AAT: HMRC needs more support and longer-term thinking

The HMRC Charter defines the service and standard of behaviour that customers should expect when interacting with the tax authority. While there has been broad support for the Charter and its aims, the latest Charter annual report demonstrates that HMRC will struggle to meet it as it contends with an ever-increasing workload, a delayed transformation programme, and reductions in staff and resource. So, what needs to happen for HMRC to reverse this trend and meet its Charter obligations in the future?

A declining service

HMRC’s Charter annual report showed declining levels of performance and customer satisfaction. Complaints to HMRC in 2022 increased by 14% compared to the previous year, while customer satisfaction was down 3%. Furthermore, the proportion of telephone adviser attempts handled declined from 77.3% in 2021, to 71.1% – dropping further adrift of HMRC’s target of 85%.

This will not come as a surprise to many accountants, including AAT members who have continually raised their concerns over significant delays and unresponsiveness when dealing with HMRC. Yet, the blame cannot be placed entirely on HMRC when considering the resources it has available to it.

The Public Accounts Committee noted last year that HMRC customer service staff numbers have been cut by 24% over five years. The strain on staff was recently evident when HMRC decided to temporarily close the self-assessment helpline so it could re-purpose staff to deal with other backlogs. Although it is too early to determine the impact of this decision, it cannot be a sustainable long-term solution.

It is also fair to say that over the past decade, HMRC has been asked to do a lot more with less. Brexit and the COVID-19 pandemic placed significant new burdens and responsibilities on HMRC at the same time as it has tried to manage enormous transformation programmes, like Making Tax Digital (MTD). HMRC has not been faultless in these efforts, but it would be fair to ask what organisation could have managed better with such limited capacity and resource.

More investment into HMRC is needed now

The Chancellor will give his Autumn Statement on 22 November 2023. There will doubtless be plenty of priorities on his mind and putting more funding into HMRC’s customer service is admittedly not the most immediate vote-winner. However, an effective and efficient tax authority is fundamental to boosting public finances, closing the tax gap, and improving productivity by preventing the delays and disruption businesses currently face with HMRC.

This need for extra resource is recognised across the profession. Earlier this year, AAT and nine other professional bodies wrote a joint letter to the Chancellor, urging him to increase investment in HMRC’s customer service resource. This was sadly not reflected in his Spring Budget, yet the Charter annual report’s findings should give the Chancellor further food for thought as he prepares his Autumn Statement. Even if he chooses not to increase investment in HMRC this year, there are still other actions he could take to try to reverse the declining trend of service levels.

Planning for the long-term

As previously mentioned, HMRC has had to face multiple unanticipated events over the decade which has put a strain on its capacity and resource. Yet, even without them, the lack of a long-term plan for HMRC puts it at a disadvantage when looking at recruitment planning, resource allocation, and prioritisation. The Government could set HMRC such a strategy to ensure there is a clear vision of the future for HMRC which it can prepare for and ensure it has the necessary resources to deliver. Of course, customer service would need to be a major focus of any long-term plan but there are also other ways to help relieve pressure on HMRC so that service levels still improve.

For example, tax simplification could be a major enabling principle of a long-term HMRC strategy. The decision to abolish the Office for Tax Simplification (OTS) is something which is still lamented today among the profession and pledges made by Government on simplification have not been especially evident or wide-ranging. AAT believes there is still merit in setting up a separate body to oversee the adherence to simplification in HMRC, not just on policy but tax administration itself. Whilst this is unlikely, AAT contends that it would not only result in more efficient and smoother processes for taxpayers, but also enable HMRC to refocus resources on providing greater customer service.

Digitisation should also feature as a major plank of the strategy, albeit with the caveat that customer services provide a dedicated resource to support those that are digitally excluded. For many, this term refers to solely elderly people, but HMRC needs to think broader and see how it can support other excluded groups, such as people with neurodiverse conditions who are not supported by a digital-only solution.

MTD, when it works, has shown how it can greatly improve the experience of dealing with the tax authority and there remains a good appetite among AAT members to harness MTD for ITSA for their clients. While that programme has faced severe delays and justified criticism, any further delays or postponement of MTD for ITSA would be a regressive move. Instead, HMRC needs to co-create with software developers and ensure the next stages of MTD meet its stated deadlines.

Lastly, any long-term plan for HMRC needs to consider what the purpose of the tax authority should be moving forward, as well as ensure resources are prioritised where they’re needed most and consider what other bodies can support the rest. Compliance is one such area, where professional bodies could take a more involved role in ensuring accountants and tax advisers meet professional standards. Over 200 professions in the UK legally require membership of a professional body but the accountancy profession is notably absent from that list. Introducing a requirement for professional body membership could help reduce the pressures on HMRC while simultaneously raising standards across the board.

Decisive action needed

The government is reaching a critical point in determining the future performance of HMRC’s customer services. While extra investment in HMRC may be difficult at a time when public finances are strained, it would be counterproductive not to and ultimately harm the economy. Investment in customer services, accompanied by a long-term strategy for HMRC, would ultimately have a positive effect on public finances and boost productivity. To ignore it for much longer could cause irreparable harm and damage to HMRC’s reputation and the trust of taxpayers and businesses.