Panellists

• Lindsey Wicks, Senior Technical Manager, Tax Policy, ICAEW
• Stephen Relf, Technical Manager, Tax, ICAEW
• Caroline Miskin, Senior Technical Manager, Digital Taxation, ICAEW

Producer

Ed Adams

Transcript

Lindsey Wicks: Hello and welcome to The Tax Track, the podcast series from ICAEW where we explore the latest developments in the world of tax and what they mean for our members and tax professionals alike. In this episode, we’ll be talking about HMRC service performance and how to improve it.

Stephen Relf: Just 45% of agents gave a positive rating for their experience with dealing with HMRC.

Caroline Miskin: HMRC really does need to up its game and really move on with providing digital services, particularly for agents.

LW: I’m Lindsey Wicks, Senior Technical Manager for Tax Policy at ICAEW. I’m joined this month by Stephen Relf, Technical Manager, Tax and Caroline Miskin, Senior Technical Manager, Digital Taxation. Welcome to you both.

A damning report from the National Audit Office in May concluded what our audience has probably known for some time: that customer service from HMRC is falling far below levels expected, with things like core waiting times soaring by over 350% over the past five years. Today we’re going to explore what can be done about it. But first, to set the scene, it’s worth reminding ourselves who it is that HMRC is serving.

There are over 34 million individual taxpayers, five million business taxpayers and over seven million families in receipt of benefits and credits, and they are all administered by HM Revenue and Customs. In 2022/23, HMRC spent £881 million on customer service, but performance has been below expected levels for telephone and correspondence for almost all of the past five years. Stephen, what does the NAO report tell us about HMRC service performance?

SR: Well, let’s go straight in and start with the traditional communication methods of telephone calls and post. On calls, the report does contain a lot of figures, some of which made for very good headlines on the day it was published. For example, the NAO found that, in total, taxpayers spent 798 years on hold waiting to speak to HMRC in 2022/23. But perhaps more interesting from our perspective is that in the first 11 months of 2023/24 HMRC answered fewer calls, just two-thirds against a target of 85%, and for those people who did get through, they waited longer – an average of 23 minutes, compared to an average of just five minutes in 2018/19. Now, as a result, and as you’d probably expect, taxpayer satisfaction levels for calls are now very low at just 43.5%.

LW: And what about the handling of written correspondence?

SR: For post, the picture is a little bit more mixed, partly because of the impact of the COVID-19 pandemic. HMRC’s handling of correspondence is below target, and it has been below target for a number of years. But the figures are getting better.

CM: One of the statistics that I find most meaningful is HMRC’s stock of post on hand – that is now down to about one million outstanding items as of February 2024. It was as high as over three million during the pandemic. Typical HMRC receipts in a month are somewhere between one or two million, just to put it into context.

LW: And do these figures reflect the feedback that we get from members?

SR: Yes, it does very much reflect our members’ experiences. What I’m seeing in my inbox, what we’re hearing at all the meetings we have with volunteers, and various surveys that have been done, currently the big issue is telephone performance. That is where it has really fallen off. We no longer get separate figures for the agent-dedicated line, but it’s the telephone waiting times which are really out of hand. The experience of post has definitely improved, but there’s considerable variability around the stats, an awful lot of outliers and backlogs in different areas.

What I think HMRC doesn’t appreciate is the very significant impact on agents’ businesses. They’re incurring time costs that can’t be billed to clients. It’s damaging relationships with clients – I’ve had members report that clients have actually disengaged them because they think the agent’s not doing their job because the refund has been so delayed – and they’re having to do more pro bono work because they are coming across people who typically might not have an agent, but are finding that, because of delays, they just can’t work their way through the system and so they are having to help people out.

The other point I would draw attention to – I think the NAO did as well – is the quality of the responses that you’re getting on the feedback, the quality of the responses in letters. There’s always a huge turnover of HMRC customer service staff, but that does seem to have got significantly worse and agents are reporting to me cases where there’s simply incorrect advice or advisers just not able to help.

LW: HMRC does have a lot of performance targets, but do those targets encourage the correct behaviour? For example, the target to handle 80% of post within 15 working days and 95% of post within 40 working days?

CM: I think that is very much open to question. Something that we have been saying for quite some considerable time is that once those 15 and 40 working day deadlines are passed, there isn’t really any incentive for HMRC to then deal with that correspondence. And we have seen the situation where HMRC is clearing a backlog… that those performance targets actually will get worse because they’re clearing the older stuff, which does suggest that the targets are not necessarily measuring the right things.

We would also like to see much more emphasis on the volume of mail on hand. To me, that’s one of the most meaningful statistics, but it’s not one that is published regularly.

There’s also a lot of information that I think would be useful in terms of what HMRC calls “avoidable contact”. We keep being told by HMRC that taxpayers and agents are phoning where HMRC thinks it’s not necessary. HMRC hasn’t been very forthcoming on the reasons for that unnecessary contact. The little we have seen, it seems to be mostly progress-chasing, but it would be very helpful if HMRC could do more to actually promote its other services and actually give us information that we could use to get messages out on reducing the avoidable contact.

SR: That’s a quite good point, isn’t it because when it comes to national insurance numbers, for example, HMRC gets contacted a lot by people who are looking for their national insurance number. And that can now be accessed through the HMRC’s app. We’ve certainly done our bit to try and publicise the app and drive taxpayers to that.

LW: Going back to the phone lines again. We discussed HMRC service standards in the first episode of The Tax Track back in January, and at that time we had significant restrictions on the self-assessment helpline for both agents and taxpayers. Since then, we had the announcement of restrictions to the VAT, self-assessment and PAYE helplines on 19 March, only for that decision to be reversed the following day. What are the implications of this change in approach?

CM: It was a pretty extraordinary reversal, and we think probably involved intervention from the chancellor. And I think it came as a big surprise for HMRC. HMRC did have to explain themselves to the Treasury Select Committee. It was very clear from that that HMRC was taken aback. They regarded the closure of the self-assessment helpline as having been a success. I think we regard that as unproven, for two main reasons. One is that there is no data on what impact there was on the quality of returns that were being submitted, and whether people were making more mistakes. I think also, HMRC regarded the fact that at least as many returns were submitted as demonstrating success. But it doesn’t take much to point to the fact that actually there was a larger number of self-assessment returns that weren’t filed. So I think at best it’s unproven. But it is extraordinary to see such a reversal – really, really unusual. And it’s quite clear that both politicians and the civil service are having to go back to the drawing board. We did get a little bit of notice, but we were not consulted. And certainly, the suggestions that we would be more on board if we’d seen the impact report of the previous closures, that it would have been different – that is not the case.

LW: Stephen, does the NAO suggest why things are so bad?

SR: Yes. It’s a fairly complicated picture because obviously there’s an awful lot going on. This could also be down to the effects of fiscal drag, for example. Over the last few years, the government has decided to keep the personal allowance and the income tax thresholds at the same level and, as a result of that, more people are now within the tax system, and more people have to engage with the more complicated areas of the tax system. So again, that’s one way in which more demand could be part on HMRC.

But in the report, the NAO’s main focus is on the impacts of HMRC’s Digital First approach. This is HMRC’s push in recent years to ensure that where a taxpayer can do something digitally, they do so. The idea is that this should improve things for taxpayers, but also for HMRC as will reduce demand for their traditional services. On the face of it, HMRC has had quite a lot of success in this area. Some 60% of taxpayer transactions are now carried out digitally, and the figures for the online personal and business tax accounts and the HMRC app are actually quite staggering. In 2022/23 they were accessed 199 million times, and that’s an increase of over 300% on the figure for 2016/17, and the figure for the first 11 months of 2023/24 is already higher at 228 million. But that is just usage, and usage probably doesn’t tell the full story. The NAO believes that not all of the digital services are fit for purpose, and in approximately half of the cases it sampled, it found that the query would need to be resolved by human input. This may be driving taxpayers back to using the traditional methods of communication.

The NAO does suggest that digital may be best suited to simple tasks and queries, and this may be part of the reason why agents in particular are frustrated with the service they receive from HMRC. In satisfaction surveys, just 45% of agents gave a positive rating for their experience with dealing with HMRC. This compares to 53% for mid-sized businesses, 65% for individuals and 74% for small businesses.

LW: I guess in terms of complexity, the other thing that we’ve got to factor in is the current cost-of-living crisis. We’ve got more people with multiple jobs, or maybe taking on an extra engagement through the gig economy, and that all adds to the complexity of their tax affairs as well.

CM: Yes. ICAEW is wholly behind HMRC’s moves to digitalise the tax system, absolutely 100% behind, although we do acknowledge, of course, that there are always going to be individuals, and there are always going to be individual circumstances that mean that post and telephone contact continue to be necessary. And HMRC, the general perception is, has gone too far too fast without bringing people with it.

What ICAEW really would like to see is very much more significant investment in HMRC digital services. Part of the problem with HMRC service performance is years of under-investment in digital services. We are now seeing some investment, for example, in the single customer account, which is going to very significantly improve the experience for individual taxpayers. But we’ve got a long history. We’re all feeling rather battle-weary. We’ve had the trust registration service, we’ve had capital gains tax real time reporting for property sales. More recently, we’ve had the VAT registration service. HMRC really does need to up its game and to really move on with providing digital services, particularly for agents.

It’s worth bearing in mind that a lot of the HMRC communication saying you must go online, you must go online – HMRC primarily wants to get that message out to individual taxpayers. Agents generally will go online. Why would an agent want to sit on the telephone when they could do something online? I think for agents the issue is – and HMRC does recognise this – that there are very significant gaps in the digital services, and we have been doing a lot of work to document those and to prioritise them. We’ve got a lot of discussions ongoing with HMRC, but we’re currently in the situation where agents can’t communicate electronically with email or a secure email-type service. Agents can’t get tax returns withdrawn, the registration and deregistration for self-assessment services for agents need improvement, and agents can’t really change tax codes online or have visibility of tax codes. There is a significant amount of work for HMRC to really up its game and provide those services. And we’d be only too delighted to promote them, and our members would be only too delighted to use them.

LW: Back on our first episode, you highlighted that a lot of the helpline contact is for things that taxpayers can do easily online, things like finding out their national insurance number – Stephen’s already given that example – asking what their PAYE code is, changing their address. But the NAO report also suggests that HMRC is contributing to the problems. Can you tell us a little bit more about that?

CM: Yes, it’s what’s called failure demand. In terms of telephone contact, there is in the NAO report a suggestion that 34% – and it’s an HMRC statistic, actually – 34% of sample calls and responses to correspondence, in 34% of cases advisers had not actually complied with HMRC’s own internal processes. What I would point to, and I do have some sympathy with HMRC but it comes back to years of investments, HMRC is having to rely on some really antiquated legacy systems that don’t talk to each other, don’t connect, and there’s a technological deficit that HMRC is struggling to keep up with. You see it in the number of batch processes that HMRC still have. Around 31 January, HMRC failed to process some payment files, and the impact of that was that an awful lot of people who were expecting to be charged voluntary class 2 national insurance contributions and who had indeed paid them, because the payment file wasn’t processed in time, those were rejected, generating a huge amount of contact, because in each and every one of those cases, either the taxpayer or their agent is going to have to contact HMRC to rectify the situation.

SR: I’m quite fascinated by the sections of the report which deal with failure demand. It would be fantastic to get some more information and some better information on what it is, the causes of it, because it bundles together quite a few things, doesn’t it. There’s different types of HMRC failure, but it also mentions customer errors. First, it’d be great to see how that figure breaks down into the different components, but also what are these customer errors, and are they themselves caused by maybe a gap in guidance or information or advice from HMRC?

CM: Indeed.

LW: We’ve already started moving into how we might improve HMRC services, but what are the NAO’s recommendations for HMRC?

SR: The NAO do make quite a number of recommendations. These do include that HMRC should develop realistic plans for its digital services, and importantly, that they should only factor in staff reductions from those changes when the services have taken effect and are proven to be efficient. Also, in coming up with those plans, HMRC needs to do more initially to understand the needs of taxpayers and agents, and they should ensure that they have access to adequate alternative services. And I think finally, as well, HMRC should adopt a more consistent approach to introducing major changes, particularly where that involves reducing or stopping existing services, so that involves early engagement, effective communication and thorough testing.

CM: Yes, and I think the point that ICAEW would add to the NAO report is that government and the Treasury need to consider much more carefully in advance how tax policy measures will be implemented digitally. It used to be the case that HMT or the government could introduce a tax policy and all it probably required was a new paper form and a new process. The lead-in time for policy changes to get systems updated, particularly while HMRC is still relying on legacy systems, is actually very considerable. We see this in things like a household basis for the high income child benefit charge… it sends most of the tax profession into horror because even if you support the fairness that the policy change is intending to achieve, the work involved in implementing it and coming up with a system that will work is just impossible.

SR: There was a report by the IFS published recently which looked at tax policy over the last 14 years, 2010 to the current day and obviously a lot of new taxes have been introduced, but also it found that a lot of existing taxes had been made more complicated, and overall we’re looking at a much more complex tax system. As you say, one effect of that is a greatly increased burden for HMRC.

LW: And at the end of the day, it’s far easier to make a tax system digital if it’s simple, not when you’re adding complexity.

CM: And when you’re working from scratch. I think it’s interesting that with the single customer account, HMRC started with child benefit, which did not have a digital service, so it was actually much more straightforward for them to build something with a clean sheet.

SR: I think as well, in our last podcast we discussed the mandatory payrolling of benefits in kind, and on reflection, having listened to Caroline’s observations here, it makes me wonder just how achievable that’s going to be when we come to that.

LW: And ICAEW is working with HMRC to improve its digital services. Caroline, tell us a little bit about what’s being done.

CM: Well, at the moment, we’ve got a number of different things going on. We’ve just started a project, a joint project with the Chartered Institute of Taxation, which is going to look at a number of different things. We’re going to look at gathering data on agents’ interactions with HMRC, for telephone in particular, and actually get some robust data that goes further than the sort of surveys that have been done to date, and gets the whole picture of the good and the bad, because we hear a lot about the bad so we wanted to get something that was more robust. But we’re also going to be doing a lot more research and really digging into all the data that is there, to come up with a report with recommendations.

The Public Accounts Committee, just before the election was called, had announced an inquiry into HMRC service performance, and I’m sure that will come back again, as will the Treasury Select Committee – they’re also likely to show an interest, so we will be working with them. A lot of the effort that we are putting in is around the digital services and what HMRC is calling “the pain points”, in particular trying to enable agents to have a better service. And particularly if there’s going to be any suggestion that there might be regulation, a quid pro quo must be better agent services.

LW: You’ve alluded to funding. Does HMRC need more support from the government?

CM: Yes, in short. Following the announcement of the helpline closures and that reversal, there were discussions between HMRC and government. That then resulted in an announcement just before the NAO report was published of an additional £51 million for HMRC customer service that will enable HMRC to recruit a significant number of telephone helpline advisers. It is a temporary fix. We haven’t actually got the details on exactly how long that additional temporary resource will be available for. We shouldn’t expect to see any improvement until the third quarter of the tax year, so October, October to December, because it takes time for HMRC to recruit and train those advisers. But it is a temporary fix, and HMRC has made it very clear that the sort of plans it had for moving contact to digital haven’t gone away and will be revisited.

LW: Finally, is there any practical guidance that we can give to members?

CM: One thing I can point you to is issue 114 of Agent Update does include recommendations for how to deal with post. It covers things like only including correspondence for one client in each envelope, avoiding cover letters unless they’re really essential, and some basic things like postcodes and addresses. Even though all the post is scanned, it is very critical to make it clear in the heading and in the first few words exactly what the letter is about, because otherwise it may end up in the wrong post queue and get delayed even further. Those kind of of things are not that exciting, I’m afraid, but there are a few things in there that are worth thinking about.

LW: I’ve read somewhere that you shouldn’t use the word complaint unless it really is a complaint because then it can end up in the wrong queue as well.

CM: Yes, that’s absolutely right. It will end up being dealt with as a complaint. That doesn’t necessarily get the underlying issue resolved very quickly. You’re better to get the underlying issue resolved and then complain.

LW: Stephen, earlier on you spoke about HMRC’s app and the fact that it’s really easy to find your national insurance number there. What else could you be using the app for?

SR: That’s a really good question. We did an article, probably a few months ago now, and we gave five good reasons to use the app, five top tips. National insurance was certainly one of them, but also maybe checking your state pension position as well, which is very important. I would strongly recommend that everyone does consider using the HMRC app. Download it for yourself from the app store, encourage your clients and your family and friends to do so as well, because it is much, much better than it was before and it’s improving all the time. You certainly can do a lot of things through it, which you may not have realised you could do.

LW: Thanks, some great tips there. I’m sure this is a topic we’ll be returning to. It’s always a hot topic for our members, and it would be great to be able to be promoting some new HMRC services next time we revisit this topic.

That’s it for this episode. Many thanks to Stephen and Caroline for your contributions, and thanks for listening. If you’ve missed anything, we’ve included some links for further reading in the show notes, and if you found it useful, then don’t forget to subscribe so you never miss an episode. You can rate and share the podcast too.

We’ll be back next month with the next Tax Track. In the meantime, why not check out the sister podcasts from ICAEW? Accountancy Insights provides business, finance and accountancy analysis, while each episode of Behind the Numbers offers a deep-dive into a selected topic. There’s also the recently launched student podcast aimed at the young professionals.

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