The National Audit Office (NAO) has just published its latest Customer Service report on HMRC and in summary it concludes that the tax office has failed spectacularly.
Just for a moment or two, let’s imagine that your business is called HMRC and has the twin aims of attempting to maximise income, whilst at the same time, keeping ‘customers’ happy. Most business owners would try to give exceptional service to their customers, and at the same time, keeping expenses within reasonable bounds.
You would primarily seek to measure success by looking at the level of income achieved, with costs being closely monitored. You would also attempt to eliminate unnecessary losses, such as by theft or fraud and take action to replace grossly inefficient software and associated IT systems.
Using these measures, ‘Big Jim’ Harra and ‘Little Ange’ MacDonald, numbers’ one and two in HMRC, as well as the oversight officials in government, have spectacularly achieved the gold medal standard for failure.
The tax gap
If we continue with ‘if HMRC was a business’ analogy for a moment, and specifically on combatting theft. It is clear that our tax authority has a quite a few security cameras, but unfortunately most are pointing in the wrong direction and to make matters worse, their security staff are not only poorly trained, but also only working part-time. Thus, the rest of the time, customers can take what they want with relative ease.
When it comes to maximising the level of income, there are various estimates of the gap between what is actually collected and what should have been. There is however general agreement that the tax gap is around £40bn per annum.
Most accountants would not be surprised to discover that many who ought to be taxpayers are slipping through the net, while others are very happy taking a flyer on understating income or inflating expenses. In many cases, this is because they cannot get an answer from HMRC on a confusing or tricky entry on their tax return, so they guess; invariably choosing the option that costs them the least amount of tax.
NAO report is disappointingly predictable
If you study the data from the annual NAO report, you’ll find it unsurprisingly predictable, largely because the decline has been going on for at least a decade.
I remember the days he days when tax offices were local and inspectors were all experienced officials who knew their area, especially the businesses in it, very well. Centralisation can be a good thing, if done well, with costs being reduced and the creation of a pool of experienced experts. Unfortunately, rather like taking bobbies off the beat and sticking them behind computers, HMRC’s removal of local tax inspectors has far too often encouraged evasion and abuse of the tax system.
In previous Blogs, I have already highlighted the seven million hours (equal to 800 years) that people have spent waiting to speak to an HMRC adviser on support phone lines. To put this into perspective, these waits have more than doubled in three years, which is quite some achievement. According to the report, HMRC spends £881m on customer service, which sounds like a lot of money, but given that even the most modest estimate of the tax gap is 50 times this amount, perhaps it is inadequate?
HMRC’s truly dreadful telephone service
If one is given the choice between dealing with a digital service, a chatbot or a human being on the end of a phone, the vast majority would much prefer to deal with a real person for help and advice. This however, is not the view of HMRC, which believes that humans should be taken out of the picture completely.
The telephone answering statistics are truly dreadful, though the good news is that the percentage of correspondence being answered within 15 days, has risen, but only because fewer people are writing in.
In 2023-24, only 66% of calls were even answered, which means that a third of taxpayers were just arbitrarily cut off, often after over 30 minutes of listening to tinny muzak! If this was your business and one third of clients or prospective clients, were treated this way, you would not be surprised if they immediately decamped to one of your competitors who actually answered their phone in a timely manner.
Even the modest proportion that got through had to wait an average of 23 minutes to speak to anybody; this is now over five times as long as it was in the 2018-19 year. It doesn’t help that many customers find the digital services unfriendly and unhelpful unless they have very straightforward queries. But what is truly ironic is that 72% of calls were as a direct result of HMRC’s process failures and admin delays.
The NAO report highlighted other statistics that have been getting progressively worse, such as complaints. In 2022/23 there were 91,217 recorded complaints, up 40% om 2019/20. In fact, all of the statistics in the report concerned with calls, are universally negative.
It just gets worse
So, what do you think is HMRC’s planned solution to all of these problems? Yes, you guessed correctly, HMRC has been planning a 14% reduction in front line customer service workforce next year, which was bound to improve the situation! But, as I reported on 16th May, the plans to cut the service were withdrawn following a hugely embarrassing media storm.
HMRC have admitted that they have no specific plans to meet their existing already very modest telephone performance target, which is to allow 15% of calls to remain unanswered; this totally ignores the fact that the true figure is currently 35% and getting worse.
The NAO’s Customer Service report summary contains these damning words: “Poor service levels have a detrimental impact on customers, and HMRC does not know the impact it has on economic activity and tax revenue.” The NAO then made a series of helpful recommendations but given past experience, there is no point in repeating them, as they’re bound to be ignored by ‘Big Jim’ and ‘Little Ange’.
Accountant’s view
The starting gun for the General Election campaign, was fired two weeks ago and both Labour and the Conservatives have ruled out raising taxes. Both parties are planning to raise the extra revenue they need for their various spending promises by tackling tax fraud. I say, good luck with that, as successive governments before you have tried and ultimately foundered on the log-jam of HMRC!
