Background 

In December 2024, a joint report by ICAEW and the Chartered Institute of Taxation (CIOT) highlighted the issues faced by agents in dealing with HMRC. Key findings included that agents find it difficult to contact HMRC and that, if they do get through, they often cannot resolve their query on the first attempt. ICAEW and CIOT made recommendations across a number of areas, including how HMRC could improve its digital services.  

ICAEW gave written evidence to PAC on 18 November 2024. This drew on initial findings from the survey which informed the joint report with CIOT.

PAC’s main findings

PAC’s latest report on HMRC’s customer service and accounts highlights the difficulties facing taxpayers calling HMRC. 

With average waiting times now exceeding 23 minutes, PAC is concerned that HMRC may have “sought to degrade its telephone service to drive taxpayers to digital channels”. However, PAC has doubts that “HMRC’s digital services are as good as HMRC claims”. As a result, PAC says, “HMRC’s treatment of taxpayers has damaged trust in the tax system”.

PAC has drawn conclusions and made recommendations in six areas, as summarised below.

Standard of telephone services

Conclusion: HMRC does not give enough consideration to the needs of taxpayers. It cuts off calls after taxpayers have been waiting 70 minutes, it does not provide a callback option and it cannot provide callers with accurate information on expected call waiting times. 

Recommendation: HMRC must address the needs of callers. It should re-instate a call waiting time target as a key performance measure and seek to improve functionality when it procures a new telephone service.

Meeting customer demand

Conclusion: HMRC’s digital services have not sufficiently reduced demand on the phone, with HMRC receiving 34m calls in 2023/24.  HMRC has failed to prioritise the resources needed to sustain an appropriate standard of telephone service.

Recommendation: HMRC should ensure it allocates sufficient resources to customer service to meet its performance targets. It should establish “guard rails” to protect services.

Managing the move to digital services

Conclusion: HMRC has been too willing to let its telephone services fail in the hope this forces people to use its digital services instead. HMRC estimates that 66% of the calls it receives could be handled online instead. However, not all services are available online, and those that are do not always provide the reassurance that customers need.

Recommendation: HMRC should ensure it meets a minimum level of service for all taxpayers, including the seven million taxpayers it estimates can’t use digital services.

In their joint report, ICAEW and CIOT recommended that HMRC maintains investment in legacy systems to ensure taxpayers and agents receive a sufficient level of customer service and functionality, and that HMRC identifies and plugs gaps in its digital services.

Improving digital services

Conclusion: HMRC does not provide an efficient means for taxpayers to communicate digitally with HMRC. It acknowledges it is clearly behind many other organisations in providing the ability for customers to securely message HMRC digitally.

Recommendation: HMRC should prioritise introducing systems for customers to submit files and send secure messages electronically to HMRC.

The joint ICAEW and CIOT report includes recommendations for HMRC to increase the use of secure email for agent communications and to co-create and continually improve digital services by working collaboratively with taxpayers and agents. 

Debt management

Conclusion: HMRC’s investment in debt management has not sufficiently reduced the amount of tax owed to it. PAC is concerned that HMRC is not effectively pursuing older debts. HMRC has estimated it may not be able to collect 45% of established taxpayer liabilities not yet received.

Recommendation: HMRC should set out what reduction in the debt balance it is aiming for and by what date, and a plan for how it will recover older debts before they become uncollectable.

Reducing the tax gap

Conclusion: HMRC is not doing enough to tackle deliberate cases of non-compliance. HMRC’s use of criminal investigation and prosecution is decreasing: there were only 344 criminal prosecutions in 2023/24, compared with 691 in 2019/20,

Recommendation: HMRC should be bolder in identifying and tackling abuse. It should set ambitious targets for compliance yield, research which investigations are most effective and consider setting a target for prosecutions. 

ICAEW’s view

Caroline Miskin, Senior Technical Manager - Digital Taxation, ICAEW Tax Faculty, said: “This latest PAC report makes sobering reading for HMRC. Despite some improvements due to an investment of £51m in May 2024, HMRC’s telephone service is in a very poor state, causing frustration for taxpayers and agents alike. New and improved digital services are key but need investment and HMRC must continue to support traditional methods of communication.” 

“PAC does not pull any punches in its assessment that the current state of play is eroding trust in the tax system. This is a worrying finding that may have significant consequences for tax collection. The government must do all it can to invest in and support HMRC in putting this right.”