC) and some corporation tax reliefs (CTR), see note 2.3, is accounted for in the Resource Accounts.

The Trust Statement is responsible for the payment of PTC and CTR through the tax collection and repayment process. As per the FReM, these amounts are recorded in the Trust Statement as revenue received and as a disbursement to Resource Accounts.

The reduction in PTC reflects the migration of claimants to Universal Credit, which is accounted for in the Department for Work & Pensions’ accounts. PTC end on 5 April 2025.

For further information on PTC and CTR, see note 4.1.1 and 4.1.4 respectively in the Resource Accounts. For further reference to the disbursement, see the Consolidated Statement of Changes in Taxpayers’ Equity in the Resource Accounts.

3.5. Taxation due to the Isle of Man 

Under the Isle of Man Act 1979, a revenue sharing arrangement exists between the UK and the Isle of Man (IoM). A revised agreement detailing the revenue sharing arrangement was signed on 11 April 2025, superseding all previous agreements. Although the agreement was signed after the financial year end, it applies to the year ending 31 March 2025. Certain tax revenue streams, known as ‘common duties’ are pooled and then shared on an agreed basis. The IoM is entitled to the share of common duties collected in the UK and the IoM that are attributable to goods consumed and services supplied in the island. If the IoM agreed share is greater than revenues collected and retained by the IoM, this results in the UK making payment to the IoM to ensure the IoM receives the correct share. This is shown as a disbursement. Where the IoM collects and retains more than agreed under the sharing arrangement, the IoM makes payment to the UK. This is shown as other revenue and income. 

For the year ended 31 March 2025 net payments to the IoM totalled £333 million (£295 million net payments for the period 1 April 2023 to 31 March 2024).

4. Receivables, accrued revenue receivable, impairment and losses

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

	Receivables £bn As at 31 March 2025	Accrued revenue receivable £bn As at 31 March 2025	Total £bn As at 31 March 2025	Receivables £bn As at 31 March 2024	Accrued revenue receivable £bn As at 31 March 2024	Total £bn As at 31 March 2024
Non-current assets
Receivables due after one year:
Inheritance Tax	2.2	-	2.2	2.2	-	2.2
Non-current assets before impairment	2.2	-	2.2	2.2	-	2.2
Less impairment (note 4.3)	(1.0)	-	(1.0)	(1.0)	-	(1.0)
Total non-current assets after impairment	1.2	-	1.2	1.2	-	1.2
Current assets
Receivables and ARR due within one year:
Income Tax	18.3	58.3	76.6	12.6	58.4	71.0
Value Added Tax	18.5	47.3	65.8	18.3	46.1	64.4
Corporation Tax	7.0	14.1	21.1	6.7	14.1	20.8
National Insurance Contributions	7.3	18.4	25.7	7.1	18.6	25.7
Other taxes and duties	15.7	10.0	25.7	13.9	9.3	23.2
Current assets before impairment	66.8	148.1	214.9	58.6	146.5	205.1
Less impairment (note 4.3)	(29.2)	(1.9)	(31.1)	(26.6)	(2.2)	(28.8)
Total current assets after impairment	37.6	146.2	183.8	32.0	144.3	176.3
Total assets before impairment	69.0	148.1	217.1	60.8	146.5	207.3
Less impairment (note 4.3) (note 1)	(30.2)	(1.9)	(32.1)	(27.6)	(2.2)	(29.8)
Total assets after impairment	38.8	146.2	185.0	33.2	144.3	177.5

Note 1: Total impairment of £32.1 billion is shown between non-current and current assets in the table above. In note 4.3 this total is shown by receivables and accrued revenue receivable and in note 4.3.1 by age of debt.

4.1. Receivables 

Receivables represent all taxpayer liabilities that have been established, due or overdue, for which payments have not been received at the Statement of Financial Position date. Established taxpayer liabilities that are postponed subject to ongoing appeals are excluded from receivables unless likelihood of receipt is probable (see note 1.2). Accrued interest on interest-bearing receivables is not available at the time of producing the accounts therefore this is recognised on a cash basis (see note 1.1).

Further information on receivables can be found in the section ‘Chief Executive’s Performance Report, Collecting debt’. 

4.2. Accrued revenue receivable

Accrued revenue receivable (ARR) represents amounts of taxes and duties where the taxable event has occurred but the tax return has not been received from the taxpayer by the end of the reporting period.  For taxes where HMRC has received returns since the end of the reporting period, the department used this information to support its valuation of ARR.  For those taxes where HMRC is yet to receive taxpayer returns, principally Income Tax self assessment (ITSA) and Corporation Tax (CT), HMRC has estimated ARR. Due to the nature of tax legislation, ITSA and CT are the most difficult taxes to estimate.    

Tax forecasting models are used to produce the ITSA and CT ARR estimates, and take into consideration the economic assumptions prepared for the March 2025 Budget and the Economic and Fiscal Outlook published by the Office for Budget Responsibility (OBR) in March 2025.

These estimates have been prepared using the judgement of professional departmental economists and statisticians. 

4.2.1. Uncertainty around the ARR estimates

Conclusions around estimation uncertainty are based on evidence from the performance of our estimation models over previous years, changes to reflect the March 2025 Budget and changes to reflect the Economic and Fiscal Outlook published by the OBR in March 2025.

Actual outcomes could differ from the estimates used, due to the areas of uncertainty involved.

Each year HMRC reviews the performance of its estimation models. Last year, the ARR overestimation was £5.5 billion, 0.7% of 2023 to 2024 total revenue (ARR underestimation of £0.7 billion in 2022 to 2023, 0.1% of 2022 to 2023 total revenue).

The process for each significant estimate is described in more detail below:

4.2.2. Income Tax self assessment

Income Tax self assessment (ITSA) ARR is estimated to be £28.9 billion this year (£31.4 billion in 2023 to 2024), which is included in the total Income Tax ARR of £58.3 billion (£58.4 billion in 2023 to 2024) in note 4.

The SA regime involves long filing and payment lags, so the ARR estimate is based on forecast liabilities as the corresponding SA returns for 2024 to 2025 are not due until 31 January 2026.

The SA ARR estimate is the total of the forecast liabilities for 2024 to 2025 less:

• any payments already received by 31 March 2025, and
• Unpaid Payment on Account 1 liabilities relating to 2024 to 2025

The estimate is driven by the March 2025 Budget forecast and the underlying economic determinants are based on the OBR central forecast rather than by receipts data.

There are several key economic factors that underpin these estimates and are the main contributors to the increase in the ARR estimate for 2024 to 2025. These include self-employed income growth, dividend income growth and Average Effective Tax Rates (AETR).

Sensitivity analysis has been produced to demonstrate the impact of changes to key assumptions used in the current estimate, and the results of those considered high-risk are shown in the table below.

Based on historic data, likely changes in key assumptions are not expected to exceed the percentages within the table below.

Impact on ITSA ARR of varying key economic factors    

Key assumption (percentage point change)	Increase £bn	Decrease £bn
Mainly SA non-saving non-dividend AETR (note 1) (+/-0.6% point)	1.8	(1.8)
Dividend income growth (+/-11% points)	1.7	(1.7)
Mixed income growth (+/-6% points)	1.6	(1.6)
Mainly SA Dividend AETR (note 1) (+/-3%points)	0.9	(0.9)
Mainly PAYE NSND SA Liability (note 2) (+/-43% points)	0.7	(0.7)
Mainly SA PAYE deduction rate(note 1) (+/-0.55% point)	(0.6)	0.6

Note 1: Mainly SA individuals are those within SA who have some Non-Saving Non Dividend (NSND) income from non PAYE sources such as self-employed income, property income, foreign income or do not have a PAYE source

Note 2: Mainly PAYE individuals are those within SA whose NSND income is entirely from PAYE sources (employment/pension).

4.2.3. Corporation Tax

Corporation Tax (CT) ARR is £14.1 billion (£14.1 billion in 2023 to 2024) which includes an estimated amount of £8.7 billion (£8.9 billion in 2023 to 2024). 

HMRC has a number of taxpayer liabilities which have been postponed pending finalisation of enquiries. HMRC undertakes a review of large postponed cases for Corporation Tax to ensure that revenue that meets the revenue recognition criteria, as set out in note 1.2, is recognised in the accounts. As a result, an amount of £3.8 billion (£3.1 billion in 2023 to 2024) has been included in ARR.

As with SA, the filing of CT returns and related payments are subject to a considerable lag and relate to the accounting periods of taxpayers rather than the current taxation period. Since there is less outturn data available, the ARR estimate is subject to uncertainty.

The key drivers of the ARR estimate are outturn CT receipts and returns received to date and a series of assumptions. The assumptions used are needed to estimate the total amount of accrued tax liabilities arising from profits generated in the taxation period and from CT returns that relate to 2024 to 2025 but are not available at the point of estimation. Separate ARR estimates have been calculated for onshore and North Sea oil and gas (offshore) companies because of differences in how these companies operate and, in particular, the number of instalments paid. Further detail can be found below. 

Onshore companies    

CT for large and very large onshore companies is paid in 4 Quarterly Instalment Payments (QIPs). CT ARR has been estimated where between one and four QIPs have been received using a model that forecasts companies’ CT liabilities based on the number and value of QIPs received by a given date.

The key assumptions used in this modelling are the proportion of CT that is paid late and/or overpaid and the proportion of CT liabilities paid in each quarterly instalment. These assumptions are informed by looking at historic trends in outturn data. CT is assumed to accrue evenly throughout the companies’ accounting periods.

For accounting periods where no QIPs have been received, ARR has been estimated using OBR’s March 2025 Corporation Tax forecast.     

As agreed with HM Treasury, Corporation Tax for smaller companies that do not pay by instalment are accounted for on a partial accrual basis, as a reliable ARR estimate for these companies cannot be formed.    

North Sea oil and gas companies 

North Sea companies pay their CT liabilities in Three Instalment Payments (TIPs). A similar methodology to that of onshore companies is used for calculating the estimate.    

However, most TIPs relating to liabilities from 1 January to 31 March are not due in sufficient time to be included in the TIPs estimation model and these amounts are therefore estimated.

This year’s estimate is based on the OBR’s March 2025 North Sea taxes forecast which shows an increase in receipts between 2024 to 2025 and 2025 to 2026 due to higher oil and gas prices and increased production. This explains the increase in the ARR estimate for North Sea companies in the latest year.

Impact on CT ARR of varying key economic factors  

Sensitivity analysis has been produced to demonstrate the impact of changes to key assumptions used in the current estimate and the results are shown in the table below. 

Based on recent historic data, changes in key assumptions are likely to fall within the ranges in the table below.

Key assumption (percentage point change)	Increase £bn	Decrease £bn
CT liability growth (+/-10% points)	0.3	(0.3)
Late payments (+/-1% point)	0.2	(0.2)
Overpayments (+/-1% point)	(0.2)	0.2
Proportion of companies’ CT liabilities paid with in-year QIPs (+/-1% point)	(0.3)	0.5

4.2.4. Value Added Tax

Value Added Tax (VAT) ARR is £47.3 billion (£46.1 billion in 2023 to 2024) which includes an estimated amount of £5.6 billion (£5.9 billion in 2023 to 2024). A large amount of the VAT ARR is based on actual return data and is not therefore subject to significant estimation uncertainty. Returns submitted in June and July relating to the current reporting period are not available at the time of producing the ARR so an estimate is produced by calculating the value of these returns as a proportion of the total value of the returns in the preceding period last year. Those proportions are then applied to the value of returns for the corresponding period this year. 

Impact on VAT ARR of varying key economic factors  

Key assumption (percentage point change)	Increase £bn	Decrease £bn
ARR estimate as proportion of total VAT gross revenue (+/- 0.5% points)	1.4	(1.4)

4.3. Impairment of receivables and accrued revenue receivable 

	Impairment of Receivables £bn As at 31 March 2025	Impairment of accrued revenue receivable £bn As at 31 March 2025	Total £bn As at 31 March 2025	Impairment of Receivables £bn As at 31 March 2024	Impairment of accrued revenue receivable £bn As at 31 March 2024	Total £bn As at 31 March 2024
Balance as at 1 April	27.6	2.2	29.8	19.2	1.5	20.7
Impairment in-year expenditure	2.6	(0.3)	2.3	8.4	0.7	9.1
Balance as at 31 March	30.2	1.9	32.1	27.6	2.2	29.8

Receivables and accrued revenue receivable (ARR) in the Statement of Financial Position are reported after impairment to reflect an amount that is likely to be collected. This amount is estimated based on HMRC’s analysis of existing receivables, debt and ARR collection rates.

4.3.1. Impairment calculation and analysis

The FReM does not require HMRC to determine impairments in accordance with IFRS 9, as the standard relates to financial instruments, and taxes and duties arise from statute and not a contract. However, impairments have been measured applying the simplified expected credit loss (ECL) model set out in IFRS 9.

The ECL model estimates the future recoverability of receivables and ARR based on their age and current debt clearance rates, accepting that the non-payment risk associated with tax debt increases with age.

HMRC has reviewed a number of scenarios and determined that current period clearance rates are reasonable in estimating future recoveries.

The table below provides an age breakdown of the current scenario:

Age	Gross Balance £bn As at 31 March 2025	Impairment Rate % As at 31 March 2025	Impairment £bn As at 31 March 2025	Impairment £bn As at 31 March 2024
Not impaired (note 1)	1.2	0.0	-	-
Accrued revenue receivable	148.1	1.3	1.9	2.2
Receivables not overdue (note 2)	14.5	4.9	0.7	0.4
Total not overdue	163.8		2.6	2.5
Tax debt less than 1 year overdue	21.5	17.5	3.8	5.4
Tax debt 1 to 2 years overdue	7.1	54.1	3.8	4.4
Tax debt more than 2 years overdue	14.2	85.0	12.1	9.7
Total tax debt (note 3)	42.8		19.7	19.5
Receivables under investigation less than 1 year overdue	0.5	17.5	0.1	0.2
Receivables under investigation 1 to 2 years overdue	0.3	54.1	0.1	0.2
Receivables under investigation more than 2 years overdue	0.9	85.0	0.8	0.7
Total receivables under investigation (note 4)	1.7		1.0	1.1
Receivables unlikely to be collectable (note 5)	8.8	100.0	8.8	6.7
Total	217.1	14.8	32.1	29.8

Note 1: Items not impaired are predominantly receivables owed from the National Insurance Fund.

Note 2: Receivables not overdue are taxpayer liabilities where the due date has not passed.

Note 3: Tax debt is the amount of tax that is overdue for payment, legally enforceable and collectable.

Note 4: Receivables under investigation are overdue receivables where investigations are being carried out by HMRC.

Note 5: Receivables unlikely to be collectable are awaiting formal write-off action.

The impairment of receivables rate (excluding ARR) is 43.8% in 2024 to 2025 (45.4% in 2023 to 2024). The lower rate is due to increases in receivables not overdue which attracts a lower impairment rate.

The total impairment rate is 14.8% (14.4% in 2023 to 2024). The higher total impairment rate is due to the impairment value increasing at a higher rate than total receivables and ARR, caused by increases in receivables unlikely to be collectable.

Sensitivity analysis 

HMRC has produced sensitivity analysis by analysing rates of debt collection and overdue receivables in years of low and high levels of economic uncertainty, to demonstrate the possible outcomes if the impairment scenario were to differ from the current period clearance rates. 

Potential impact on the impairment balance     

Scenario	Change to impairment balance £bn
Low estimate scenario	(2.6)
High estimate scenario	7.7

The low scenario is based on HMRC debt collection performance during periods of low economic volatility, whilst the high scenario is based on performance during periods of high economic volatility, over the past 6 years. Low economic volatility would increase speed of collection and reduce the impairment by as much as 8.9% (£2.6 billion) across aged debt and amounts not overdue. High economic volatility would reduce the speed of collection and increase the impairment by as much as 24.1% (£7.7 billion).

4.4.  Revenue losses 

For the year ended 31 March	Remissions (2025) £m	Write-offs (2025) £m	Total (2025) £m	Remissions (2024) £m	Write-offs (2024) £m	Total (2024) £m
Income Tax	215	1,137	1,352	144	990	1,134
Value Added Tax	146	2,774	2,920	106	2,518	2,624
Corporation Tax	21	499	520	22	360	382
National Insurance Contributions	60	728	788	34	705	739
Fines and penalties	659	666	1,325	177	421	598
Other remissions and write-offs	109	216	325	84	55	139
Total revenue losses	1,210	6,020	7,230	567	5,049	5,616

Revenue losses are made up of remissions and write-offs. Remissions are debts capable of recovery, but HMRC has decided not to pursue the liability on the grounds of value for money. Write-offs are debts that are considered to be irrecoverable because there is no practical means for pursuing the liability. The vast majority of revenue losses are driven by individual and business insolvencies. 

HMRC write off debt from the statement of financial position when a customer is formally declared insolvent. On 31 March 2025, HMRC had £3.3 billion of debt that may go into formal insolvency. Once in formal insolvency, on average the dividend payment HMRC eventually receives is 5 pence in the pound. In 2024 to 2025 we have received £233 million in such dividend payments (£162 million in 2023 to 2024).

For certain taxes, only a partial split between remissions and write-offs is known. Where information is unavailable, the percentage split of the known element is applied to the remainder to calculate a total estimated remission and write-off split.

Taxpayers can satisfy their inheritance tax with certain categories of property rather than cash. HMT set an annual offer limit of £40 million for the amount of tax that can be satisfied by acceptance in lieu. This is treated as a tax loss and is included in other remissions and write-offs, as no revenue will flow to the consolidated fund. For 2024 to 2025, tax satisfied by acceptance in lieu was £50 million, split between £29 million relating to offers made in 2024 to 2025, and £21 million relating to offers made in previous financial years.

Fines and penalties relating to National Insurance Contributions (NICs) are accounted for as NICs revenue losses.

Further information on losses can be found in the section ‘Chief Executive’s Performance Report, Collecting debt’.

Revenue losses - cases more than £10 million  

For the year ended 31 March 2025, there were 45 cases (31 cases as at 31 March 2024) where the loss exceeded £10 million, totalling £1.9 billion  (£1.2 billion as at 31 March 2024). Details are shown below: 

There were 39 write-offs relating to insolvency and 3 remissons (28 write-offs as at 31 March 2024)  totalling £1.1 billion (£934 million as at 31 March 2024). 

There were 3 bulk remissions (3 cases as at 31 March 2024) totalling £839 million (£227 million as at 31 March 2024). Details are shown below:

• Self Assessment penalties of £231 million (£189 million as at 31 March 2024), where it had been identified customers were no longer liable for SA or were no longer self-employed and had ceased to trade
• Self Assessment outstanding debts of £558 million (nil as at 31 March 2024), where it had been identified customers were no longer self employed and who had ceased to trade in the tax year 2020 to 2021 or earlier and are no longer in the SA regime
• there was a bulk remission of IHT acceptance in lieu of £50 million, this is treated as a tax loss as explained above

HMRC decided not to pursue on the grounds of value for money for both Self Assessment bulk remissions above.

5. Payables, accrued revenue payable, deferred revenue, and cash and cash equivalents 

	Payables £bn As at 31 March 2025	Accrued revenue payable £bn As at 31 March 2025	Deferred revenue £bn As at 31 March 2025	Total £bn As at 31 March 2025	Payables £bn As at 31 March 2024	Accrued revenue payable £bn As at 31 March 2024	Deferred revenue £bn As at 31 March 2024	Total £bn As at 31 March 2024
Income Tax	4.9	1.3	-	6.2	5.2	1.3	-	6.5
Value Added Tax	1.6	18.4	-	20.0	1.6	21.4	-	23.0
Corporation Tax	14.0	6.4	0.3	20.7	13.7	4.7	0.2	18.6
National Insurance Contributions	0.8	22.1	-	22.9	0.8	20.8	-	21.6
Other taxes and duties	4.2	0.3	4.0	8.5	2.8	0.2	3.4	6.4
Payments on account	4.2	-	-	4.2	3.1	-	-	3.1
Current liabilities before cash and cash equivalents	29.7	48.5	4.3	82.5	27.2	48.4	3.6	79.2
Cash and cash equivalents	1.3	-	-	1.3	1.1	-	-	1.1
Total current liabilities	31.0	48.5	4.3	83.8	28.3	48.4	3.6	80.3

There are no liabilities in the table above which fall due after one year. 

5.1. Payables 

Payables are amounts due to customers by HMRC at the end of the reporting period, but for which payment has not been made.  Payments on account are taxpayer credit amounts that have not been allocated to a tax charge at the reporting period end date.

5.2. Accrued revenue payable

Accrued revenue payable (ARP) is recognised for: 

• amounts due to VAT traders that have an established revenue repayment claim relating to the financial year, but the date the claim is received is after the end of the reporting period. It is necessary to estimate VAT ARP of £2.6 billion as returns submitted in June and July relating to the current financial year are not available at the time of producing the estimate
• amounts of receivables and accrued revenue receivable that when received will be passed to a third-party after adjusting for expenditure, for example National Insurance Contributions due to the National Insurance Funds and National Health Services
• amounts in respect of Corporation Tax, Income Tax and other small taxes likely to be repayable by HMRC pending finalisation of taxpayer liabilities accruing over the taxation period, and for expected Corporation Tax overpayments.

Estimates have been made to support the ARP balances where tax returns reporting taxpayer liabilities or associated tax repayments related to the taxation period are not filed until after the Trust Statement has been published. Each year HMRC reviews the performance of its estimation models. Last year, the ARP overestimation was £0.1 billion, 0.01% of 2023 to 2024 total revenue (ARP underestimation of £1.5 billion in 2022 to 2023, 0.2% of 2022 to 2023 total revenue).

5.3. Deferred revenue

Deferred revenue includes taxes and duties paid in the current year which relate to future accounting periods. 

5.4. Cash and cash equivalents 

This reflects the net position of cash in HMRC bank accounts and payments that have been authorised for issue but the money has not cleared through the banking system as of 31 March. The balance does not represent an overdraft position.

6. Provision for liabilities and contingent liabilities

Provisions are recognised when HMRC has a present legal or constructive obligation as a result of a past event, it is probable that HMRC will be required to settle that obligation and an amount can be estimated reliably. Separate provisions, in respect of associated legal costs, are recognised in the Resource Accounts.

Contingent liabilities relate to legal cases for which the outcome is uncertain or HMRC consider that there is only a possible rather than probable likelihood that a payment will be required and/or the amount cannot be measured reliably.   

Provision for liabilities 

	Legal claims £bn	Oil and gas field decommissioning £bn	Total 2025 £bn	Total 2024 £bn
Balance as at 1 April	2.6	5.7	8.3	7.5
Provided in the year	0.9	0.6	1.5	1.9
Provision not required written back	(0.6)	-	(0.6)	(0.2)
Provision utilised in the year	(0.5)	(0.5)	(1.0)	(0.9)
Balance as at 31 March	2.4	5.8	8.2	8.3

Analysis of expected timing of cash flows   

	Legal claims £bn	Oil and gas field decommissioning £bn	Total 2025 £bn
Amounts payable within 5 years	2.4	2.5	4.9
Amounts payable after 5 years	-	3.3	3.3
Balance as at 31 March	2.4	5.8	8.2

6.1. Provisions in-year expenditure

	Legal claims £bn	Oil and gas field decommissioning £bn	Total 2025 £bn	Total 2024 £bn
Total provided in the year	0.9	0.6	1.5	1.9
Provision not required written back	(0.6)	-	(0.6)	(0.2)
Net movement increase/(decrease)	0.3	0.6	0.9	1.7

6.2 Legal claims

Provision for liabilities 

HMRC is involved in various legal and other disputes, which can lead to claims by taxpayers. Due to the nature of HMRC’s business, some of these matters may be litigated over several years.

The department, after consulting legal and other specialists, has established provisions based on the relevant facts and circumstances of each case, in accordance with accounting requirements. However, due to uncertainties in estimating these provisions, the ultimate liability may differ from the amounts provided. This is dependent on the outcomes of litigation, investigations, and potential settlements.

Provisions were reviewed during 2024 to 2025 and discounting was not applied as it was of immaterial impact.

Contingent liabilities 

Contingent liabilities are disclosed at a value made in accordance with a best estimate based on the information available at the end of the reporting period.  Those estimates are subject to change and, for some legal cases, are inherently uncertain. Regular review of the contingent liabilities leads to the recognition of new cases where appropriate. Existing cases may also be revalued, recognised as provisions, or removed from the contingent liability disclosures (i.e. where the probability that HMRC will be required to make a payment to settle the liability is now considered to be remote). 

As at 31 March 2025, HMRC has 8 cases estimated to have a value of £6.0 billion (compared to 8 cases with an estimated value of £5.4 billion as at 31 March 2024) where the maximum potential tax repayment, before losses, capital allowances and other tax reliefs, is over £100 million. Each case may include a lead case with follower claimants and cover a range of taxes and duties, including Corporation Tax and VAT. 

Further claimants may opt to follow a lead case but are not yet known to HMRC or the Courts. Wider adoption claims of this nature are difficult to quantify with sufficient reliability and therefore deemed to fall outside of criteria in the relevant accounting standards. They are not recognised in the Accounts or disclosed in these notes.

6.3. Exchequer liabilities arising from oil and gas infrastructure 

There are 2 taxes levied on companies exploring and producing oil and gas from the UK Continental Shelf (UKCS): Petroleum Revenue Tax (PRT) and offshore Corporation Tax (CT), the latter comprising of 3 elements: Ring-fenced Corporation Tax, Supplementary Charge and the Energy Profits Levy.

The legislation governing the losses from decommissioning costs (Oil Taxation Act 1975) allows participators in an oil and gas field liable to PRT to carry-back decommissioning losses almost indefinitely against profits it has previously made from the field, or which previous participators in the field have made. This may result in the repayment of PRT. With respect to offshore CT, the Corporation Tax Act 2010 allows for a company’s decommissioning loss to be carried back against its own historical profits dating back to April 2002. Again, this may result in a repayment of offshore CT. 

Provision for oil and gas field decommissioning

The provision for tax repayments is an estimate based on the appropriately discounted sum of all forecast decommissioning repayments over the expected lifetime of the North Sea oil and gas fields. Repayment profiles are derived from the output produced by HMRC’s North Sea Forecasting Model developed at the individual company and field level. There has been no significant change in the model since last year. 

A provision of £5.8 billion has been reported in 2024 to 2025 based on the estimated tax repayments of PRT £1.9 billion (£2.1 billion in 2023 to 2024) and offshore CT £3.9 billion (£3.6 billion in 2023 to 2024) by HMRC to companies over the period to 2067 due to losses from decommissioning expenditure.

The key determinants of the provision estimate are:

• future decommissioning costs from the North Sea Transition Authority’s (NSTA) latest UKCS  Stewardship Survey
• oil and gas prices, expenditure and production from the Office for Budget Responsibility (OBR),  Department for Energy Security and Net Zero (DESNZ) and NSTA
• discount rates from HM Treasury
• the US Dollar/Sterling exchange rate from the OBR

There has been a £0.1 billion increase in the overall provision since last year with an increase due to the impact of economic assumptions being largely offset by the utilisation of the provision for 2024 to 2025.

The provision utilised in-year relates to tax repayments in 2024 to 2025 due to decommissioning expenditure. 

Uncertainty around the estimate of the provision

There is inherent uncertainty surrounding forecasting oil and gas revenues over 30+ years ahead.

The largest impact on the size of the provision, and biggest source of uncertainty in estimating it, is quantification of future decommissioning costs. Annually, the NSTA estimates the total costs of remaining oil and gas decommissioning for the UKCS, including newly sanctioned projects, and changes to the portfolio of potential, as yet unsanctioned projects.

The provision included in the Trust Statement is calculated using the NSTA’s estimate for  decommissioning costs (details of the UKCS decommissioning costs will be included in the NSTA Cost & Performance Report 2025 due to be published Summer 2025). A 10% increase in the decommissioning cost estimate would increase the provision by  £0.3 billion. Similarly, a 10% reduction would decrease the provision by £0.3 billion.

A major economic determinant which drives the provision is oil and gas prices. The model has utilised DESNZ long-term projections. Compared to the baseline oil and gas price forecasts a 10% increase (decrease) would decrease (increase) the provision by approximately £0.4 billion (£0.5 billion).

The provision is also impacted by discount rates and foreign exchange rates as follows: - an increase in the discount rate will reduce the present value of the provision. An overall increase in the discount rates of 50 basis points will decrease the overall provision by £0.2 billion. The same decrease in discount rates would increase the provision by £0.3 billion - as oil prices are denominated in US Dollars, the overall provision is impacted by changes in the US Dollar/Sterling exchange rate. A 10-cent appreciation in the US Dollar gives rise to higher Sterling oil prices resulting in a £0.3 billion decrease in the provision. A 10-cent depreciation of the Dollar results in a £0.2 billion increase in the required provision

7. Balance on Consolidated Fund Account 

Movements on Consolidated Fund account

	2025 £bn	2024 £bn
Balance due to/(due from) Consolidated Fund as at 1 April	88.9	88.7
Net revenue for the Consolidated Fund	680.9	628.3
Less amount paid to Consolidated Fund	(676.8)	(628.1)
Balance due to/(due from) Consolidated Fund Account	93.0	88.9

8. Certificates of tax deposit 

Under the Certificate of Tax Deposit (CTD) scheme, HMRC previously accepted deposits from individuals, businesses and trustees liable for certain taxes. The scheme is now closed, details can be found at www.gov.uk/guidance/certificate-of-tax-deposit-scheme. As at 31 March 2025 the value of unclaimed certificates is £12 million (£38 million as at 31 March 2024). HMRC will seek to repay the balance of certificates which remain unclaimed.

9. R.N. Limited 

R.N. Limited is a registered company that administers, on behalf of HMRC, the holding of charges securing tax debts owed to HMRC. These tax debts are reflected in the Trust Statement. The company’s parent undertaking and controlling party is HMRC. 

R.N. Limited also holds on behalf of HMRC, assets that have been assigned to HMRC in settlement of tax debts. These are not recognised in the Trust Statement until realised. There is no designation order requiring R.N. Limited’s financial statement to be consolidated within HMRC’s Accounts. R.N. Limited’s accounts can be viewed at Companies House.

10. Third party assets 

The department holds cash and other assets which have been seized in relation to ongoing legal proceedings. These assets do not belong to the department and do not form part of these accounts although, where seized assets are forfeited without legal proceedings, proceeds are recognised as penalty income. 

The department holds amounts in relation to businesses operating under the terms of the Northern Ireland (NI) protocol who have registered with HMRC to use the One Stop Shop (OSS) scheme to report and pay VAT due to the EU. This entails the making of payments to HMRC who will then forward any relevant amounts to the EU. The scheme was implemented on 1 July 2021 and covers goods sold from NI to consumers in the EU.  

11. Related party transactions 

Due to the nature of HMRC’s business, we have a large number of transactions, relating to taxation income, with other government departments and other central government bodies. Ministers’ interests are declared and maintained through the Register of Members’ Interests at the House of Commons and the Register of Lords’ Interests at the House of Lords. No Board member, key manager or other related party has undertaken material transactions (i.e. transactions of £0.1 million or more) with the department during the year. 

12. Devolved taxes

12.1. Scottish Income Tax 

The Scottish Parliament has the power to set and change its own tax rate bands and limits, introduce new ones, and include a zero rate, to all non-savings non-dividend (NSND) Income Tax paid by Scottish taxpayers (Scotland Acts 2012, 2016). These powers were fully effective from 6 April 2017. 

Starting from the 2018 to 2019 tax year and continuing up to the 2023 to 2024 tax year there have been 5 Income Tax bands in Scotland with different limits and rates applied to each. From 2024 to 2025 a new Advanced rate band set at 45% was introduced for income between £75,000 and £125,140, bringing the total number of Scottish Income Tax bands to 6. These range from the Starter rate of 19% up to the Top rate of 48%. This means that a Scottish taxpayer can pay a different amount of total Income Tax compared to someone from England and Northern Ireland earning the same amount of income. More information on the Scottish Income Tax rates for the 2024 to 2025 tax year can be found on the GOV.UK website (Income Tax in Scotland: Current rates - GOV.UK).

12.2. Welsh rates of Income Tax

The Wales Act 2017 gives the Welsh Parliament the power to set Welsh Rates of Income Tax (WRIT). This allows the Welsh Government to affect the amount of Income Tax that Welsh taxpayers pay and, as a result, the amount that the Welsh Government can spend in Wales. WRIT is calculated on a tax year basis and was introduced with effect from 6 April 2019. 

The Welsh rates up to the  2024 to 2025 tax year were set at 10% for each of the tax bands. This means that a Welsh taxpayer paid the same amount of total Income Tax as someone from England and Northern Ireland earning the same amount of income, but for the Welsh taxpayer 10 percentage points of each tax band was owed to the Welsh Government with the remainder owed to the UK Consolidated Fund. 

12.3. Scottish and Welsh rate of Income Tax estimates for 2024 to 2025 

The provisional estimate of revenue raised in 2024 to 2025 from Scottish Income Tax is £19.0 billion and from Welsh rates of Income Tax it is £3.3 billion. 

These figures have been estimated because actual data is unavailable. For example, minimal disclosure has been made to HMRC in respect of SA revenue for the 2024 to 2025 tax year, since the deadline for submitting SA returns online is not until 31 January 2026, and PAYE revenue is not available for taxpayers whose accounts have not been reconciled at the time the estimate has been produced for the Trust Statement. They also include estimates for the impact of budget measures, Gift Aid and other effects, such as broader demographic changes before the amount is apportioned between Scotland, Wales and the remainder of the UK. 

The Scottish and Welsh shares of Income Tax liabilities are estimated using a model based on the HMRC Survey of Personal Incomes which reflects data collected in 2022 to 2023. These are also adjusted to take account of the latest 2023 to 2024 Income Tax for the Scottish and Welsh final outturn data. This latter adjustment involves scaling each of the provisional estimates in 2024 to 2025 by the percentage difference between their 2023 to 2024 final outturn data and the underlying methodology’s estimates of 2023 to 2024 based on the HMRC Survey of Personal Incomes. 

The underlying methodology estimated higher Scottish Income Tax receipts in 2023 to 2024 than the final outturn, therefore, the 2024 to 2025 provisional estimate has been scaled down by a proportionate amount. Conversely, the methodology estimated lower Welsh rates of Income Tax receipts for 2023 to 2024 than the final outturn and the 2024 to 2025 provisional estimate has been scaled up by a proportionate amount. 

Further information on revenue for the tax year 2024 to 2025 that becomes available during 2025 to 2026 will allow refinement of these calculations. Updated figures will be disclosed in the 2025 to 2026 Trust Statement, allowing a final reconciliation for the 2024 to 2025 tax year. 

12.4. Scottish and Welsh rates of Income Tax outturn for 2023 to 2024

Provisional estimates for Scottish Income Tax of £17.3 billion and £2.9 billion for Welsh rates of Income Tax were disclosed in last year’s accounts. Now that HMRC has established over 95% of the tax liabilities for the year, the final outturn figures for 2023 to 2024 have been calculated as £17.1 billion for Scottish Income Tax and £3.0 billion for Welsh rates of Income Tax. 

For full details on the 2023 to 2024 outturn please refer to the HMRC publications released on 10 July 2025 Scottish and Welsh Income Tax Outturn Statistics - GOV.UK. The outturn publications are not subject to NAO audit.

HM Treasury is responsible for ensuring that the proceeds are made available to fund expenditure by the Scottish and Welsh Governments; these transfers are not accounted for in the HMRC Trust Statement.

The costs of collecting and administering are charged to the Scottish and Welsh Governments and accounted for in the Resource Accounts, but these are not individually disclosed due to materiality.

13. Events after the reporting period 

There are no reportable events after the reporting period. These accounts have been authorised for issue by the Accounting Officer on the same date as the Comptroller and Auditor General’s Audit Certificate.

Accounts direction given by HM Treasury

Accounts direction given by HM Treasury in accordance with section 2 of the Exchequer and Audits Departments Act 1921

1. This direction applies to those government departments listed in appendix 2.
2. The Department shall prepare a Trust Statement (‘the Statement’) for the financial year ended 31 March 2024 for the revenue and other income, as directed by the Treasury, collected by the department as an agent for others, in compliance with the accounting principles and disclosure requirements of the edition of Government Financial Reporting Manual (‘FReM’) 2024-25.
3. The Statement shall be prepared, as prescribed in appendix 1, so as to give a true and fair view of (a) the state of affairs relating to the collection and allocation of taxes, licence fees, fines and penalties and other income by the Department as agent and of the expenses incurred in the collection of those taxes, licence fees, fines and penalties insofar as they can properly be met from that revenue and other income; (b) the revenue and expenditure; and (c) the cash flows for the year then ended.
4. The Statement shall also be prepared so as to provide disclosure of any material expenditure or income that has not been applied to the purposes intended by Parliament or material transactions that have not conformed to the authorities which govern them.
5. When preparing the Statement, the Department shall comply with the guidance given in the FReM (Chapter 11). The Department shall also agree with HM Treasury the format of the Principal Accounting Officer’s Foreword to the Statement, and the supporting notes, and the accounting policies to be adopted, particularly in relation to revenue recognition. Regard shall also be given to all relevant accounting and disclosure requirements in Managing Public Money and other guidance issued by HM Treasury, and to the principles underlying International Financial Reporting Standards.
6. Compliance with the requirements of the FReM will, in all but exceptional circumstances, be necessary for the accounts to give a true and fair view. If, in these exceptional circumstances, compliance with the requirements of the FReM is inconsistent with the requirement to give a true and fair view, the requirements of the FReM should be departed from only to the extent necessary to give a true and fair view. In such cases, informed and unbiased judgement should be used to devise an appropriate alternative treatment which should be consistent with both the economic characteristics of the circumstances concerned and the spirit of the FReM. Any material departure from the FReM should be discussed in the first instance with HM Treasury.
7. The Statement shall be transmitted to the Comptroller and Auditor General for the purpose of his examination and report by a date agreed with the Comptroller and Auditor General and HM Treasury to enable compliance with the administrative deadline for laying the audited accounts before Parliament.
8. The Statement, together with this direction (but with the exception of the related appendices) and the Report produced by the Comptroller and Auditor General under section 2 of the Exchequer and Audit Departments Act 1921 shall be laid before Parliament at the same time as the Department’s Resource Accounts for the year unless the Treasury have agreed that the Trust Statement may be laid at a later date.

Kevin Pertaub
Deputy Director, Government Financial Reporting
HM Treasury
19 December 2024 

Resource Accounts

Consolidated Statement of Comprehensive Net Expenditure for the year ended 31 March 2025

This statement summarises the expenditure incurred and income generated on an accruals basis. Other comprehensive expenditure and income includes changes to the values of non-current assets that cannot yet be recognised as income or expenditure.

Consolidated Statement of Comprehensive Net Expenditure

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

	Note	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Cash items:
Child Benefit		13,307.1	12,514.4
Corporation tax reliefs	4.1.4	10,123.3	12,049.1
Personal tax credits	4.1.1	2,460.4	7,305.5
Tax-Free Childcare		617.9	635.3
Lifetime ISA		624.4	499.1
Payments in lieu of tax relief and rates		280.3	262.6
Help to Save		45.0	51.7
COVID-19 support schemes (note 1)		(1.1)	(22.0)
Cost of Living Payment (note 2)		(5.2)	760.0
Staff and related costs		3,535.2	3,551.6
Goods and services		1,535.1	1,545.2
Service charges (contract payments)		137.1	100.0
Other cash expenditure		287.5	266.6
Non-cash items:
Transfer of personal tax credit receivables to DWP		412.0	166.7
Amortisation	7	470.8	392.3
Depreciation	6, 8.1	142.3	147.4
Personal tax credit provisions	4.1.1, 13	209.3	1.7
Other provisions	13	112.2	(16.0)
Other		104.1	30.1
Total operating expenditure	2	34,397.7	40,241.3
Total operating income	5	(394.1)	(364.5)
Net operating expenditure		34,003.6	39,876.8
Finance income	5	(0.8)	(0.8)
Finance expense		12.7	17.2
Net expenditure for the year		34,015.5	39,893.2
Other comprehensive net expenditure
Items that will not be reclassified to net operating expenditure:
Net loss/(gain) on:
– revaluation of property, plant and equipment		9.9	(9.9)
– revaluation of intangible assets (note 3)		–	(151.1)
– actuarial revaluation of pension scheme		4.7	(6.9)
Total comprehensive expenditure for the year		34,030.1	39,725.3

Note 1: Values represent return of COVID-19 payments.

Note 2: The balance of cost of living payments due from 2023 to 2024, payable in 2024 to 2025, was lower than anticipated. The release of the underutilised accrual has resulted in a credit balance in 2024 to 2025.

Note 3: Intangible assets were not revalued in 2024 to 2025. In agreement with HM Treasury, HMRC has early adopted the 2025 to 2026 FReM change which requires them to be valued at cost.

Consolidated Statement of Financial Position as at 31 March 2025

This statement presents the financial position of the department. It comprises 3 main components: assets owned or controlled; liabilities owed to other bodies; and equity, the remaining value of the entity.

Consolidated Statement of Financial Position

	Note	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Non-current assets:
Intangible assets	7	2,964.4	2,859.4
Trade and other receivables	10	290.4	1,112.4
Right-of-use assets	8.1	948.8	989.4
Property, plant and equipment	6	669.0	717.3
Pension asset	14	3.6	8.5
Total non-current assets		4,876.2	5,687.0
Current assets:
Trade and other receivables	10	874.9	1,095.6
Cash and cash equivalents	11	68.6	41.0
Total current assets		943.5	1,136.6
Total assets		5,819.7	6,823.6
Current liabilities:
Trade and other payables	12	(10,822.1)	(10,895.7)
Lease liabilities	8.2	(59.4)	(63.1)
Provisions	13	(367.7)	(22.3)
Total current liabilities		(11,249.2)	(10,981.1)
Total assets less current liabilities		(5,429.5)	(4,157.5)
Non-current liabilities:
Trade and other payables	12	(2,347.0)	(1,881.5)
Lease liabilities	8.2	(1,130.3)	(1,181.5)
Provisions	13	(75.1)	(108.0)
Total non-current liabilities		(3,552.4)	(3,171.0)
Total assets less total liabilities		(8,981.9)	(7,328.5)
Taxpayers’ equity and other reserves:
General Fund		(9,162.3)	(7,577.0)
Revaluation reserve		180.4	248.5
Total equity		(8,981.9)	(7,328.5)

John-Paul Marks
Accounting Officer
15 July 2025

Consolidated Statement of Cash Flows for the year ended 31 March 2025

The Statement of Cash Flows shows the changes in cash and cash equivalents of the department during the reporting period. The statement shows how the department generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of service costs and the extent to which these operations are funded by way of income from the recipients of services provided by the department. Investing activities represent the extent to which cash inflows and outflows have been made for resources which are intended to contribute to the department’s future public service delivery.

Consolidated Statement of Cash Flows

	Note	Departmental Group (2024-25) £m	Departmental group (2023-24) £m
Cash flows from operating activities
Net operating expenditure		(34,003.6)	(39,876.8)
Adjustments for non-cash transactions		12,888.3	19,726.4
(Increase)/decrease in trade and other receivables	10	1,042.7	81.7
Less movements in receivables not passing through the Statement of Comprehensive Net Expenditure		14.0	(113.3)
Personal tax credits receivables, adjusted for impairment, transferred to DWP	4.1.2	(412.0)	(166.7)
Increase/(decrease) in trade and other payables	12	391.9	358.7
Capital element of receipts in respect of sub-leases		–	0.1
Less movements in payables not passing through the Statement of Comprehensive Net Expenditure		(27.6)	58.2
Use of provisions	13	(9.0)	(14.7)
Net cash outflow from operating activities		(20,115.3)	(19,946.4)
Cash flows from investing activities
Additions to property, plant and equipment	6	(65.1)	(70.2)
Less additions to leased property, plant and equipment		1.5	–
Additions to intangible assets	7	(649.7)	(675.7)
Less additions to leased intangible assets		–	5.9
Proceeds of disposal of property, plant and equipment		7.5	0.5
Financing income		0.8	0.8
Net cash outflow from investing activities		(705.0)	(738.7)
Cash flows from financing activities
From the Consolidated Fund (Supply) – current year		20,686.0	20,591.5
From the National Insurance Fund		257.7	272.0
Capital element of payments in respect of leases and on-Statement of Financial Position PFI contracts		(76.7)	(198.0)
Financing expenditure		(12.7)	(17.2)
Net financing		20,854.3	20,648.3
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund		34.0	(36.8)
Payments of amounts due to the Consolidated Fund		(6.4)	(0.8)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund		27.6	(37.6)
Cash and cash equivalents at the beginning of the period	11	41.0	78.6
Cash and cash equivalents at the end of the period	11	68.6	41.0

Consolidated Statement of Changes in Taxpayers’ Equity for the year ended 31 March 2025

This statement shows the movement in the year on the different reserves held by the department, analysed into General Fund and Revaluation Reserve. The General Fund represents the total assets less liabilities of the department, to the extent that it is not represented by other reserves and financing items. The Revaluation Reserve reflects the change in asset values that have not been recognised as income or expenditure.

Consolidated Statement of Changes in Taxpayers’ Equity

	Note	General fund Departmental group (2024-25) £m	Revaluation reserve (note 1) Departmental group (2024-25) £m	Taxpayers’ equity Departmental group (2024-25) £m	General fund Departmental group (2023-24) £m	Revaluation reserve (note 1) Departmental group (2023-24) £m	Taxpayers’ equity Departmental group (2023-24) £m
Opening Balance		(7,577.0)	248.5	(7,328.5)	(7,733.2)	159.3	(7,573.9)
IFRS 16 adjustment (note 2)		–	–	–	5.9	–	5.9
Net Parliamentary funding – drawn down		20,686.0	–	20,686.0	20,591.5	–	20,591.5
Net Parliamentary funding – deemed (note 3)		35.6	–	35.6	72.3	–	72.3
Funding from Trust Statement (note 4)		11,443.2	–	11,443.2	19,053.5	–	19,053.5
National Insurance Fund		278.8	–	278.8	281.4	–	281.4
Supply (payable)/receivable adjustment		(68.7)	–	(68.7)	(35.5)	–	(35.5)
Income payable to the Consolidated Fund		(0.9)	–	(0.9)	(0.8)	–	(0.8)
Net expenditure for the year		(34,015.5)	–	(34,015.5)	(39,893.2)	–	(39,893.2)
Other net comprehensive expenditure:
Revaluation of property, plant and equipment		–	(9.9)	(9.9)	–	9.9	9.9
Revaluation of intangible assets		–	–	–	–	151.1	151.1
Transfer between reserves		58.2	(58.2)	–	71.8	(71.8)	–
Pension reserve actuarial (losses)/gains		(4.7)	–	(4.7)	6.9	–	6.9
Contributions to Local Government Pension Scheme pension fund by DWP		0.4	–	0.4	0.3	–	0.3
Non-cash charges – auditor’s remuneration	2	2.3	–	2.3	2.1	–	2.1
Balance at 31 March		(9,162.3)	180.4	(8,981.9)	(7,577.0)	248.5	(7,328.5)

Note 1: The 31 March 2025 balance comprised £9.1 million in relation to property, plant and equipment assets (31 March 2024 £21.9 million) and £171.3 million in relation to intangible assets (31 March 2024 £226.6 million).

Note 2: This adjustment relates to a 2023 to 2024 refinement in the application of HMRC’s IFRS 16 subleasing policy which resulted in an increase in the number of operating subleases and a corresponding reduction in finance subleases (see note 1.10.2).

Note 3: This represents previously drawn down Supply that is available to be spent in the current financial year.

Note 4: Personal tax credits and corporation tax reliefs are funded out of tax receipts from the Trust Statement. Please see the Statement of Revenue, Other Income and Expenditure in the Trust Statement.

Notes to the departmental Resource Accounts

Notes to the financial statements provide additional information required by statute and accounting standards to explain a particular feature of the financial statements. The notes which follow will also provide explanations and additional disclosure to assist readers’ understanding and interpretation of the financial statements.

1. Statement of accounting policies

1.1. Basis of accounting

These financial statements have been prepared in accordance with the Government Financial Reporting Manual (FReM) for the financial year 2024 to 2025 issued by HM Treasury. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context. Net liabilities shown on the Statement of Financial Position are expected to be met by future funding from the Trust Statement, in respect of the corporation tax reliefs which are the primary element, or voted by Parliament annually through Supply and Appropriation Acts. Given there is no reason to believe the resources required to settle these liabilities will not be forthcoming, the Resource Account has been prepared on a going concern basis.

2024 to 2025 FReM

Where the FReM permits a choice of accounting policy, HM Revenue and Customs has applied the most appropriate to give a true and fair view.

1.2. Accounting convention

These accounts have been prepared on an accruals basis under the historical cost convention, modified to account for the revaluation of property, plant and equipment.

1.3. Basis of consolidation

This account consolidates the results of the bodies falling within the departmental boundary as defined by the FReM. For HMRC these are core department and Valuation Office Agency (VOA).

As there are no entities apart from the core department and VOA, these are presented in a single column format as ‘Departmental group’ throughout the Resource Account and Parliamentary Accountability disclosures.

1.4. Cost of Living Payment

HMRC jointly paid Cost of Living Payments with the Department for Work and Pensions (DWP). Two payments totalling £650 were made in 2022 to 2023, and three payments totalling

£900 were made in 2023 to 2024. Payments are made in accordance with the relevant legislation and are recognised in the financial year when payment is due to a customer and approved for payment. An accrual is recognised for payments not made by year end in line with the forecast tax credit award.

1.5. Tax credits

1.5.1. Personal tax credits

Personal tax credits, reported at note 4.1.1, consist of Child Tax Credit and Working Tax Credit. Receivable and payable balances are based on data from tax credits systems and are used to inform the appropriation of revenue from the Trust Statement, where a cash-based disbursements figure is recorded (see note 3.4), to these accounts on an accruals accounting basis.

The accrual for personal tax credits is calculated using the actual split of Working Tax Credit and Child Tax Credit payments made in the current year.

Where overpayments of personal tax credits arise, these are not by arrangement and are not credit assessed or loan agreements. Customers are given a certain time to settle the overpayment or enter into an arrangement to pay debt. The debt is considered to be overdue after 30 days. The HMRC business model for managing personal tax credit overpayment debt is to collect the contractual cash flows only, with no intention to sell the debt asset.

Personal tax credit debt is being transferred to DWP as part of the transition to Universal Credit, this is a transfer between government bodies and not a sale of the debt.

As per the FReM, the IFRS 9 simplified approach to impairing assets is used to impair tax credit overpayment debt over the lifetime of the debt. The contractual cash flows are solely repayments of principal debt and therefore the debt is measured at amortised cost.

For personal tax credits receivables, there is not a definition of default due to the nature of the legislation surrounding the recovery of overpayments. Personal tax credits receivables are reported net of losses which are defined and detailed in the Losses statement which is reported in the Parliamentary accountability section on page 166.

Personal tax credits closed on 5 April 2025, with remaining eligible customers moving to Universal Credit, administered by the DWP. Any customers with an outstanding personal tax credits debt will have this transferred to the DWP to be collected via live Universal Credit awards. Any residual debt remaining in HMRC will be collected via usual recovery methods.

1.5.2. Corporation tax reliefs

In the absence of a specific applicable accounting standard, management have determined the following accounting policy for recognising and measuring expenditure on corporation tax reliefs in line with the principles of IFRS.

Expenditure is recognised as companies engaged in qualifying activities incur their qualifying expenditure, not when subsequent claims are received. This provides a consistent recognition point for expenditure and income between these accounts and the HMRC Trust Statement, where the related corporation tax income is recognised as the taxable events occur and not when returns are filed.

Expenditure and related accrual profiles are estimated by the department’s statisticians using analysis of historic relief claims and applying forecast growth and uplift assumptions and adjustments made for planned changes in relevant policy and rates. This estimation is required due to the time-lag between the end of companies’ accounting periods and the submission of their tax returns. The filing requirements are such that these returns are not due until 12 months after their accounting period end. Additionally, amended claims can be received up to 24 months after their accounting period end.

In subsequent accounting periods the department evaluates any new information available and determines whether previous estimates of expenditure need to be adjusted. A final estimate is made 5 years after initial recognition with the resulting amount considered to be a reasonable proxy for final outturn in the absence of readily available actual outturn values.

All reliefs expenditure is funded by the Trust Statement, this funding being recognised in reserves.

1.6. Child Benefit

Child Benefit payments are made in accordance with relevant legislation, and expenditure is recognised in the month payment becomes due.

Child Benefit expenditure includes amounts paid to taxpayers earning greater than £60,000 per annum and recovered via the High Income Child Benefit Charge. These income tax charges are accounted for in the Trust Statement.

Where under or overpayments are identified, adjustments are made to expenditure, with receivables and payables recognised appropriately. Overpayments are treated as receivables and the department seeks to recover these from future benefit entitlement or through direct repayment.

Child Benefit receivables are reported net of losses as detailed in the losses statement which is reported in the Parliamentary accountability section on page 166. Losses are made up of remissions and write-offs.

1.7. Tax-Free Childcare (note 1)

Tax-Free Childcare expenditure is recognised in the financial year in which the top-up payments are due.

1.8. Lifetime ISA (LISA) (note 1)

LISA expenditure is recognised in HMRC financial statements net of penalties; at the point a claim is paid to the relevant LISA provider.

1.9. Revenue recognition

HMRC complies with IFRS 15 for income streams and recognises revenue when earned.

1.10. Non-current assets

1.10.1. General

Property, furniture, vehicles, IT hardware, software licences and website development costs reported by the core department are capitalised (excluding certain low-value assets).

Note 1: Payments in respect of Tax-Free Childcare and Lifetime ISA (LISA) are made in accordance with the relevant legislation.

The following thresholds apply:

• accommodation refurbishments £150,000 (VOA: £15,000)
• other tangible assets £5,000
• information technology £5,000
• software licences £250,000

Where a contract contains a lease with a term of more than 12 months (unless the underlying asset is of low value), a right-of-use asset and a lease liability are recognised, under the lease accounting standard IFRS 16. In accordance with options given within the accounting standard, HMRC has elected not to apply IFRS 16 to leases of intangible assets. These continue to be accounted for under IAS 38.

Non-property assets are valued on a depreciated historical cost basis as a proxy for fair value as they are of low value with short lives.

Assets are stated at cost less accumulated depreciation/amortisation and impairment losses. These are depreciated/amortised at rates calculated to write them down to estimated residual values on a straight-line basis over their useful lives. All intangible assets are assessed to have a finite useful life over which they are amortised. Asset useful lives are normally in the following ranges:

Asset category – property, plant and equipment	Useful economic life
Freehold land	Not depreciated
Leasehold land	Period of the lease
Freehold buildings	50 years
Leased serviced accommodation	Period of the lease
Leased IT assets	Period of the lease
Right-of-use assets	Period of the lease
Accommodation refurbishments	Remainder of the lease to which they relate
Office equipment	5 to 20 years
Computer equipment	4 to 7 years
Vehicles	5 to 8 years
Furniture and fittings	10 to 15 years
Scientific aids	3 to 10 years

Asset category – intangible assets	Useful economic life
Developed computer software	10 years unless known to be otherwise
Software licences	Period of the licence
Website development costs	10 years unless known to be otherwise

Useful Economic Lives are applied based on a reasonable assessment of the period over which an asset is expected to be available to the business. HMRC undertakes a review of asset lives using their specific knowledge and expertise to request what they believe to be an appropriate period of use, both on implementation and annually.

A formal impairment review is undertaken on an annual basis for buildings, accommodation refurbishments, developed computer software assets and intangible assets under construction.

Assets under construction are recorded at cost and are not depreciated or amortised until they are available for use. Once in use they are depreciated and subject to impairment reviews in accordance with the policy applicable to the asset class.

1.10.2. Property, plant and equipment

Property

Freehold property is recognised where the contract in substance transfers a freehold interest in the building to HMRC.

Leases

Like other government bodies, HMRC typically lease properties used for administrative purposes for reasons of efficiency and flexibility. The departmental group also benefits from the lease of vehicles. For other types of assets, the departmental group determines whether to lease or purchase based on value for money considerations, such as whether the underlying asset is required for its entire life or for a more limited period.

Scope and exclusions – the departmental group as lessee

In accordance with IFRS 16 Lease accounting, contracts, or parts of contracts, that convey the right to control the use of an asset for a period, in exchange for consideration, are accounted for as leases. Leases relating to low-value items, where the underlying asset would have a cost of less than £5,000 when new, and those with a term of less than 12 months, are not included.

The lease liability is measured at the present value of the remaining lease payments discounted either by the interest rate implicit in the lease or, where this is not readily determinable, the department’s incremental rate of borrowing. This rate is advised annually by HM Treasury, 4.72% for leases recognised to 31 December 2024, 4.81% for leases recognised from 1 January 2025.

Expenditure charged to the Consolidated Statement of Comprehensive Net Expenditure (CSoCNE) for each financial year includes interest on the lease liability and a straight-line depreciation charge on the right-of-use asset over the life of the lease, together with any impairment of the right-of-use asset and any change in variable lease payments that was not included in the measurement of the lease payments during the period in which the triggering event occurred.

Finance and operating leases – the departmental group as lessor

Where the department acts as a lessor or intermediate lessor for an asset it has itself leased, the arrangement will be assessed to determine whether it constitutes a finance lease, this being where the risks and rewards incidental to ownership of a right-of-use (RoU) or underlying asset are substantially transferred to the lessee. For these leases the asset is derecognised, and a receivable representing the net interest in the lease is recognised, with accrued interest being treated as income over its life. Where sublease rental income is inclusive of the value of irrecoverable VAT charged on the headlease, the value of the VAT is excluded from the receivable and credited directly to the CSoCNE.

All other leases are treated as operating leases and rental income is recognised in the CSoCNE on a straight-line basis. In 2023 to 2024 HMRC reassessed its accounting treatment where the department acts as lessor and sublets to another government department under a Memorandum of Terms of Occupation (MoTO). Such agreements are not legally enforceable, and the risks and rewards incidental to ownership of an RoU or underlying asset are not deemed to have transferred from the lessor to lessee. Accordingly, all MoTOs under which the department is

lessor are treated as operating leases to reflect the economic and legal substance of the arrangements.

Where a long leasehold for property transfers to HMRC in substance, the contract is not treated as a right-of-use asset in accordance with IFRS 16, the asset is instead recognised as a freehold property.

For Private Finance Initiative (PFI) transactions where the department has control within a contract and a material residual interest, property is recognised as a non-current asset and the liability to pay for it is accounted for as a lease. Contractual payments are apportioned between CSoCNE, financing and service charges and a Consolidated Statement of Financial Position lease liability.

The department has also capitalised other PFI property interests as leases being concession arrangements.

Property assets have been stated at current value in existing use using professional valuation on a rolling 5-year programme, all assets will be professionally revalued within this time period. Each year 20% of the estate is physically revalued with the remainder undergoing a desktop revaluation exercise to identify material changes. The basis of the valuation is in accordance with the professional standards of the Royal Institute of Chartered Surveyors: RICS Valuation. Compliance with the RICS professional standards and valuation practice statements gives assurance also of compliance with the International Valuers Standards. For IFRS 16, the cost model is applied as a proxy for fair value as the lease payments are updated to reflect current market pricing.

Information technology

Where applicable, the IT non-current assets recognised by our IT partners and used in providing the IT service to the department have been capitalised as leases and are disclosed at the lower of fair value and the present value of the minimum lease payments, at the inception of the contract.

Assets under construction

Assets under construction are separately reported in note 6. In respect of the HMRC Locations Programme, this includes accommodation refurbishment and furniture assets. Costs are accumulated until the asset is available for use whereupon it is transferred to the relevant asset class and depreciation commences.

1.10.3. Intangibles

A thematic review undertaken by HM Treasury, in consultation with the Financial Reporting Advisory Board (FRAB), has prescribed a revised approach to the subsequent measurement of intangible assets. The changes are set out in the Financial Reporting Manual (FReM) 2025 to 2026.

The option to employ the revaluation model will be withdrawn from 1 April 2025 and the cost model should be employed. Transition requires the carrying values of existing intangible assets, measured under the previous revaluation approach, to be taken forward as a deemed historic cost. International accounting standard (IAS 8) has been adapted so that these changes, and all changes stemming from the thematic review, will be completed prospectively rather than retrospectively.

HMRC has early adopted the change from 2024 to 2025 with agreement from HM Treasury and therefore no revaluation has been applied to intangible assets in year.

Developed computer software

Computer software that has been developed by the department and its IT service partners, and for which the department has ownership rights, has been capitalised. This capitalisation includes the staff costs for developing, integrating and testing IT software.

Software licenses

For a software licence to be identified as a capital asset, it needs to adhere to IAS 38 and HMRC policy. The threshold for the capitalisation of software licences is £250,000. Software licences must also have a life over 12 months, be separately identifiable, (arising from legal rights), under HMRC control and will generate a future economic benefit for HMRC.

Assets under construction

Intangible assets under construction relate to software development by the department and our commercial IT partners. Intangible assets under construction are separately reported in note 7. Costs are accumulated until the asset is available for use whereupon it is transferred to the relevant asset class and amortisation commences.

1.11. Pensions

1.11.1. Civil Service Pension Schemes

The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servants and Others Pension Scheme (CSOPS) known as Alpha, are unfunded and contributory defined benefit schemes. The departmental group recognises the expected cost of these elements. This is determined systematically and rationally over the period during which we benefit from employees’ services by payment to the PCSPS and CSOPS of amounts calculated on an accruing basis. Liability for payment of future benefits is a charge on the PCSPS and CSOPS. Further information can be found within the accounts of Civil Service Pensions.

Civil Service Pensions

1.11.2. Local Government Pension Scheme

A number of the Valuation Office Agency employees are members of London Pensions Fund Authority (LPFA) a Local Government Pension Scheme (LGPS). The LGPS is one of the largest public sector pension schemes in the UK. It is a nationwide defined benefit pension scheme designed for people working in local government or for individuals employed by other organisations who have chosen to participate in it.

The Statement of Financial Position includes an LGPS asset, which is the fair value of the scheme assets attributable to the agency minus the present value of the defined benefit obligation to staff.

VOA applies the asset ceiling test per IFRIC 14 in order to calculate how much of the surplus to recognise as an asset, ultimately limiting the value of the asset.

Further information can be found in the Valuation Office Agency accounts.

1.11.3. Partnership pensions

The partnership pension account is a stakeholder pension arrangement with employees able to choose a stakeholder pension product from a panel of providers. The partnership pension account is a defined contribution scheme, provided as an alternative option for members who do not wish to join one of our defined benefit arrangements.

1.12. Provisions and Contingent liabilities

The department discloses provisions and contingent liabilities in excess of the de minimis limit for reporting of £0.1 million.

We recognise provisions in accordance with IAS 37: Provisions, Contingent Liabilities and Contingent Assets. The expenditure required to settle the obligation is calculated based on the best available information.

Where the time value of money is significant, provisions and contingent liabilities are stated at discounted amounts, as directed by revised Public Expenditure System (PES) (2024) 09.

1.13. Value Added Tax (VAT)

Most of the activities of the department are outside the scope of VAT. A proportion of the activities of the department will attract VAT, and output VAT will apply in these circumstances. The department also has recoverable and non-recoverable elements for input VAT on purchases. Some purchase VAT on a restricted number of services is recovered under Section 41 of the VAT Act 1994 and in accordance with the HM Treasury ‘Contracting-out Direction’.

Section 41 is intended to remove any disincentive to government departments of contracting- out activities performed ‘in-house’ where there is a sound basis for doing so. Non-recoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of non-current assets. Income and expenditure is otherwise shown net of VAT.

1.14. Critical accounting judgements and key sources of estimation

The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise judgement in the process of applying the department’s accounting policies.

The areas that involve a higher degree of judgement or complexity, or where the assumptions and estimates are significant to the Resource Accounts, are as follows:

Corporation tax reliefs expenditure

The accounting policy for corporation tax reliefs is a judgement in the context of these accounts because management has determined an appropriate policy for recognition and measurement in the absence of a specific accounting standard. In adopting the current policy, we have selected a recognition point that maintains consistency between relief expenditure recognised in these accounts and the related corporation tax income recognised in the Trust Statement.

Expenditure is recognised for corporation tax reliefs in advance of claims being received because of the timing difference between when qualifying expenditure is incurred by companies and when they make claims. Estimation uncertainty results from this timing difference because assumptions about qualifying expenditure need to be made based on historic experience, forecast growth rates, and planned changes in relevant tax policy and rates.

The key assumptions in the estimates for corporation tax reliefs are:

• the proportion of company tax returns for the latest year’s outturn data used in the estimate that have not been received or processed at the time the data extract is taken for the estimate (referred to as the ‘uplift factor’)
• the forecast growth rate

Note 4.1.4 provides further detail on the estimation uncertainty relating to corporation tax reliefs.

Impairment of receivables

Receivables in the Statement of Financial Position are reported after impairment, which is estimated based on our analysis of existing receivables and historical trends in debt recovery, losses, discharges, amendments, and cancellations. In accordance with the FReM and IFRS 9, HMRC account for impairments for tax credits and benefits arising from statute and not a contract. However, to the extent applicable and feasible, impairment of receivables has been calculated in accordance with this standard.

The following receivables balances have been impaired: personal tax credits, Child Benefit, law costs, and other receivables (see note 9).

To calculate the impairment for personal tax credits receivables we use an expected credit losses (ECL) model that estimates future debt recoverability of personal tax credits debt based on historic debt recovery rates.

The main judgements that we have made when producing the ECL model are:

• future debt recoverability used in our scenario analysis is informed from recoverability of debts we have seen in recent years
• the transfer of debt to DWP affects debt movements and it is therefore necessary to assess the effect of HMRC debt recovery efficiency in isolation from the effect of the transfer to DWP.
• external future economic developments will not significantly affect recovery rates
• the discount rate applied to future recoveries is 2.15%, in accordance with Public Expenditure System papers published for government by HM Treasury
• the consideration of the following 3 debt scenarios:
  • the upper scenario considers the average ppt change in the past 3 years debt recoverability rates, adds this change onto the last complete year’s debt recoverability rate, and applies that rate to future debt stocks
  • the middle (base) scenario takes the last complete year’s debt recoverability rate and applies that to future debt stocks
  • the lower scenario considers the average ppt change in the past 3 years debt recoverability rates, minuses half of this change from the last complete year’s debt recoverability rate, and applies that rate to future debt stocks

The model assumes the upper and lower recovery scenarios will occur with a 25% and a 5% likelihood respectively and the base scenario with a 70% likelihood.

Provisions and contingent liabilities

The department undertakes a quarterly review of provisions and contingent liabilities. These are estimated by appropriate business areas based on the likelihood of a liability materialising.

1.15. Impending application of newly issued accounting standards not yet effective

New and revised standards and interpretations have been issued but are not yet effective and have not therefore been adopted in this account.

IFRS 17 – Insurance contracts

IFRS 17 Insurance Contracts replaces IFRS 4 and represents a fundamental change to the accounting, presentation, and disclosure of insurance contracts. It introduces a comprehensive framework that incorporates significant judgment and estimation techniques in the measurement and reporting of liabilities.

HMRC will adopt IFRS 17 as interpreted and adapted in the Financial Reporting Manual (FReM), with effect from 1 April 2025, in line with HM Treasury’s mandatory application by government departments and agencies.

HM Treasury has mandated that IFRS 17 be implemented retrospectively where possible or using the fair value approach for contracts where full retrospective application is impracticable. Therefore, at the date of initial application, HMRC will recognise the cumulative effect of initially applying IFRS 17 as an adjustment to the opening balance of taxpayers’ equity.

HMRC have conducted a qualitative and quantative initial review of contracts and contingent liabilities and do not consider implementation of IFRS 17 to have material impact to these Resource Accounts.

IFRS 18 – Presentation and Disclosure of Financial Statements

The objective of IFRS 18 is to set out requirements for the presentation and disclosure of information in general purpose financial statements to help ensure they provide relevant information that faithfully represents an entity’s assets, liabilities, equity, income and expenses.

IFRS 19 – Subsidiary without Public Accountability

The objective of IFRS 19 is to specify the disclosure requirements an entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards.

IFRS 18 and IFRS 19 become effective from 1 January 2027. However, they have not yet been endorsed by the UK Endorsement Board (UKEB) and have not yet been considered by the Financial Reporting Board (FRAB). HMRC will consider impacts of implementing these standards once endorsed by UKEB and FRAB.

2. Expenditure

	Note	Departmental Group (2024-25) £m	Departmental Group (2023-24) £m
Personal tax credits (note 1)	4.1.1	2,460.4	7,305.5
Corporation tax reliefs	4.1.4	10,123.3	12,049.1
Child Benefit
Child Benefit (note 2)		13,302.8	12,510.2
Guardian’s Allowance (funded from National Insurance Fund)		4.3	4.2
		13,307.1	12,514.4
Cost of Living Payment (note 3)		(5.2)	760.0
Tax-Free Childcare		617.9	635.3
Lifetime ISA		624.4	499.1
Help to Save		45.0	51.7
COVID-19 support schemes (note 4)		(1.1)	(22.0)
Staff and related costs
Wages and salaries		2,520.8	2,611.2
Pension costs		721.7	654.6
Less capitalised costs		(62.5)	(69.5)
Social security costs		283.7	282.4
Travel, subsistence and hospitality		44.7	40.4
Recruitment and training		26.9	28.7
Early severance schemes (note 5)		(0.1)	3.8
		3,535.2	3,551.6
Service charges
Contract payments		137.1	100.0
Interest charges		12.7	17.2
		149.8	117.2
Goods and services
IT services and consumables		1,017.4	1,011.7
Contracted out services		286.0	322.7
Printing, postage, stationery and office supplies		65.9	63.9
Legal and investigation		61.9	46.2
Enforcement costs		34.2	37.8
Telephone expenses		46.0	26.9
Other goods and services		23.4	22.0
Consultancy		0.3	14.0
		1,535.1	1,545.2
Payments in lieu of tax relief and rates		280.3	262.6
Other cash expenditure
Accommodation expenses		166.6	176.4
Operating leases		25.5	19.8
Payments to add capacity		0.2	0.1
NIF collection service on behalf of other government departments		51.0	51.1
Losses and special payments (excluding Child Benefit, tax credits & COVID-19 support schemes)		7.7	3.2
Other		36.5	16.0
		287.5	266.6
Non-cash items:
Amortisation, depreciation and impairments
Amortisation	7	470.8	392.3
Depreciation	6, 8.1	142.3	147.4
Loss on impairment of non-current assets		98.2	14.5
		711.3	554.2
Provisions for liabilities and charges1	13	321.5	(14.3)
Other non-cash
Transfer of personal tax credits receivables to DWP		412.0	166.7
Auditors’ fee (note 6)		2.3	2.1
Other		3.6	13.5
		417.9	182.3
Total non-cash items		1,450.7	722.2
Total expenditure		34,410.4	40,258.5

Notes 1: Personal tax credits (PTC) expenditure reported in note 4.1.1 has reduced in 2024 to 2025 due to the closure of PTC. In 2024 to 2025 expenditure is increased by a net provision of £209.3 million (provision increase of £210.0 million, see note 13.2, less provision write back of £0.7 million).

Note 2: Child Benefit expenditure includes amounts paid to claimants or their partners with net adjusted incomes of more than £60,000 per annum in the 2024 to 2025 financial year, who were subject to the High Income Child Benefit Charge (HICBC). It is estimated that £271 million of HICBC liabilities relating to 2024 to 2025 will be paid in this and subsequent years. These income tax charges are accounted for in the Trust Statement. The equivalent estimate for 2023 to 2024, when the HICBC threshold was £50,000 per annum, has been revised from £560 million to £602 million. The significant fall in liabilities in 2024 to 2025 reflects the Spring Budget 2024 policy change, which increased the threshold from £50,000 to £60,000 from April 2024 and introduced a more gradual taper ending at £80,000.

Note 3: The balance of cost of living payments due from 2023 to 2024, payable in 2024 to 2025, was lower than anticipated. The release of the underutilised accrual has resulted in a credit balance in 2024 to 2025.

Note 4: Negative values represent return of COVID-19 payments.

Note 5: Early severance payments due from 2023 to 2024, payable in 2024 to 2025, were lower than anticipated. The release of the underutilised accrual has resulted in a credit balance in 2024 to 2025.

Note 6: The NAO did not undertake any work of a non-audit nature during the period.

3. Statement of operating expenditure by operating segment

This note shows how resource expenditure is apportioned against the main areas of core business activity.

Each segment relates to a core business activity reported to the Chief Executive and the Board. This management information covers expenditure and income and is used by the Board to inform decisions.

In line with the requirements of IFRS 8, prior year comparatives have been restated to reflect organisational changes.

3.1. Expenditure and income by reportable segment

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

	Gross expenditure (2024-25) £m	Income (2024-25) £m	Net expenditure (2024-25) £m	Gross expenditure (2023-24) £m	Income (2023-24) £m	Net expenditure (2023-24) £m
Reportable segment
Customer Compliance	1,734.8	79.0	1,655.8	1,670.0	74.1	1,595.9
Chief Digital and Information Officer Group	1,032.0	87.1	944.9	1,096.9	71.1	1,025.8
Customer Services	1,016.7	59.0	957.7	1,021.2	58.9	962.3
Chief Finance Officer Group	429.1	96.5	332.6	424.1	119.5	304.6
Borders and Trade	311.6	30.7	280.9	336.9	14.0	322.9
Change Delivery Group (note 1)	258.3	9.7	248.6	249.4	1.4	248.0
Customer Strategy and Tax Design	229.0	11.0	218.0	226.4	7.5	218.9
Chief People Officer Group	112.6	7.5	105.1	110.2	7.2	103.0
Corporately managed	110.0	0.3	109.7	45.0	1.7	43.3
Solicitors Office and Legal Services	110.0	10.8	99.2	102.4	8.4	94.0
Enterprise Transformation Group (note 2)	49.7	0.7	49.0	-	-	-
Communications	39.2	0.1	39.1	22.7	0.1	22.6
Chief Executive Office	2.5	-	2.5	2.5	-	2.5
Valuation Office Agency	263.2	61.1	202.1	242.7	58.4	184.3
Total	5,698.7	453.5	5,245.2	5,550.4	422.3	5,128.1

Note 1: Change Delivery Group was previously named Transformation Group.

Note 2: Enterprise Transformation Group is a new line of business introduced this year.

3.2. Reconciliation between operating segments and Consolidated Statement of Comprehensive Net Expenditure

Information on all other net expenditure is included in the table below. This information is reported to the Board, however, as it is centrally managed it is reported in a different format than the reportable segments in the management accounts which compares budgeted spend to full year forecast spend at the segment level.

Reconciliation between operating segments and Consolidated Statement of Comprehensive Net Expenditure

	2024-25 £m	2023-24 £m
Total net expenditure reported for operating segments	5,245.2	5,128.1
COVID-19 support schemes	(1.1)	(22.0)
Cost of Living Support	(5.2)	760.0
Personal tax credits	2,669.7	7,307.2
Child Benefit and Child Trust Fund	13,307.1	12,514.4
Corporation tax reliefs	10,123.3	12,049.1
Lifetime ISA	624.4	499.1
Depreciation/Amortisation/Impairment	701.8	546.3
Transfer of personal tax credits receivables to DWP	412.0	166.7
Tax-Free Childcare	617.9	635.3
Help to Save	45.0	51.7
Payments in lieu of tax relief	192.6	173.6
Payments of Local Authority Rates	82.8	83.7
Net Expenditure in Statement of Comprehensive Net Expenditure	34,015.5	39,893.2

4. Tax credits, Child Benefit and Tax-Free Childcare

4.1. Tax credits

Since the 2011 to 2012 financial year, personal tax credits (PTC) expenditure and certain corporation tax reliefs have been reported in these accounts. PTC closed on 5 April 2025, with remaining eligible customers moving to Universal Credit, administered by the Department for Work and Pensions. Tax credits can comprise of both an element that is treated as negative taxation, being the extent to which the relief is less than or equal to the recipient’s tax liability, and an element that is more than the tax liability, being a payment of entitlement. Only those credits whose design allows the inclusion of a payment of entitlement are reported in these accounts.

4.1.1. Analysis of personal tax credits expenditure

PTC consists of Child Tax Credit and Working Tax Credit. The apportionment of expenditure between Child Tax Credit and Working Tax Credit shown in the table below is estimated.

Awards are assessed and paid throughout the financial year on a provisional basis, based on claimants’ assessments of their personal circumstances.

Claims are adjusted after the end of each award year, once claimants’ actual circumstances are known, this is called Finalisation. Finalisation may give rise to under or overpayments which are accounted for as soon as identified. Finalisation is not complete until after the Resource Account has been published, consequently there is uncertainty around the level of adjustments likely to arise.

Please refer to note 1.5.1 for details concerning the closure of PTC.

Analysis of personal tax credits expenditure

	2024-25 £m Child Tax Credit	2024-25 £m Working Tax Credit	2024-25 £m Total tax credits	2023-24 £m Child Tax Credit	2023-24 £m Working Tax Credit	2023-24 £m Total tax credits
Tax credits	1,577.4	415.4	1,992.8	5,894.8	1,543.3	7,438.1
Movement in impairment of receivables	250.4	66.0	316.4	(383.2)	(100.3)	(483.5)
Remissions/write-offs	240.5	120.0	360.5	225.7	126.9	352.6
Total personal tax credits	2,068.3	601.4	2,669.7	5,737.3	1,569.9	7,307.2

Further information on the operation of personal tax credits can be found on GOV.UK.

4.1.2. Personal tax credits receivables

Where under or overpayments are identified, either during the award year or subsequently, adjustments are made to expenditure. Overpayments are treated as receivables, and the department seeks to recover these through direct repayment.

The Department for Work and Pensions (DWP) has responsibility for recovering PTC debt for customers who have made a claim to Universal Credit (UC). DWP is also responsible for taking on the debt of customers who have fallen out of the tax credits regime and for whom a direct earnings attachment can be used to recover the debt. HMRC started to transfer this debt in 2019 to 2020. In line with the Financial Reporting Manual (FReM), debt transfers are treated as capital grants in kind in the Financial Statements. The debt stock is impaired consistently with IFRS 9 (Financial Instruments) and in line with HMRC policy.

Personal tax credits receivables

	Note	2024-25 £m	2023-24 £m
Receivables as at 1 April		2,290.0	2,963.2
Adjustment to prior year finalisation estimate		(41.1)	98.6
Estimated overpayment of awards prior to finalisation		0.4	86.0
Overpayments identified from change of circumstances in year		342.2	304.2
Transferred to DWP (note1)		(609.7)	(309.9)
Recoveries made		(285.6)	(499.5)
Remissions/write-offs		(360.5)	(352.6)
Receivables as at 31 March		1,335.7	2,290.0
Impairment as at 1 April		742.6	1,369.5
Transferred to DWP (note 1)		(197.7)	(143.2)
Movement in impairment		316.4	(483.6)
Impairment at 31 March		861.3	742.7
Net receivables at 31 March		474.4	1,547.3
Of which:
Amounts expected to be recovered within one year	10	183.9	434.9
Amounts expected to be recovered in more than one year	10	290.4	1,112.4
Total		474.3	1,547.3

Note:

1. Summary of receivables transferred to DWP.

	Note	2024-25 £m	2023-24 £m
Gross receivables		609.7	309.9
Impairments		(197.7)	(143.2)
Net receivables transferred to DWP		412.0	166.7

Personal tax credits expected credit loss (ECL)

HMRC routinely assess likely recovery of debts, accepting that the individual credit risk associated with these debts increases as they age. However, the credit risk itself is not routinely assessed because the debts relate to overpayments made to benefit claimants, and not to lending through formal arrangements.

As simple financial instruments, under IFRS 9 the debts are impaired over their lifetime as required under the FReM (chapter 8.2, table 2, interpretation 6).

The credit loss we recognise is the difference between the cash flows that are due to HMRC, in accordance with our contractual relationship with our customers, and the cash flows that we expect to receive. The main data inputs to the model are historic monthly stocks and flows recoveries of debt.

The key assumptions/judgements included in the ECL model are included in note 1.14.

HMRC have explored possible correlations between the Average Earnings Index and Consumer Price Index and direct recovery of PTC debt. After testing, no robust relationships were found between these economic determinants and debt recovery, therefore forecasts of future economic conditions are not included in our ECL model. We therefore consider historic recovery experience to be a suitable proxy for future debt recovery.

The impairment rate has increased compared to prior years due to transfer of recoverable debt to DWP and the fact that HMRC can no longer recover debt from ongoing live awards.

The table below provides a summary of the impairment information:

	Gross receivable £m	Impairment £m	Net receivable £m
Total HMRC debt	1,335.7	861.3	474.4
of which debt less than one year old	48.3	30.2	18.1
of which debt more than one but less than 5 years old	401.0	257.3	143.7
of which debt more than 5 but less than 10 years old	348.7	222.1	126.6
of which debt more than 10 years old	537.7	351.7	186.0

Sensitivity analysis

There is a significant degree of uncertainty around the assumptions that underpin the ECL model. The sensitivity analysis below provides an indication of the impact on the impairment estimate if key assumptions were to change.

Scenario	Change to impairment as a percentage of gross receivables	Change to impairment £m
The upper recovery scenario was applied to 100% of the debt stock (as opposed to 10%).	-2%	(32.0)
The lower recovery scenario was applied to 100% of the debt stock (as opposed to 10%).	3%	35.0

Personal tax credits finalisation

Due to the closure of PTC on 5 April 2025, most customers have transferred over to Universal Credit administered by the DWP. Therefore, the estimated overpayment of awards relating to finalisation is immaterial to the level that sensitivity analysis is not relevant for this year.

4.1.3. Personal tax credits error and fraud

Error and fraud in personal tax credits (PTC E&F) was previously estimated by the tax credits Error and Fraud Analytical Programme (EFAP); a stratified random sample of tax credits awards was investigated by HMRC compliance officers to identify error and fraud in favour of the claimant or HMRC. From tax year 2022 to 2023, HMRC ceased the tax credits EFAP random enquiry in line with the planned closure of PTC. HMRC uses a projection methodology based on 5 previous years of data from EFAP to produce PTC E&F estimates for the remaining duration of PTC.

The projection methodoloy breaks down the PTC population into 10 distinct groups and calculates the average E&F rate for each group from historic E&F data from EFAP. The categories used to create the 10 group combinations are listed below:

• Out of Work Child Tax Credits, no self-employment, single claim
• Out of Work Child Tax Credits, no self-employment, joint claim
• In Work Working Tax Credits and Child Tax Credits, with self-employment, single claim
• In Work Working Tax Credits and Child Tax Credits, with self-employment, joint claim
• In Work Working Tax Credits and Child Tax Credits, no self-employment, single claim
• In Work Working Tax Credits and Child Tax Credits, no self-employment, joint claim
• Working Tax Credits only, with self-employment, single claim
• Working Tax Credits only, with self-employment, joint claim
• Working Tax Credits only, no self-employment, single claim
• Working Tax Credits only, no self-employment, joint claim

Calculated E&F rates for each of these groups are applied to the relevant entitlement forecast for the group and then summed to give the central estimate of the total value of E&F. This value can then be expressed as a percentage of total forecast entitlement for the tax year to give the central E&F rate. As the historical E&F rates for each group are based on a random sample, there is uncertainty associated with the estimate. A 95% confidence interval has been calculated using the standard error for the historic E&F data for each group.

The central claimant favour E&F rate for tax year 2024 to 2025 is 4.2% of total PTC entitlement, with a 95% confidence interval of 4.0% to 4.5%. This equates to £85 million. The HMRC favour error rate for 2024 to 2025 is 0.8% (0.6% to 0.9%), or £15 million.

Estimated value of personal tax credits error and fraud and as a percentage of final award value

	2024-25 awards £m Lower bound	2024-25 awards £m Central estimate	2024-25 awards £m Upper bound	2023-24 awards £m Lower bound	2023-24 awards £m Central estimate	2023-24 awards £m Upper bound
Overpayments to claimants	80 (4.0%)	85 (4.2%)	90 (4.5%)	335 (4.4%)	365 (4.7%)	385 (5.0%)
Underpayments to claimants	13 (0.6%)	15 (0.8%)	17 (0.9%)	50 (0.7%)	60 (0.8%)	70 (0.9%)

Although not a statistically significant decrease from the 2023 to 2024 estimate of 4.7%, the change in the claimant favour central estimate is likely to be due to a large proportion of higher risk awards leaving the tax credits population between 2023 to 2024 and 2024 to 2025.

4.1.4. Corporation tax reliefs

In certain circumstances, companies are permitted to reduce their tax liability by making a claim for corporation tax reliefs. To be entitled to these reliefs, a company must be undertaking specific activities and meet the criteria set out for that relief. The corporation tax reliefs reported in these Resource Accounts are reliefs where there is or could be, by their design, a payable element that is in excess of any negative taxation. Other corporation tax reliefs are included in the Trust Statement.

Corporation tax reliefs

		2024-25 £m	2023-24 £m
Research and development:	Research and development expenditure credits (RDEC) (note 1)	4,686.0	4,893.3
	Small and Medium-sized Enterprises (SME) scheme (note 2)	2,963.7	4,547.6
Creative industries:	High-end Television Tax Relief	817.8	1,212.4
	Audio-Visual and Video Games Expenditure Credits	626.1	119.5
	Film Tax Relief	290.8	580.9
	Video Games Tax Relief	243.2	307.4
	Theatre Tax Relief	233.5	206.3
	Independent Film Tax Relief (note 3)	95.2	-
	Orchestra Tax Relief	44.3	47.4
	Museums and Galleries Exhibition Tax Relief	38.3	14.6
	Animation Tax Relief	17.0	22.3
	Children’s Television Tax Relief	6.7	40.6
Land Remediation Relief		60.5	56.1
Enhanced Capital Allowance		0.2	0.7
Total		10,123.3	12,049.1

Note 1: Includes merged (large) (£469 million). This will replace RDEC in 2025 to 2026.

Note 2: Includes SME intensives (£1,134 million) and merged (SME) (£125 million). These will replace the SME scheme in 2025 to 2026.

Note 3: Relief introduced in 2024 to 2025.

In accordance with our accounting policy set out in note 1.5.2, of the expenditure reported in 2024 to 2025 above, £(281.0) million relates to our final estimate for 2019 to 2020.

Expenditure relating to 2019 to 2020:

	Estimate reported in historic Resource Accounts (£m)	Final estimate (£m)	Included in value reported in these accounts (£m)
Research and development SME	4,412.6	4,182.5	(230.1)
Research and development RDEC	2,984.3	2,708.7	(275.6)
Creative industries	1,201.4	1,428.8	227.4
Land Remediation Relief	41.5	38.6	(2.9)
Enhanced Capital Allowances	0.1	0.3	0.2
Total	8,639.9	8,358.9	(281.0)

Corporation tax reliefs expenditure and related accruals are estimated using analysis of historic relief claims and applying forecast growth and uplift assumptions, and adjustments made for planned changes in relevant policy and rates, by the department’s statisticians. An estimate is required due to the time-lag between the end of companies’ accounting periods and the submission of their company tax returns (as explained in note 1.5.2). The settled values for 2019 to 2020 are reported in 2024 to 2025.

Research and development tax relief uplifts and growth assumptions

The cut-off date for data used in the research and development tax relief estimate for the financial year 2024 to 2025 were claims for the 2023 to 2024 financial year processed by 31 January 2025. The percentage uplift factor applied for claims not received at the cut-off date is:

• R&D SME claims: for negative taxation element 66.0%; for payment element 24.0%
• R&D Expenditure Credit (RDEC) claims: 49.0%

The forecast growth assumption used for the 2024 to 2025 R&D reliefs estimates are:

• R&D expenditure on which RDEC is claimed, will grow by 3.5% in 2024 to 2025, calculated as the Office for Budget Responsibility’s International Chamber of Commerce economic determinant for business investment (the ‘ICC’ determinant)
• R&D expenditure on which R&D SME relief is claimed will increase by 13.2% in 2024 to 2025. This is a combined impact of growth in line with the OBR ICC investment determinant of 3.5% and a reduction in the size of downward adjustment applied to account for the reduction in R&D claims since the implementation of the R&D Additional Information Form (AIF), which is estimated to be smaller in 2024 to 2025 than 2023 to 2024. To model the impact of the AIF, first a counterfactual estimate of R&D expenditure is produced which excludes the observed impact of the AIF from outturn data. The counterfactual expenditure is grown in line with the ICC determinant as described above, and reduced by 10.0% to represent the impact of the AIF in reducing claims for R&D. This assumption has been agreed with the OBR as part of their fiscal event forecasts.

Changes between 2023 to 2024 and 2024 to 2025

The overall estimated cost of CT reliefs has decreased, mainly due to changes in the R&D stability adjustment between 2023 to 2024 and 2024 to 2025. Excluding the impact of stability adjustments, there has been a slight increase in the cost of the RDEC scheme while the cost of the SME scheme has not changed substantially. R&D claims relating to the 2024 to 2025 year are fully affected by recent changes to the rates of relief available for R&D claims, which previously only partially impacted claims relating to the 2023 to 2024 year. The RDEC rate was

increased from 13% to 20%, while the SME additional deduction rate was reduced from 130% to 86% and the SME credit rate fell from 14.5% to 10%.

The value of High-end TV relief is projected to fall in relation to the 2024 to 2025 year due to lower levels of expenditure in High-end TV shows in the UK in recent years. This is partly due to a correction from a peak in investment owing to backlog of productions that were delayed due to COVID-19, as well as the WRA and SAG-AFTRA strikes between July and November 2023 which affected the production of many TV shows. Typically, there is a lag between reported production expenditure in the UK and the resulting impact on the creative industry tax reliefs.

Audio-Visual Expenditure Credits (AVEC) and Video Game Expenditure Credits (VGEC) were introduced in 2024 and will replace the legacy reliefs for High-end TV, Film, Animation, Children’s TV and Video Games by 2027. The value of claims for AVEC and VGEC is projected to increase substantially in the 2024 to 2025 year, representing increased take-up of AVEC and VGEC over the legacy reliefs, resulting in a corresponding decrease in claims for the legacy schemes.

Sensitivity analysis

Sensitivity analysis has been applied to understand the degree of uncertainty in the estimates if the key assumptions were to change. The range estimates set out in the table below are based on judgments of the levels of uncertainty, and it is possible actual values may exceed them.

Change to key assumption:	Change in assumption	Variation £m	Change in assumption	Variation £m
R&D SME uplift for 2023 to 2024 vary by up to 11.0% (note 1)	Increase by 11.0%	267	Decrease by 11.0%	(267)
RDEC uplift for 2023 to 2024 varies by up to 18.0% (note 2)	Increase by 18.0%	593	Decrease by 18.0%	(593)
R&D SME expenditure growth in 2024 to 2025 varies by up to +5.0%/-5.0% (note 3)	Increase by 5.0%	155	Decrease by 5.0%	(155)
RDEC expenditure growth in 2024 to 2025 varies by up to +5.0%/-5.0% (note 3)	Increase by 5.0%	240	Decrease by 5.0%	(240)
R&D SME additional information form impact varies by up to +5.0%/-5.0% (note 4)	Increase by 5.0%	225	Decrease by 5.0%	(132)

Note 1: For the R&D SME uplift factors, the change to the key assumption is based on maximum variations seen in recent years, based on a 31 January cut-off date for data.

Note 2: For the R&D RDEC uplift factor, the change to the key assumption is based on maximum variations seen in recent years between the actual increase and the uplift assumption.

Note 3: For the R&D SME/RDEC expenditure growth, the increase and decrease use a flat rate of + 5.0%/-5.0%. Previously, these levels were based on the highest and lowest growth levels observed in the previous 3 years. However, due to the large increases and decreases seen over the COVID period, these produced extreme scenarios.

Note 4: For the SME additional information form impact, the increase and decrease is equal to 5% above or below the average impact observed in previous years. This results in an asymmetrical best vs worst case scenario, as the average growth rate (-8.7%) is higher than the assumption used in the forecast model (-10%).

Creative industries reliefs assumptions

The key assumptions underpinning the creative industries reliefs are similar to those used for R&D relief. For High-end Television Tax Relief, Film Tax Relief, Video Games Tax Relief and AVEC/VGEC claims relating to these industries the cut-off date used for data was returns received by 3 March 2025. These represent the 3 biggest creative industries by value of relief. For the other creative industries tax reliefs, we have used outturn data extracted by 31 May 2024.

The forecast growth rate assumptions used for the financial year 2024 to 2025 are:

• Film Tax Relief (including independent film) and High-end Television Tax Relief will grow in line with a bespoke growth rate calculated using British Film Industry data.
• Video Games Tax Relief, Animation Tax Relief and Children’s TV Tax Relief will grow in line with the OBR nominal GDP determinant.
• Theatre Tax Relief, Orchestra Tax Relief and Museum and Galleries Exhibition Tax Relief expenditure is forecast to be the estimated expenditure for the financial year 2019 to 2020 (pre-COVID-19) increased annually by the OBR nominal GDP determinant per year, before making an adjustment for the estimated impact of the increase in the rate of these reliefs which commenced on 27 October 2021.
• Audio-Visual and Video Games Expenditure Credits replace the Film, High-end TV, Children’s TV, Animated TV and Video Game tax reliefs. Their overall value is forecast based on the growth rates used for each of those reliefs, and rates of uptake of the schemes. The uptake assumptions were agreed with the OBR when estimating the impacts of implementing AVEC and VGEC and represent claims transitioning from the old-style reliefs to AVEC and VGEC.

For High-end Television Tax Relief and Audio-Visual and Video Games Expenditure Credits, the 2 largest creative industries reliefs, sensitivity analysis has been applied to understand the degree of uncertainty in the estimates if the key assumptions underpinning them were to change. The range estimates set out in the table below are based on judgments of the levels of uncertainty, and it is possible that actual values may exceed them. Sensitivity analysis is not included for other creative industries reliefs – these have a smaller estimate, and their range is expected to be immaterial.

Change to key assumption:	Change in assumption	Variation £m	Change in assumption	Variation £m
High-end Television Tax Relief expenditure growth in 2024 to 2025 varies by up to +3.0%/-3.0% (note 1)	Increase by 3.0%	32.3	Decrease by 3.0%	(32.3)
Audio-Visual and Video Games Expenditure Credits uptake rates in 2024 to 2025 varies by 25.0%/-25.0% (note 2)	Increase by 25.0%	141.3	Decrease by 25.0%	(141.3)

Note 1: For High-end Television Tax Relief, the change is the current growth rate plus or minus the difference between the highest growth and average growth over the last 3 years.

Note 2: For Audio-Visual and Video Games Expenditure Credits, the uptake rate is based on uptake being 25% faster or slower than the current assumptions for each relief. Note that the size of this impact relates to the amount claimed in AVEC/VGEC instead of the existing reliefs, so does not represent an increase or decrease to the overall CT reliefs estimate, rather the category of relief being claimed.

4.1.5. Corporation tax reliefs – R&D error and fraud

An estimate of error and fraud has been included in these accounts since 2019 to 2020 in response to the increasing take up of these reliefs over recent years.

We first undertook a Random Enquiry Programme (REP) for Small and Medium Enterprise (SME) claims based on a random sample of 500 claims received in 2020 to 2021. This is the third year we have used a REP to estimate error and fraud for SMEs and is based on a sample of 350 cases. 296 cases were closed as of 31 May 2025, which equates to 85% of all cases.

The number of cases closed in the sample is 11 percentage points lower than when we finalised the estimate for 2021 to 2022 published in the 2023 to 2024 Annual Report and

Accounts, where 387 out of 404 cases were closed (96%) at 31 May 2024. Our analysts are satisfied that the sample is still statistically valid.

HMRC wanted to assess the impact of policy changes that were introduced by the government to combat the high levels of error and fraud. As a result, samples for the third REP were taken from 1 November 2023 to 29 February 2024, providing a more compressed timetable to enquire into the selected cases than for previous years, resulting in the lower closure rate.

These samples were taken from claims submitted after the introduction of an additional information form on the 8 August 2023.

A forecasting method has been undertaken to estimate yield associated with the 15% of REP cases which remained open at the end of May to determine the estimate. The forecasting method used estimates of the likely final settlement of cases from compliance staff to provide the most accurate level of error and fraud available. More information on the calculation of the error and fraud estimates is explained below.

Given the lag between R&D expenditure and the filing deadline for making R&D claims and amendments, the sample for the third REP related to claims with expenditure incurred in Accounting Periods Ending (APE) 2022 to 2023. This differs from previous years where samples related to claims received in the estimate year. This meant the estimate previously included claims for expenditure relating to several years prior. This change was introduced to align the estimate more closely with expenditure reported in the Accounts.

The third REP assessed the amount of error and fraud for SMEs for claims received after the introduction of the additional information form. To calculate the error and fraud levels for 2022 to 2023, the error and fraud rate for claims received prior to the introduction of the additional information form on 8 August 2023 was taken from the results from the second REP for claims for 2021 to 2022. The overall level of error and fraud for SMEs for 2022 to 2023 is a weighted proportion of expenditure received before and after the additional information form was introduced, multiplied by the respective levels of error and fraud from the second and third REPs.

Therefore, we are reporting an updated estimate of error and fraud relating to the financial year 2022 to 2023 in these Accounts. We are also providing an illustrative estimate for 2023 to 2024 and 2024 to 2025. See the last paragraph of this note for further details.

For large businesses (LB) claiming RDEC, the estimate is derived using a combination of data on claims received and the population reviewed through our compliance processes. The estimate reflects LB compliance processes including dedicated Customer Compliance Managers who lead customer case teams and build ongoing relationships with large businesses, which enables collaborative working with customers eligible for RDEC reliefs. Also included in the E&F estimate is an approximation for the remaining population using comparable error rates from the tax gap. Further information on the tax gap can be found in the section ‘Chief Executive’s Performance Report - Closing the tax gap’ (page 15).

HMRC analysts have used 2022 to 2023 compliance data from our Large Business team, to estimate the error and fraud within the R&D tax relief expenditure for Large Business customers claiming RDEC in 2022 to 2023. For LB claiming RDEC, the approach is similar to that used to calculate R&D error and fraud in previous years.

Estimated value of R&D error and fraud and as a percentage of the estimated R&D tax relief expenditure

	Estimate of the rate of error and fraud	2022-23 Implied monetary value of error and fraud £bn
Error and fraud – SME scheme (note 1)	14.7%	0.65
Error and fraud – RDEC (note 2 and 3)	3.3%	0.11
Error and fraud – Total R&D tax relief expenditure (note 4)	9.9%	0.76

Note 1: Revised figures for 2022 to 2023 – the illustrative estimated rate of error and fraud for SME scheme for 2022 to 2023 previously reported in Annual Report & Accounts was 19.5% (1,002 million) of the expenditure estimate originally reported for 2022 to 2023.

Note 2: Revised figures for 2022 to 2023 – the illustrative estimated rate of error and fraud for RDEC for 2022 to 2023 previously reported in Annual Report & Accounts was 1.7% (£48.0 million) of the expenditure estimate originally reported for 2022 to 2023.

Note 3: RDEC includes claims made by LB and SME claiming RDEC.

Note 4: 4 Revised figures for 2022 to 2023 – previously reported in Annual Report & Accounts: illustrative estimated rate of error and fraud for total R&D tax relief expenditure for 2022 to 2023 was 13.3% (£1.05 billion).

For the SME estimate, we estimated ranges which illustrate a 95% confidence interval for the error and fraud estimate. The rate of error and fraud in the SME scheme for 2022 to 2023 is not statistically different from the rate for 2021 to 2022 of 25.8%.

For LB claiming RDEC, given the assumption-based methodology used to calculate error and fraud, statistical confidence intervals cannot be calculated. Therefore, upper, and lower bounds have been derived based on best and worst-case scenarios for the rate of error and fraud within the non-reviewed populations. For the upper estimate we assume the level of risk in the non-reviewed population is 6%. For the lower estimate, we assume there is no risk in the

non-reviewed population, as in the reviewed population.

Whilst we attempt to capture all reasonable possibilities within our ranges, they do not exhaust the range of reasonable possible outcomes and it is possible that actual values may fall outside the ranges.

Applying the resultant lower, middle, and upper bound rates for SME and LB claiming RDEC to the estimated R&D corporation tax relief expenditure for the financial year 2022 to 2023 (as reported in the Resource Accounts for 2022 to 2023) gives the results below. The overall rate of error and fraud in total R&D expenditure across the SME and RDEC schemes for 2022 to 2023 is not statistically different from 2021 to 2022.

	Lower bound £bn	Lower bound %	Most likely £bn	Most likely %	Upper bound £bn	Upper bound %
SME scheme	0.46	10.3	0.65	14.7	0.92	20.8
RDEC scheme	0.06	1.9	0.11	3.3	0.16	5.1
Combined (note 1)	0.52	6.7	0.76	9.9	1.09	14.1

Note 1: Figures may not sum due to rounding.

Also impacting the quantitative estimates of error and fraud for 2022 to 2023 are revisions to the estimated expenditure base of R&D corporation tax reliefs for that year. As explained in note 4.1.4 there are timing lags between companies’ accounting periods during which underlying R&D expenditure is incurred and submission of their corporation tax returns, and R&D relief claims related to that year. Our estimates of reliefs expenditure are therefore revised over a 5-year period after which they are considered final, and an adjustment is made to each year’s expenditure base for the final change in estimate relating to the period 5 years preceding. We have used the latest estimate for 2022 to 2023 which decreases the expenditure base and reflects overestimations in earlier estimates.

	2022-23 expenditure initially estimated £m	Final adjustment relating to 2017-18 £m	Total expenditure reported in 2022-23 Annual Report and Accounts £m	Updated estimate for 2022-23 £m
R&D SME	5,135.8	1,356.7	6,492.5	4,443.0
RDEC	2,786.5	914.5	3,701.0	3,245.0
Total	7,922.3	2,271.2	10,193.5	7,688.0

Quantifications for error and fraud in subsequent years’ expenditure, including for that reported in these accounts, will be performed once relevant available data is available. While the above results are indicative of lower levels of error and fraud than previously estimated, applying the rates above to estimates of subsequent years’ expenditure would not give a reliable estimate of error and fraud in those years. There is considerable uncertainty ahead of performing random enquiries for these years because of policy and operational measures introduced to the R&D schemes, which have been designed to reduce the rate of error and fraud.

For illustrative purposes we have considered the possible updated error and fraud position for 2023 to 2024 and the error and fraud position for 2024 to 2025 expenditure to take account of legislative changes and operational measures. The legislative changes introduced from 2023 to 2025 include rate changes, extending relief to data and cloud computing costs and the mandation of digital claims requiring additional information (including pre-notification of some claims). A summary of previously published estimates and the latest estimates based on random enquiry programmes, including for 2022 to 2023 is in the table below.

		Previously published illustrative estimates 2022-23 £m	Previously published illustrative estimates 2023-24 £m	Previously published illustrative estimates 2021-22 (final estimate) £m	Previously published illustrative estimates 2022-23 (final estimate) £m	Latest estimates based on random enquiry programmes 2023-24 (illustrative) £m	Latest estimates based on random enquiry programmes 2024-25 (illustrative) £m
Value of error fraud (£million)	SME scheme	1,003	476	1,203	652	370	339
	RDEC scheme	48	125	134	107	127	142
	Total	1,051	601	1,337	759	497	481
Rate of error and fraud (%)	SME scheme	19.5	14.6	25.8	14.7	11.7	10.6
	RDEC scheme	1.7	2.8	4.6	3.3	2.9	2.9
	Total	13.3	7.8	17.6	9.9	6.5	5.9

The reduced rates of error and fraud in 2023 to 2024 and 2024 to 2025 reflect the policy changes and operational measures that HMRC has implemented to tackle error and fraud.

4.2. Child Benefit

Error and Fraud in Child Benefit is measured by selecting a random sample of 2,700 claimants each year who are asked to provide evidence that they are eligible for Child Benefit.

The 2024 to 2025 cycle runs over 12-month period with a random sample of 225 claimants pulled from the population each month between December 2023 to November 2024.

In the years prior to 2023 to 2024 we selected the full sample of 2,700 claimants from the August Child Benefit data and assessed their eligibility across a full year. This methodology change means that estimates from 2023 to 2024 onwards cannot be directly compared with previous years.

In 2024 to 2025, the majority of claimants (89%) responded to these compliance requests. Of those, almost all (98%) provided the necessary evidence to prove their eligibility, while a small proportion of those who responded (2%) informed HMRC that they are ineligible for Child Benefit (and so their claim is in error and fraud).

11% of those contacted failed to respond to the compliance request. To determine whether these claimants should be considered compliant or non-compliant they were put through a Desk-Based Analysis (DBA) model, which uses other information HMRC holds on these claimants. In previous years results from the DBA were adjusted to account for potential misclassification. For the 2024 to 2025 campaign unadjusted DBA results are used as they give the most robust E&F estimate following the move to monthly sampling and continuous improvement to the DBA. Although we cannot directly measure, we estimate the impact of removing this step to be minimal, likely less than 0.1 percentage point. The 2024 to 2025 DBA concluded that 15% of non-responders were most likely to be non-compliant and 85% were likely to be compliant.

Estimated value of Child Benefit error and fraud and as a percentage of estimated Child Benefit expenditure

	2024-25 Lower bound £m	2024-25 Central estimate £m	2024-25 Upper bound £m	2023-24 Lower bound £m	2023-24 Central estimate £m	2023-24 Upper bound £m
Child Benefit error and fraud	200 (1.5%)	270 (2.0%)	330 (2.5%)	150 (1.2%)	200 (1.6%)	250 (2.0%)

This year’s central estimate of E&F (2.0%) has increased compared to 2023 to 2024 (1.6%). Although this is a larger year on year increase than we had observed under the previous methodology, the differences between the estimates are not statistically significant. With only two comparable data points it is not possible to determine whether this indicates an increase in E&F or if this is expected variation due to the sample-based nature of the approach.

4.3. Tax-Free Childcare

A Tax-Free Childcare Error and Fraud (TFC E&F) estimate is included in this year’s report to reflect increased availability of robust modelling data since the inception of the scheme in April 2017 when only limited samples were available.

E&F in Tax-Free Childcare can arise either through the customer having been found to not meet one or more of the eligibility criteria at the point of reconfirmation, occurring every 3 months, or through using top up to pay a childcare provider for something other than qualifying childcare.

HMRC developed and implemented an ongoing annual Error and Fraud Analytical Programme (EFAP) for Tax-Free Childcare, starting in 2021. The exercise uses a stratified random sample to select 1,440 households (120 per month) across a calendar year for a full compliance investigation, and results are weighted to the Tax-Free Childcare population level to give our best estimate of E&F in Tax-Free Childcare for the year. The calendar year estimate is then used as a proxy for the reporting year (i.e. using the 2024 E&F estimate for tax year 2024 to 2025). This allows time for operational and analytical work to conclude for publication in the Resource Accounts.

Estimated value of Tax-Free Childcare error and fraud and as a percentage of estimated Tax-Free Childcare expenditure, tax years 2024 to 2025 and 2023 to 2024

	2024-25 Lower bound £m	2024-25 Central estimate £m	2024-25 Upper bound £m	2023-24 Lower bound £m	2023-24 Central estimate £m	2023-24 Upper bound £m
Tax-Free Childcare error and fraud	4 (0.7%)	9 (1.4%)	14 (2.2%)	8 (1.2%)	14 (2.3%)	21 (3.5%)

The central estimate of Tax-Free Childcare E&F in 2024 was 1.4% of government top up, with a 95% confidence interval of 0.7% to 2.2%. This is equivalent to £9 million and is a decrease of 0.9 percentage points from the 2023 central estimate, although the change is not statistically significant.

Based on results to date, the sample size of 1,440 gives an accuracy of +/ 0.5%. For example, if the true E&F rate was 2%, the central estimate from EFAP could be anywhere between 1.5% and 2.5%. Note that accuracy is a separate measure to precision. Accuracy describes how close an estimate is to its true value (which is unknown), whereas precision describes statistical or sampling variability, and is expressed in the 95% confidence interval around the central estimate.

5. Income

Operating income is income which relates directly to the operating activities of the department. It principally comprises fees and charges to other government departments, agencies, non-departmental public bodies and external customers for services provided on a full cost basis. It includes not only income allowed to be retained by the department but also any operating income which is required to be paid to the Consolidated Fund.

VOA services relate to income generated by the agency for the provision of valuations and property advice required to support taxation and benefits. Operating income is stated net of VAT.

Operating income

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Administration services	95.9	90.9
Banking services	20.4	17.7
VOA services	51.2	49.4
Subscriptions and fees	48.9	39.2
IT and telephony charges	50.1	35.2
Other income types (note 1)	128.4	132.9
	394.9	365.3
Of which:
Income from services	167.4	158.0
Other operating income	227.5	207.3
Total	394.9	365.3

Note 1: Other income types includes £58 million where there is an agreement with other Crown bodies allowing the sharing of costs for occupying a building, or part of a building. The income and full cost included is where HMRC is the major occupier of the building and has recharged the costs to other Crown bodies who also occupy the buildings.

6. Property, plant and equipment

	Land (2024-25) £m (note 1)	Buildings (2024-25) £m (note 1)	Accommodation refurbishments (2024-25) £m (note 1)	Office and computer equipment (2024-25) £m	Vehicles and scientific aids £m (note 2)	Furniture and fittings (2024-25) £m	Assets under construction (2024-25) £m	Total (2024-25) £m
Cost or valuation
At 31 March 2024	55.4	287.2	426.1	332.3	16.7	67.2	27.1	1,212.0
Balance at 1 April 2024	55.4	287.2	426.1	332.3	16.7	67.2	27.1	1,212.0
Additions	–	–	–	35.1	1.5	1.1	27.4	65.1
Donations	–	–	–	–	–	–	–	–
Disposals	–	(3.4)	(0.5)	(10.4)	(1.9)	(0.7)	–	(16.9)
Impairments (note 3)	(11.7)	(0.8)	(18.0)	–	–	(0.1)	–	(30.6)
Reclassifications	–	0.1	9.7	7.1	0.4	0.6	(21.4)	(3.5)
Revaluations (note 4)	–	(113.4)	–	–	–	–	–	(113.4)
At 31 March 2025	43.7	169.7	417.3	364.1	16.7	68.1	33.1	1,112.7
Depreciation
At 31 March 2024	(0.1)	(176.9)	(67.3)	(220.5)	(10.7)	(19.2)	–	(494.7)
Balance at 1 April 2024	(0.1)	(176.9)	(67.3)	(220.5)	(10.7)	(19.2)	–	(494.7)
Charged in year	(0.2)	(6.3)	(21.9)	(42.9)	(1.5)	(5.8)	–	(78.6)
Disposals	–	13.3	0.5	10.0	1.5	0.7	–	26.0
Impairments	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	–	–
Revaluations (note 4)	–	103.6	–	–	–	–	–	103.6
At 31 March 2025	(0.3)	(66.3)	(88.7)	(253.4)	(10.7)	(24.3)	–	(443.7)
Carrying amount
at 31 March 2024	55.3	110.3	358.8	111.8	6.0	48.0	27.1	717.3
Carrying amount
at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0
Of the total:
Core department	43.4	103.4	325.5	110.7	6.0	43.7	32.7	665.4
Valuation Office Agency	–	–	3.1	–	–	0.1	0.4	3.6
Carrying amount at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0
The assets are financed as follows:
Owned	43.4	95.2	77.0	108.6	6.0	43.8	33.1	407.1
Developer contribution funded	–	–	251.6	–	–	–	–	251.6
PFI contracts	–	8.2	–	2.1	–	–	–	10.3
Carrying amount at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0

Note 1: See notes 1.10.1 and 1.10.2 for the accounting policy for property assets.

Note 2: This merged column represents immaterial values previously reported separately.

Note 3: This includes Holyhead land and accommodation refurbishment which have been impaired by £11.7 million and £18.0 million respectively to reflect an external valuation completed in Spring 2025.

Note 4: See notes 1.2 and 1.10.2 for the accounting policy regarding revaluation of property, plant and equipment.

	Land (2023-24) £m (note 1)	Buildings (2023-24) £m (note 1)	Accommodation refurbishments (2023-24) £m (note 1)	Office and computer equipment (2023-24) £m	Vehicles and scientific aids £m (note 2)	Furniture and fittings (2023-24) £m	Assets under construction (2023-24) £m	Total (2023-24) £m
Cost or valuation
At 1 April 2023	20.4	95.9	458.5	318.8	17.2	68.4	35.8	1,015.0
Additions	18.1	–	–	26.8	1.6	1.1	22.6	70.2
Donations	–	–	–	–	–	–	–	–
Disposals	(6.6)	(18.5)	(34.0)	(19.5)	(2.1)	(2.7)	–	(83.4)
Impairments	–	–	–	–	–	–	–	–
Reclassifications	23.5	96.4	1.6	6.2	–	0.4	(31.3)	96.8
Revaluations (note 3)	–	113.4	–	–	–	–	–	113.4
At 31 March 2024	55.4	287.2	426.1	332.3	16.7	67.2	27.1	1,212.0
Depreciation
At 1 April 2023	–	(72.5)	(83.3)	(198.1)	(11.5)	(14.7)	–	(380.1)
Charged in year	(0.1)	(6.4)	(22.2)	(41.3)	(1.1)	(6.1)	–	(77.2)
Disposals	–	5.5	33.1	18.9	1.9	1.6	–	61.0
Impairments	–	–	–	–	–	–	–	–
Reclassifications	–	–	5.1	–	–	–	–	5.1
Revaluations (note 3)	–	(103.5)	–	–	–	–	–	(103.5)
At 31 March 2024	(0.1)	(176.9)	(67.3)	(220.5)	(10.7)	(19.2)	–	(494.7)
Carrying amount at 31 March 2023	20.4	22.4	352.6	120.7	5.8	53.7	35.8	611.4
Carrying amount at 31 March 2024	55.3	110.3	358.8	111.8	6.0	48.0	27.1	717.3
Of the total:
Core department	55.3	110.3	354.9	111.8	6.0	47.8	27.1	713.2
Valuation Office Agency	–	–	3.9	–	–	0.2	–	4.1
Carrying amount at 31 March 2024	55.3	110.3	358.8	111.8	6.0	48.0	27.1	717.3
The assets are financed as follows:
Owned	55.3	96.9	109.0	109.9	6.0	46.3	27.1	450.5
Developer contribution funded	–	–	249.8	–	–	1.7	–	251.5
PFI contracts	–	13.4	–	1.9	–	–	–	15.3
Carrying amount at 31 March 2024	55.3	110.3	358.8	111.8	6.0	48.0	27.1	717.3

Note 1: See notes 1.10.1 and 1.10.2 for the accounting policy for property assets.

Note 2: This merged column represents immaterial values previously reported separately.

Note 3: See notes 1.2 and 1.10.2 for the accounting policy regarding revaluation of property, plant and equipment.

Property revaluation

Valuations were performed by the Valuation Office Agency, an executive agency of HM Revenue and Customs, whose services include providing valuation and estate surveying services to government departments. No properties were revalued in 2024 to 2025.

7. Intangible assets

	2024-25 Licences £m	2024-25 Software and website development (note 1) £m	2024-25 Assets under construction (note 1) £m	2024-25 Total £m
Cost or valuation
At 1 April 2024	106.6	5,482.7	988.0	6,577.3
Additions	18.2	–	631.5	649.7
Donations	–	–	–	–
Disposals	(20.0)	(255.8)	(0.2)	(276.0)
Impairments (note 2)	–	–	(67.6)	(67.6)
Reclassifications	11.1	535.7	(543.3)	3.5
Revaluation (note 3)	–	–	–	–
At 31 March 2025	115.9	5,762.6	1,008.4	6,886.9
Amortisation
At 1 April 2024	(46.7)	(3,671.2)	–	(3,717.9)
Charged in year	(34.9)	(435.9)	–	(470.8)
Disposals	19.0	247.2	–	266.2
Impairments	–	–	–	–
Reclassifications	–	–	–	–
Revaluation (note 3)	–	–	–	–
At 31 March 2025	(62.6)	(3,859.9)	–	(3,922.5)
Carrying amount at 31 March 2024	59.9	1,811.5	988.0	2,859.4
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4
The assets are financed as follows:
Owned	53.3	1,902.7	1,008.4	2,964.4
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4
Of the total:
Core department	53.3	1,827.3	961.1	2,841.7
Valuation Office Agency	–	75.4	47.3	122.7
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4

	2023-24 Licences £m	2023-24 Software and website development (note 1) £m	2023-24 Assets under construction (note 1) £m	2023-24 Total £m
Cost or valuation
At 1 April 2023	79.1	4,888.7	836.3	5,804.1
Additions	31.2	0.1	693.8	725.1
Donations	–	–	–	–
Disposals	(22.5)	(361.6)	(2.5)	(386.6)
Impairments	–	(14.5)	–	(14.5)
Reclassifications	18.8	520.3	(539.6)	(0.5)
Revaluation (note 3)	–	449.7	–	449.7
At 31 March 2024	106.6	5,482.7	988.0	6,577.3
Amortisation
At 1 April 2023	(42.4)	(3,356.3)	–	(3,398.7)
Charged in year	(27.0)	(365.3)	–	(392.3)
Disposals	22.7	349.0	–	371.7
Impairments	–	–	–	–
Reclassifications	–	–	–	–
Revaluation (note 3)	–	(298.6)	–	(298.6)
At 31 March 2024	(46.7)	(3,671.2)	–	(3,717.9)
Carrying amount at 31 March 2023	36.7	1,532.4	836.3	2,405.4
Carrying amount at 31 March 2024	59.9	1,811.5	988.0	2,859.4
The assets are financed as follows:
Owned	59.9	1,811.5	988.0	2,859.4
Carrying amount at 31 March 2024	59.9	1,811.5	988.0	2,859.4
Of the total:
Core department	59.9	1,796.7	915.5	2,772.1
Valuation Office Agency	–	14.8	72.5	87.3
Carrying amount at 31 March 2024	59.9	1,811.5	988.0	2,859.4

Note 1: Software and website development asset class includes material assets for Customs Declaration Service (CDS) which relate to declarations for all goods, including excise goods and those that move through all routes including maritime ports. The carrying amount for these at 31 March 2025 is £688.8 million (2023 to 2024: £704.0 million). Additionally, the assets under construction asset class includes CDS assets with a carrying amount at 31 March 2025 of £77.8 million (2023 to 2024: £44.0 million).

Note 2: This includes Single Trade Window (STW) which has been impaired in full by £30.1 million. Delivery of the programme was paused at the end of 2024. It remains the government’s intention to deliver a STW. HMRC has retained the technology and will re-assess the value of the asset as and when it is appropriate to do so. Similarly, HMRC no longer requires licences for its Managing Authorisations project that cost

£6.5 million. These licences were however treated as resource expenditure as they did not meet the IFRS requirements to be capitalised as intangible assets and the costs are included in note 2, within IT services and consumables.

Note 3: See notes 1.2 and 1.10.3 for the accounting policy regarding revaluation of intangible assets.

Software revaluation

In agreement with HM Treasury, HMRC have early adopted a change set out in 2025 to 2026 Financial Reporting Manual (FReM) and therefore no 2024 to 2025 revaluation has been applied to intangible assets.

8. Leases

8.1. Right-of-use assets recognised in Statement of Financial Position

		2024-25 Buildings and vehicles (note 1) £m	2023-24 Buildings and vehicles £m
Cost:	At 1 April	1,112.5	1,224.6
	Remeasurement of existing leases	26.9	–
	Additions – new leases	9.3	12.3
	Disposals	(26.1)	(14.3)
	Cost reclassification	–	(110.1)
	At 31 March	1,122.6	1,112.5
Depreciation:	At 1 April	(123.0)	(67.0)
	Charged in-year	(63.7)	(70.3)
	Disposals	12.9	5.5
	Depreciation reclassification	–	8.7
	At 31 March	(173.8)	(123.1)
Carrying amount:	at 31 March	948.8	989.4

Note 1: The above balances predominantly reflect leasehold property - the carrying value for vehicles is less than £2.5 million.

8.2. Lease liabilities recognised in Statement of Financial Position (note 1) - Maturity analysis

	2024-25 £m	2023-24 £m
Buildings
Not later than one year	58.8	77.4
Later than one year and not later than 5 years	304.5	307.4
Later than 5 years	944.5	1,010.1
	1,307.8	1,394.9
Less interest element	(120.8)	(153.6)
Present Value of obligations	1,187.0	1,241.3
Vehicles
Not later than one year	0.8	0.7
Later than one year and not later than 5 years	1.9	2.6
	2.7	3.3
Less interest element	–	(0.1)
Present Value of obligations	2.7	3.2
Total Present Value of obligations	1,189.7	1,244.5
Current portion	59.4	63.0
Non-current portion	1,130.3	1,181.5

Note 1: At any given time, IFRS 16 liability and asset values will not be equal and opposite due to a number of factors. The key reasons are that, on recognition, any prepayments are included in the asset but not the liability and the liability itself is repaid at a different rate to straight line depreciation. Although at the end of the life of the lease both liability and asset should reduce to nil, at any given point in the lease life cycle they will not be equal and offsetting.

8.3. Amounts recognised in Statement of Comprehensive Net Expenditure

	2024-25 £m	2023-24 £m
Interest paid to lessor	11.7	15.6
Depreciation	63.7	71.8
Variable lease payments not included in lease liabilities	–	(0.2)
Non-recoverable VAT	14.7	14.8
Expenses related to short-term leases	–	0.1
Expenses related to low value asset leases (excluding short-term leases)	0.1	–
Rental income from sub-leasing	(13.2)	(29.1)
Other	(0.4)	–
Total charged to the Statement of Comprehensive Net Expenditure under IFRS 16	76.6	73.0

Total charged to the Statement of Comprehensive Net Expenditure resulting from IFRS 16 above is materially the same as would have been charged under IAS 17.

8.4. Amounts recognised in Consolidated Statement of Cash Flows

	2024-25 £m	2023-24 £m
Total cash outflow for leases	(83.5)	(77.9)

9. Commitments under PFI and other service concession arrangements

9.1. Off-Statement of Financial Position

The department has no off-Statement of Financial Position PFI contracts.

9.2. On-Statement of Financial Position

The following commitments are in respect of assets that have been brought onto the department’s Statement of Financial Position under IAS 17 and IFRIC 12 Service Concession Arrangements. These comprise of commitments relating to Newcastle Estates Partnership (NEP) held with DWP.

The total amount charged in the Consolidated Statement of Comprehensive Net Expenditure in respect of on-Statement of Financial Position PFI and other service concession arrangement transactions (there were no off-Statement of Financial Position transactions) was £68.4 million (2023 to 2024: £49.6 million).

The substance of each contract is that payments comprise 2 elements – lease payments and service elements.

Details of the obligations for lease payments

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Minimum lease payments:
Due within one year	5.9	7.9
Due between one year and 5 years	6.2	10.6
Due later than 5 years	–	–
Total minimum lease payments due in future periods	12.1	18.5

Details of the obligations for service elements

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Service elements due in future periods:
Due within one year	25.5	31.7
Due between one year and 5 years	25.4	52.5
Due later than 5 years	–	–
Total service elements due in future periods	50.9	84.2
Total commitments	63.0	102.7

9.3. Capital commitments

The capital commitments reported relate to the future cost of development of the estate and IT infrastructure.

Contracted capital commitments at 31 March not otherwise included in these financial statements

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Property, plant and equipment	74.6	14.4
Intangible assets	54.5	19.5
	129.1	33.9

9.4. Other financial commitments

This note discloses commitments to future expenditure, not otherwise disclosed elsewhere in the financial statements. These are non-cancellable contracts that the department has entered into which are not a lease, PFI contract or other service concession arrangement.

The payments to which the department are committed are as follows:

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Due within one year	341.0	306.8
Due between one year and 5 years	651.3	333.8
Due later than 5 years	86.5	10.2
	1,078.8	650.8

10. Trade receivables, financial and other assets

	Note	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Amounts expected to be received within one year:
Personal tax credits	4.1.2	183.9	434.9
Child Benefit (note 1)		73.0	157.2
Help to Save		8.1	11.1
Deposits and advances		152.9	161.4
Value Added Tax		54.5	59.7
Prepayments – Child Benefit		90.5	–
Accrued income, other prepayments		250.6	202.3
Trade and other receivables (note 2)		61.4	69.0
		874.9	1,095.6
Amounts expected to be received in more than one year:
Personal tax credits	4.1.2	290.4	1,112.4
		290.4	1,112.4

Note 1: This figure is net of provision for impairment amounting to £28.2 million (2023 to 2024: £28.2 million).

Note 2: This figure includes other receivables which are net of provision for impairment amounting to: £23.3 million (2023 to 2024: £22.8 million).

11. Cash and cash equivalents

Cash and bank balances relate to the administering of the department and programme expenditure but exclude all tax and duty revenues collected. The latter are included in the department’s Trust Statement. Cash and cash equivalents comprise cash in hand and current balances, which are readily convertible to known amounts of cash and which are subject to insignificant changes in value. Bank accounts are part of the Exchequer pyramid whereby balances are effectively held overnight with the Bank of England.

Cash and cash equivalents

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Balance at 1 April	41.0	78.6
Net change in cash and cash equivalent balances	27.6	(37.6)
Balance at 31 March	68.6	41.0
Of which balances were held at:
Government Banking Service	71.6	47.9
Commercial banks and cash in hand (note 1)	(3.0)	(6.9)
Balance at 31 March	68.6	41.0

Note 1: The balance also reflects money owing to/from the Trust Statement.

11.1. Reconciliation of liabilities arising from financing activities

	Balance at 31 March 2024 £m	Opening Balance Adjustment £m	Financing £m	Cash flows £m	Non-cash changes £m	Non-cash changes £m	Balance at 31 March 2025 £m
			Net cash requirement	Acquisition	Disposal
Supply - current year	35.5	–	20,686.1	(20,652.9)	–	–	68.7
From the National Insurance Fund (note 1)	(5.5)	(59.6)	257.7	(278.8)	–	–	(86.2)
Lease liabilities	1,262.0	(0.4)	(76.3)	–	31.9	(8.9)	1,208.3
Total liabilities from financing activities	1,292.0	(60.0)	20,867.5	(20,931.7)	31.9	(8.9)	1,190.8

	Balance at 31 March 2023 £m	Opening Balance Adjustment £m	Financing £m	Cash flows £m	Non-cash changes £m	Non-cash changes £m	Balance at 31 March 2024 £m
			Net cash requirement	Acquisition	Disposal
Supply – current year	72.3	–	20,591.5	(20,628.3)	–	–	35.5
From the National Insurance Fund	(8.7)	12.5	272.1	(281.4)	–	–	(5.5)
Lease liabilities	1,448.5	21.0	(70.6)	–	13.2	(150.1)	1,262.0
Total liabilities from financing activities	1,512.1	33.5	20,793.0	(20,909.7)	13.2	(150.1)	1,292.0

Note 1: The opening balance adjustment of £59.6 million represents an element of the accumulated receivable balance in respect of NIC (paybill and other costs) previously not included in the disclosure.

12. Trade and other payables

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Amounts expected to be paid within one year:
Accruals – Corporation tax reliefs	9,451.8	9,359.4
Accruals – Tax-Free Childcare	46.6	56.3
Other accruals	472.5	573.7
Personal tax credits	319.5	399.0
Child Benefit	270.8	242.0
Trade and other payables	105.8	148.8
Taxation and social security excluding VAT	64.9	62.2
Deferred income	21.5	13.2
Amounts issued from the Consolidated Fund for Supply but not spent at year end	68.7	35.5
Consolidated Fund Extra Receipts due to be paid to the Consolidated Fund:
Received	–	5.6
	10,822.1	10,895.7
Amounts expected to be paid in more than one year:
Accruals – corporation tax reliefs	2,331.2	1,863.7
IT Public Private Partnership	2.3	1.7
Accommodation PFI	4.9	9.5
Other payables	8.6	6.6
	2,347.0	1,881.5

13. Provisions for liabilities and charges

Provisions are recognised when HMRC has a present legal or constructive obligation as a result of a past event, it is probable that HMRC will be required to settle that obligation, and an amount has been reliably estimated.

Provisions for liabilities and charges

	Departmental group (2024-25) £m	Departmental group (2023-24) £m
Balance at 1 April	130.3	159.3
Provided in the year	379.8	38.0
Provisions not required written back	(58.3)	(52.3)
Net expenditure	321.5	(14.3)
Provisions utilised in the year	(9.0)	(14.7)
Balance at 31 March	442.8	130.3

13.1. Analysis of expected timing of discounted flows

	2024-25 £m	2023-24 £m
Not later than one year	367.7	22.3
Later than one year and not later than 5 years	48.8	61.5
Later than 5 years	26.3	46.5
Balance at 31 March	442.8	130.3

	Personal tax credits £m	Stakeholder pensions £m	Legal claims £m	Other £m	Total £m
Not later than one year	210.0	141.3	12.5	3.9	367.7
Later than one year and not later than 5 years	–	–	46.7	2.1	48.8
Later than 5 years	–	–	25.4	0.9	26.3
Balance at 31 March	210.0	141.3	84.6	6.9	442.8

13.2. Personal tax credits

A provision of £210.0 million has been created where net underpayments have been identified on customer records as part of personal tax credits closure activities.

13.3. Stakeholder pensions

A provision has been created for an estimated outstanding liability of £141.3 million payable to the Trust Statement as reimbursement of additional Stakeholder Pensions expenditure or Payment in Lieu of Tax Reliefs (PILOTR) after estimates used in prior years have subsequently been revised. This provision will be utilised in 2025 to 2026 once outstanding amounts are finalised, and going forward a stabilisation adjustment will be made to PILOTR expenditure each year reflecting a new process of finalisation to estimated spend 2 years prior.

13.4. Legal claims

A provision of £84.6 million (2023 to 2024: £105.6 million) has been created for legal costs relating to claims against the department for tax litigation cases accounted for within the Trust Statement. This reflects all known claims where legal advice indicates the case will be successful. There has been no discounting applied as the impact is considered immaterial.

13.5. Other

Provisions relating to various other claims against the department amount to £6.9 million (2023 to 2024: £24.7 million).

14. Pension asset/liability

The Valuation Office Agency (VOA) merged with The Rent Service on 1 April 2009, taking on staff who are members of the Local Government Pension Scheme. The pension assets part of the Local Government Pension Scheme are reflected in the Consolidated Statement of Financial Position (CSoFP), (see page 228).

The impact on the HMRC CSoFP is immaterial, the table below shows the pension assets and liabilities that results in a net asset. (note 1)

	2024-25 £m	2023-24 £m
Fair value of fund assets (bid value)	231.8	232.0
Present value of defined benefit obligation	(109.9)	(124.1)
Net asset	121.9	107.9
Present value of unfunded obligations	(0.2)	(0.2)
Remeasurement of net defunded benefit pension asset for changes in asset ceiling	(118.1)	(99.4)
Net asset in the Statement of Financial Position	3.6	8.3

Note 1: Table added 2024 to 2025 to provide context to the underlying movements for the net figure.

Due to insufficient evidence available for the purposes of the VOA financial statements audit, the NAO audit opinion on the financial statements is qualified in respect of this matter. Further information can be found in the VOA Annual Report and Accounts, published at www.voa.gov.uk

15. Contingent liabilities

The department’s contingent liabilities are possible obligations that arise from past events and for which existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within HMRC’s control. An example is legal action where the department may need to pay legal costs if it loses the case. These are not disclosed where disclosure could seriously prejudice the outcome of legal claims against the department.

The department has the following quantifiable contingent liabilities:

• legal claims – A contingent liability of £132.5 million (2023 to 2024: £129.2 million) has been made for legal costs relating to claims against the department for tax litigation cases where provision for the tax repayment is accounted for in the Trust Statement. The contingent liability for legal costs reflects all known claims where legal advice indicates that it is possible that the case will be successful. Discounting has not been applied as immaterial.
• guaranteed costs – possible liability where appointed liquidators have been guaranteed payment of their costs with a view to recovery of outstanding tax liabilities £0.6 million, 34 cases (2023 to 2024: £0.7 million, 32 cases).
• other – the department has a further number of contingent liabilities amounting to £81.4 million (2023 to 2024: £127.3 million).

The department has remote unquantifiable contingent liabilities relating to some legal claims.

16. Financial instruments

As the cash requirements of the department are met through the Estimates process, financial instruments play a more limited role in creating and managing risk than would apply to a non- public sector body of a similar size. The majority of financial instruments relate to contracts for non-financial items in line with the department’s expected purchase and usage requirements and the department is therefore usually exposed to little credit, liquidity or market risk.

17. Related-party transactions

The department is the parent of the Valuation Office Agency. This body is regarded as a related party with which the department has had various material transactions during the year.

The Valuation Office Agency has had a significant number of material transactions with other government departments. Most of these transactions have been with the Ministry of Housing, Communities and Local Government, the Department for Work and Pensions and the Welsh Government.

In addition, the department has had a small number of transactions with other government departments and other central government bodies.

No Board member, key manager or other related party has undertaken any material transactions (i.e. transactions of £0.1 million or more) with the department during the year. Details of compensation for key management personnel can be found in the remuneration report within the accountability section.

18. Entities within the departmental boundary

The Valuation Office Agency is a supply-financed agency. Its Annual Report and Accounts are published at www.voa.gov.uk.

19. Investments and loans in other public sector bodies

The department holds no ordinary shares, loans, public dividend capital or other interests in public bodies outside the departmental boundary.

20. Events after the reporting period date

On 28 April 2025, as part of its Tax Update: Simplification, Administration and Reform (TUSAR), the Government announced that VOA will be brought back into its parent department, HMRC, by April 2026. Whilst this means the VOA will no longer exist as an executive agency, its functions and operations remain critical to providing the valuations that underpin the collection of local authority funding and these will continue to be performed from within HMRC.

These accounts have been authorised for issue by the Accounting Officer on the same date as the Comptroller and Auditor General’s Audit Certificate.

Annex 1: Arm’s-length bodies

Information on arm’s length bodies is shown within the Principal Accounting Officers report. The following bodies are those within our accounting boundary for 2024 to 2025 that contribute to the departmental group. This section has not been subject to audit.

					Permanently employed staff		Other staff (note 1)
	Total operating income £’000	Total operating expenditure £’000	Net expenditure for the year (including financing) £’000	Number of employees	Staff costs £’000	Number of employees	Staff costs £’000
HMRC	(336,526)	34,102,682	33,777,730	62,224	3,301,085	1,924	15,218
VOA	(57,579)	295,099	237,799	3,763	195,178	93	11,156

Note 1 “Other staff” includes Fixed Term Appointments and Temporary Fixed Term Appointments.

Annex 2: Statistical Tables

This table provides further detail by category on HMRC spending.

Table 1: Total departmental spending (£000)

	2020-21 Outturn	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Outturn	2025-26 Plans
Resource DEL (note 1)
HMRC administration	4,335,323	4,570,843	5,199,284	5,271,201	5,354,901	6,309,443
VOA administration	141,100	143,995	132,548	183,309	201,708	250,573
Utilised provisions	96,219	31,502	19,614	10,004	7,995	–
National Insurance Fund	222,649	251,344	259,413	277,222	274,510	239,810
Cost of Living	–	–	717,872	760,000	-5,248	–
COVID-19	–	719,062	–110	–	–	–
Total Resource DEL	4,795,291	5,716,746	6,328,621	6,501,736	5,833,866	6,799,826
Of which:
Staff costs	2,778,298	2,862,995	3,265,139	3,477,773	3,613,969	4,022,563
Purchase of goods and services	1,494,300	1,842,658	1,903,404	1,907,881	1,787,446	2,207,477
Income from sales of goods and services	-288,573	-269,435	-268,378	-370,010	-445,724	-428,600
Current grants to persons and non- profit bodies (net)	52,638	743,791	720,321	757,241	-4,654	1,955
Current grants abroad (net)	840	1,025	1,043	1,672	1,811	–
Subsidies to private sector companies	–	–	–	–	–	–
Rentals	326,652	277,172	159,943	112,242	112,550	106,912
Depreciation (note 2)	310,833	174,352	478,237	535,681	694,842	849,533
Change in pension scheme liabilities	-210	–	–	–	–	-
Other resource	120,513	84,188	68,912	82,366	73,626	39,986
	4,795,291	5,716,746	6,328,621	6,501,736	5,833,866	6,799,826

Note 1: Outturn values are consistent with those reported in SOPS 1.1 on page 157.

Note 2: Includes impairments.

Note: The totals may differ to the information in the Statement of Parliamentary Supply due to rounding.

	2020-21 Outturn	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Outturn	2025-26 Plans
Resource AME (note 1)
Child Benefit	11,541,713	11,420,034	11,595,575	12,510,146	13,302,821	14,402,477
Tax-Free Childcare	253,047	428,406	494,401	635,340	617,876	455,410
Providing payments in lieu of tax relief to certain bodies	140,071	130,003	7,973	173,626	192,610	203,231
Lifetime ISA	346,120	418,943	436,809	499,125	624,403	569,837
Help to Save	–	20,361	53,202	51,654	45,031	43,620
HMRC administration	52,212	8,072	33,808	-3,987	120,587	3,960
VOA – Payments of rates to LAs on behalf of certain bodies	75,646	78,061	64,199	83,738	82,778	96,970
VOA Administration	1,184	1,010	1,082	853	898	2,000
Utilised provisions	-96,223	-31,510	-19,615	-14,730	-7,997	–
Personal tax credits	15,063,222	10,605,481	8,834,945	7,307,214	2,669,737	–
Other reliefs and allowances	10,698,573	11,696,601	12,560,346	12,053,282	10,127,655	12,234,849
COVID-19	81,233,264	16,543,682	-132,476	-21,800	-1,140	110
Total Resource AME	119,308,829	51,319,144	33,930,249	33,274,461	27,775,259	28,012,464
Of which:
Purchase of goods and services	95,721	83,492	68,188	89,053	87,917	104,350
Income from sales of goods and services	-4,535	-4,412	-3,918	-5,200	-4,957	-5,380
Current grants to persons and non-profit bodies (net)	26,770,567	39,076,439	21,426,819	21,311,587	17,456,784	15,679,268
Subsidies to private sector companies	88,673,903	12,186,849	12,423,956	11,897,211	10,122,209	12,230,266
Depreciation (note 2)	1,785	9,514	12,752	12,208	11,604	3,960
Take up of provisions	50,315	-2,222	22,067	-15,327	108,983	30,000
Release of provision	-102,416	-31,299	-19,615	-15,071	-7,099	-30,000
Other resource	3,823,489	783	–	–	-182	–
	119,308,829	51,319,144	33,930,249	33,274,461	27,775,259	28,012,464
Resource budget (note 1)
Total Resource DEL	4,795,291	5,716,746	6,328,621	6,501,736	5,833,866	6,799,826
Total Resource AME	119,308,829	51,319,144	33,930,249	33,274,461	27,775,259	28,012,464
Total Resource budget	124,104,120	57,035,890	40,258,870	39,776,197	33,609,125	34,812,290
Of which:
Depreciation (note 2)	312,618	183,866	490,989	545,134	706,446	853,493

Note 1: Outturn values are consistent with those reported in SOPS 1.1.

Note 2: Includes impairments

Note: The totals may differ to the information in the Statement of Parliamentary Supply due to rounding.

	2020-21 Outturn	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Outturn	2025-26 Plans
Capital DEL (note 1)
HMRC administration	529,830	643,880	524,552	695,753	686,362	834,000
VOA administration	6,746	20,650	31,848	29,364	41,709	41,233
Total Capital DEL	536,576	664,530	556,400	725,117	728,071	875,233
Of which:
Purchase of assets	677,700	982,938	644,473	805,498	750,944	895,233
Income from sales of assets	-141,124	-318,408	-88,073	-80,381	-22,873	-20,000
	536,576	664,530	556,400	725,117	728,071	875,233
Capital AME (note 1)
Child Benefit	4	7	1	2	2	10
VOA administration	–	–	–	–	-	385
Total Capital AME	4	7	1	2	2	395
Of which:
Capital grants to persons & non-profit bodies (net)	4	7	1	2	2	395
	4	7	1	2	2	395
Capital budget (note 1)
Total Capital DEL	536,576	664,530	556,400	725,117	728,071	875,233
Total Capital AME	4	7	1	2	2	395
Total Capital budget	536,580	664,537	556,401	725,119	728,073	875,628

Note 1: Outturn values are consistent with those reported in SOPS 1.2.

This table shows HMRC administration expenditure, utilised provisions and the administration element of the National Insurance Fund. This table does not include programme expenditure.

Table 2: Administration budget (£000)

	2020-21 Outturn	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Outturn	2025-26 Plans
Resource DEL
HMRC administration	896,424	828,681	948,413	918,850	1,002,674	1,249,705
National Insurance Fund	50,536	56,030	54,712	63,962	64,082	53,966
Total administration budget	946,960	884,711	1,003,125	982,812	1,066,756	1,303,671
Of which:
Staff costs	467,299	437,580	474,413	560,426	618,437	748,507
Purchase of goods and services	338,798	374,643	450,180	425,260	420,528	474,931
Income from sales of goods and services	-94,044	-94,887	-59,763	-89,116	-117,781	-119,586
Current grants to persons and non-profit bodies (net)	1,661	1,642	1,659	1,936	1,829	1,841
Rentals	149,860	110,563	39,512	24,279	58,013	40,917
Depreciation	52,274	30,933	86,522	50,496	73,795	146,542
Other resource	31,112	24,237	10,602	9,531	11,935	10,519
	946,960	884,711	1,003,125	982,812	1,066,756	1,303,671

Note: The totals may differ to the information in the Statement of Parliamentary Supply due to rounding.

Annex 3: Sustainability data tables

Greening Government Commitments (GGC)

	2017-18 (note1)	2022-23	2023-24	2024-25
Greenhouse gas emissions (tonnes CO2e, 000s)	88.4	37.0	30.6	29.9
Direct building emissions (tonnes CO2e, 000s)	25.4	17.4	11.7	10.6
Domestic flight emissions (tonnes CO2e, 000s)	2.2	0.7	0.9	1.0
Paper purchased (A4 reams equivalent, 000s)	295.3	35.7	30.2	28.3
Water consumption (m3 000s)	566.1	211.3	207.2	225.5
Waste generated (tonnes, 000s excl. ICT)	9.5	4.0	3.1	2.8
Waste to landfill (% excl. ICT)	1.9	0.04	–	–
Waste recycled (% excl. ICT)	81	67	68	69
ICT waste recycled (tonnes)	70.6	121.0	47.5	3.6
ICT waste reused (tonnes)	213.8	269.6	75.3	18.2

Note 1: This is in the baseline year for our GGC commitments.

Greenhouse gas emissions

	2022-23	2023-24	2024-25
Non-financial indicators (tCO2e, 000s)
Total gross emissions	38.54	32.87	33.16
Total net emissions	25.99	20.47	20.77
Gross emissions Scope 1 and 2	32.85	26.73	25.41
Gross emissions Scope 3: business travel	5.69	6.14	7.75
Energy consumption (kWh, 000s)
Electricity: non-renewable	2,872	2,164	2,323
Electricity: renewable	59,491	55,135	54,969
Gas	88,635	62,559	57,432
Oil	4,828	820	300
Whitehall District Heating	N/A	N/A	N/A
Enviroenergy District Heating	N/A	N/A	N/A
Stratford District Heating	6,289	6,368	5,136
Sheffield District Heating	N/A	N/A	N/A
Travel breakdown (tCO2e, 000s)
Road	2.75	2.43	2.62
Rail	1.86	1.54	1.86
Air: domestic and overseas	2.23	3.15	4.22
Ultra Low Emission Vehicles (% of fleet)	13 (note 1)	29	41
Financial indicators (£000)
Expenditure on energy	24,556	23,375	24,144
Expenditure on accredited offset purchases	–	–	–
Expenditure on official business travel	20,405	19,610	20,853

Note 1: This figure increases to 29% when vehicles on order are included, meeting the interim Government Fleet Commitment target.

Waste (note1)

	2022-23	2023-24	2024-25
Non-financial indicators (Tonnes 000s)
Total waste (excl. ICT)	4.03	3.11	2.80
Waste: Landfill	0.002	0.00	0.00
Waste: Recycled/ composted	2.7	2.13	1.92
Waste: Incinerated/ energy from waste	1.33	0.99	0.88
Waste: ICT waste	0.39	0.12	0.02
Financial indicators (£000s)
Total waste (excl. ICT)	226	174	157
Waste: Landfill	0.28	–	–
Waste: Recycled/ composted	151	119	108
Waste: Incinerated/ energy from waste1	75	55	49
Waste: ICT waste	1,253	661	–

Food waste

		2023-24 (Tonnes)	2024-25 (Tonnes)
Reuse	Redistribution for human consumption	–	–
	Animal feed	–	–
	Bio-based materials/Biochemical processing	–	–
	Other reuse	–	–
Waste	Anaerobic digestion/codigestion	39.40	43.76
	Composting/Aerobic processes	–	–
	Incineration/Controlled combustion	–	–
	Land application	–	–
	Landfill	–	–
	Sewer/Wastewater treatment	–	–
	Refuse/Discards/Litter (incl. dumping and unmanaged disposal)	–	–
	Other	–	–
	Total food waste	39.40	43.76

Note 1: Figures may not sum due to rounding.

Finite resource consumption – water

	2022-23	2023-24	2024-25
Financial indicators (£000s)
Water consumption - supplied	1,270	1,278	1,154

Copier paper purchased

	2022-23	2023-24	2024-25
Financial indicators (£000s)
	154	137	124

Air travel breakdown (Note 1)

	2022-23	2022-23	2022-23	2023-24	2023-24	2023-24	2024-25	2024-25	2024-25
Non-financial indicators	No	Kms	mtCO2e	No	Kms	mtCO2e	No	Kms	mtCO2e
Total domestic	13,359	5,505,928	715.94	13,096	5,310,480	854.93	15,374	6,008,038	967.17
Total international	2,400	6,488,016	1,510.17	2,512	6,984,380	2,291.85	3,192	9,286,344	3,253.10
Short haul economy	1,127	1,107,488	167.25	1,158	1,243,080	227.32	1,627	1,773,122	324.25
Short haul business	27	34,147	7.73	27	36,635	10.05	49	65,714	18.03
Long haul economy	632	2,978,393	440.42	563	2,629,894	527.55	399	1,952,200	390.65
Long haul premium economy	54	310,958	73.57	61	330,856	105.93	38	241,354	77.27
Long haul business	332	1,649,887	707.50	442	2,259,994	1,311.45	752	3,510,151	2,036.87
Long haul first	18	78,385	46.36	4	23,644	18.93	26	131,792	105.49
International non-UK	210	328,758	67.34	257	460,276	90.63	301	1,612,011	300.54

Online meetings

	2022-23	2023-24	2024-25
Total number of on-line meetings initiated	11,788,133	13,931,789	18,006,792

Note 1: Figures may not sum due to rounding.