Shrinking the estate, but at what cost?

    The transformation of HMRC into 13 regional hubs continues, but the National Audit Office casts doubt about the cost savings. The delay to Making Tax Digital for Business threatens the projected additional revenue promised in return for the transformation investment.

    During the last financial year, HMRC closed a further 26 offices as it seeks to consolidate into 13 regional hubs spread across city centre locations in the UK.

    Currently occupying 145 buildings in 92 towns and cities, HMRC began moving staff into the new Croydon regional hub at 1 Ruskin Square earlier this week (24 July) and also signed a 20 year lease for the Edinburgh hub at New Waverley, adjacent to Waverley station, earlier this month.

    The Bristol hub at 3 Glass Wharf is currently under construction, whilst Three Snowhill remains the frontrunner for the Birmingham hub and Central Square the favourite site for the Cardiff hub.

    The 13 regional hubs are to be based in the following cities:

    • Belfast
    • Birmingham
    • Bristol
    • Cardiff
    • Croydon
    • Edinburgh
    • Glasgow
    • Leeds
    • Liverpool
    • London (Stratford)
    • Manchester
    • Newcastle
    • Nottingham


    HMRC expects the move to regional hubs to save more than £300m up to 2025 and annual cost savings of more than £90m a year from 2026.

    Not so optimistic

    At the beginning of this year, the National Audit Office (NAO) disclosed HMRC’s original estimate of its estate costs had increased by nearly £600m (22%) since it submitted its business case for the 2015 spending review settlement, more than half of which was due to higher than anticipated running costs for its new buildings.

    In its report alongside HMRC’s most recent Annual Accounts, the NAO acknowledges HMRC has recognised its original plan was unrealistic and has taken steps to adjust the scope and timing of the estate programme to keep a tighter rein on cost and delivery risk.

    However, the NAO report also refers to the total transformation bill. As part of the 2015 spending review, HMRC received a budget of £1.8bn for its transformation from 2016/17 to 2019/20, in return for committing to efficiencies of £1.9bn by 2019/20 and additional tax revenue of £920m by 2020/21.

    Much of the additional tax revenue was expected to flow from the introduction of Making Tax Digital for Business, but the delay in rollout until 2020, at the earliest (for tax reporting), places the target of £920m in serious jeopardy.

    The NAO report discloses current projections putting the total transformation cost as high as £2.2bn. 

    For further information please contact Guy Smith on 0345 223 2727.