Moving taxpayers to digital services is a key part of HMRC’s plan to achieve efficiency targets. HMRC hopes that its ‘digital-first’ approach will allow it to cut costs and free up resources to help those with complex affairs or who need extra support. Use of HMRC’s digital services has increased considerably in recent years. HMRC estimates that around 60% of transactions with taxpayers are now carried out digitally.  

Digital services better for straightforward issues 

In its report on HMRC customer service, the NAO has found that digital services are better suited to straightforward issues, such as reporting a change in circumstances. It is not clear if digital services can offer a like-for-like replacement to traditional channels for many issues. Additionally, there are gaps in what individuals can do online and even more so for agents. For example, taxpayers still need to call or write to HMRC to split a personal allowance between two or more different employments. The NAO found that only half of the queries it sampled could be resolved digitally. 

Telephone and post services still needed 

The move to digital has not reduced the demand for HMRC’s telephone and correspondence services, and service levels have suffered as a result. HMRC answered just two-thirds of calls in the first 11 months of 2023-24. Those callers who did get through waited on average nearly 23 minutes to speak to an adviser. HMRC believes that most calls are avoidable as the taxpayer could find what they need online. It would also appear that many calls may be caused by errors or delays on HMRC’s part and could be avoided if HMRC had better processes in place. It is estimated that at least 13% of calls are made to chase progress.  

HMRC service quality questioned 

The NAO believes that the quality of HMRC’s services has suffered, referring to HMRC audits, which found that staff had failed to fully comply with procedures in 34% of the telephone and correspondence cases sampled. This may add to demand for HMRC’s traditional services in the form of follow-up queries from customers. In exit surveys, taxpayers reported that their query was not satisfactorily resolved in 29% of handled calls in the first 11 months of 2023-24. 

NAO recommendations and government action

The NAO recommends that HMRC allows more time for new services to bed in and to understand the difference they make. HMRC should cut staff numbers only when the benefits are demonstrated. HMRC should offer a more customer-focused approach to encourage the take-up of new digital services.

In the run-up to the publication of the report, the government announced that it will provide £51m in new funding to help HMRC meet the target of answering at least 85% of calls.

ICAEW’s Tax Faculty response

Caroline Miskin, Senior Technical Manager – Digital Taxation, said: “Although it’s been clear for some time that HMRC’s services are falling short, the NAO has provided a lot of additional insight about the reasons for, and the depth of, the problems. This situation simply can’t be allowed to continue. Tax collection is suffering and there are huge inefficiency costs for taxpayers, agents and HMRC”. 

“Yes, digitalisation is the way forward, but urgent action is needed now. HMRC needs to significantly step up its digital offering, and ensure traditional services are fit for purpose in the meantime. The additional funding announced by the government is welcome, but it may not be enough. Any improvement in performance is not likely to be seen until the Autumn and in the meantime service levels will remain very challenging.”