The Public Accounts Committee has said it’s “not convinced” by HM Revenue & Customs’ plans to reduce demand for its phone and postal lines, or by its plans to improve the “unacceptable” level of service taxpayers and advisers are currently experiencing.
In a report published today (January 11), MPs said HMRC’s digitalisation of the tax system will take time and that the government department does not currently have the resources required to provide the level of service its customers need.
As a result, they surmised that service levels are “unlikely to improve quickly”.
HMRC employs about 63,000 people but in the past five years, the number of customer service staff has reduced from 25,500 to 19,500.
We were surprised to learn that at times in the past, HMRC has simply closed its telephone line when it could not cope with demand.MPsWhile the tax collector has said it has made efficiencies with digital agents, it has caveated this with “the additional pressure of responding to the pandemic”.
It blames this pressure for poorer service in the past and backlogs such as a 3.3mn post pile up it had at one point.
HMRC has come under renewed pressure over its service levels of late, after reports in December and January pointed to customer service issues.
Last month, the tax department’s website struggled to cope with an influx of people trying to use it, and this month taxpayers were reportedly kept on hold for several hours before being cut off without speaking to a staff member.
The Treasury committee has been pressing HMRC for answers on why the outages happened, and how it plans to avoid them in the future.
In the report published today, MPs said they were “surprised to learn” that at times in the past, HMRC has simply closed its telephone line when it could not cope with demand.
It is crazy that people trying to get help from HMRC on paying the right amount of tax find it so difficult to get through.Susan Ball, Chartered Institute of TaxationThey dubbed the practice “unacceptable”, especially when people ringing in are simply trying to pay the government money.
The tax gap - the difference between the amount of tax that should, in theory be paid, and what is actually paid - was £32bn in 2020-21, or 5.1 per cent of all tax liabilities.
MPs said improving customer service is set to become even more difficult as the current inflationary pressures squeeze taxpayer budgets and reduce HMRC’s own spending power.
They added: “HMRC’s plan for improving customer service is to continue digitalising the tax system, moving people away from phone and post onto online systems.
“However, we are not convinced that its plans will sustainably reduce demand for traditional channels or deal with the unacceptable level of service that taxpayers and agents are currently suffering.
“The move to online services will not happen quickly and will not be appropriate for all circumstances or customers.”
The committee of MPs included a recommendation that HMRC send it a plan within the next three months on how it will improve customer service “to adequate levels as quickly as possible”, adding to the plan it needs to send to the Treasury committee by the end of this month.
This plan needs to include the metrics HMRC uses to measure call times, customer service level goals, solutions for taxpayers who cannot use digital services, and a contingency plan if it cannot reduce the use of its traditional - versus digital - channels.
The report also highlighted other areas of concern, including:
- Resourcing issues for HMRC’s compliance work, which MPs believe are exacerbating a multi-billion pound tax gap.
- Lagging behind on preventing fraudulent VAT registrations.
- HMRC’s plan to “only recover a quarter” of the £4.5bn losses due to fraud and error on its Covid-support schemes “does not go far enough” and “risks rewarding those taxpayers that were dishonest”.
Tax body: ‘It’s crazy’
The Chartered Institute of Taxation has said MPs are right to challenge HMRC on its service levels.
“Our members tell us every day of the delays they face getting answers and action from HMRC – and the impact this is having on businesses and individuals,” said the tax body’s president, Susan Ball.
“HMRC has 6,000 fewer customer service staff than five years ago. The government appear to have cut staff numbers anticipating efficiencies and time savings from digitalisation that have not yet arrived.”
Ball noted that HMRC is also sending out fewer payslips and payment reminders than it used to, which she said could be leading to more attempts to contact HMRC to find out how much to pay and by when.
“It is crazy that people trying to get help from HMRC on paying the right amount of tax find it so difficult to get through, especially when an estimated £3bn a year is lost to the Exchequer from non-deliberate taxpayer error,” she added.
“The first principle of compliance surely has to be making it easy for willing taxpayers to comply with their obligations.”
Back in October, Ball spoke at FTAdviser’s Financial Advice Forum and said HMRC’s response levels were “the worst it’s ever been”, frustrating both tax and mainstream advisers, with some saying it is hard to get any sort of response from the government department at all.
HMRC’s response
A HMRC spokesperson told FTAdviser: “Since 2005 we have cut the UK’s tax gap by more than 30 per cent, and we continue to prioritise collecting unpaid taxes, which is why are adding a further 2,500 people to our compliance teams as well as rolling out our digital offer to ensure everyone pays what is due.
“We take a supportive approach to taxpayers in debt and balance that with recovering debt from those who can afford it. A blanket approach would put thousands of people and businesses to the wall.
“The Covid support schemes protected millions of jobs and businesses during the unprecedented pandemic, and whilst we ensured payments were not unnecessarily delayed we also minimised fraud through compliance checks and have protected £1.2bn so far.”
Jim Harra told the Public Accounts Committee hearing that with the resources he was given in the 2021 spending review, what he promised in return was that HMRC could maintain the tax gap with that resource.
“We do, however, get additional resources then given to us on top of that from time to time in fiscal events in return for promising additional tax revenues,” he added.
“That would tend to reduce the tax gap. If you look at the tax gap over time, it has reduced from about 7.5 per cent, in 2005-06, down to 5.1 per cent (2020-21).”
ruby.hinchliffe@ft.com
