HMRC introduces evaluation framework

HMRC have announced a new formalised framework to assess and evaluate policies and identified areas selected for evaluation, which includes some signi

HMRC have announced a new formalised framework to assess and evaluate policies and........

A significant challenge in implementing tax policy is assessing whether, once implemented, it achieves the aims that were initially the driving force behind the policy. On 25 November 2021, the HMRC evaluation framework was announced. The framework outlines the approach to monitoring and evaluation of policies and programmes, with the aim of understanding whether these policies have been effective and achieved the desired outcomes. A key aim of this framework involves transparency in the evaluation decision-making process by using evaluation criteria and delivering proportionate and systematic evaluations. Some key tax policy areas have been selected as the first areas for evaluation.

HMRC, in choosing to deliver proportionate and systematic evaluations, have chosen to take a proportionate approach to evaluating tax policies and programmes by selecting some key areas for evaluation, rather than undertaking evaluation of all activities.

There are five criteria that will help determine what is in and out of scope as follows:

  • Whether there is a knowledge gap to be filled by an evaluation;
  • Whether there is an untested or a new strategy, policy or operational intervention;
  • Whether there is an opportunity to gather timely and useful evaluation outputs;
  • Whether there is an opportunity to improve future change (e.g. strategy, policy, transformation programme); and
  • To demonstrate accountability and transparency of the use of public funds.

Not all five criteria need to be met to qualify for evaluation and, in some cases, additional criteria will be applied to assess what will be evaluated. As an example, additional criteria have been applied in respect of tax reliefs in order to prioritise the evaluation of specific reliefs.

A list of HMRC’s future evaluation publications has already been published and consists of a number of policies across the spectrum of tax. Some of the significant evaluation publications include:

  • Making Tax Digital (MTD) - this is already underway and the evaluation plans to cover more taxes and businesses as MTD develops;
  • Off Payroll Working rules – HMRC have already commissioned and published some external research in this area and the remaining findings will be published in due course;
  • UK Freeports Programme – the evaluation strategy will be published in Spring 2022 and will be led by the Department for Levelling up, Housing and Communities (DLUHC);
  • Coronavirus Job Retention Scheme – delivered by HMRC and HM Treasury, the evaluation will assess the delivery of the scheme, the difference it made to employees and businesses, and what lessons can be learnt to inform future policy making; and
  • Self Employment Income Support Scheme – HMRC and HM Treasury will perform an evaluation after the relevant data is available from tax returns in 2022.

HMRC received additional funding in 2021 to 2022 to help their evaluation capability.

Going forward, HMRC intend to publish more evaluation activity as part of their monitoring programme and are welcoming any comments and suggestions.

The area of evaluating and monitoring policies to inform future policy development has been called for from many quarters and it will be interesting to see how this framework will operate in practice going forward.