Postby etf » Fri Feb 16, 2024 2:05 pm
29 January 2024
Nigel Huddleston MP
Financial Secretary to the Treasury
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ
Dear Minister,
HMRC SERVICE PERFORMANCE
ICAEW
Chartered Accountants’ Hall Moorgate Place London EC2R 6EA UK
T +44 (0)20 7920 8100 F +44 (0)20 7920 0547 icaew.com
The Institute of Chartered Accountants in England and Wales (ICAEW) incorporated by Royal Charter (RC000246)
Registered office: Chartered Accountants’ Hall Moorgate Place London EC2R 6EA UK
I am writing to you with some further details on HMRC service performance, as discussed at a
meeting between the Chancellor and ICAEW on 16 January 2024.
Before setting out the details of issues that our members face when interacting with HMRC, I
summarise ICAEW’s recommendations to improve matters.
Recommendations
Increased investment in HMRC to develop better digital services and to improve customer support
that is needed until these digital services can be demonstrated to reduce phone and telephone
demand.
• An HMRC taskforce to clear the backlog of correspondence and thereafter keep on top of
it.
• Prioritisation of HMRC resources. We think that there may be scope to refocus HMRC
resources onto the development of digital services and altering processes that will reduce
phone and post demand in the short to medium term. This is particularly the case for digital
services for agents. We have provided a list of possibilities to HMRC. As part of this
reprioritisation, HMRC may need to stop some activities.
• Greater consideration of the impact of any tax policy changes on HMRC’s effectiveness
including, for example, the increase in the number of taxpayers who will need to complete
self assessment tax returns because of the freezing and reduction of bands and
allowances.
• A step change is needed in HMRC’s approach to driving forward improvements along with
greater accountability.
• Ensuring that any tax policy changes adopt a ‘digital first’ position with the aim of reducing
the administration burdens placed on HMRC and taxpayers.
• Also in the longer term, the tax system needs to be radically simplified so that taxpayers are
able to successfully engage with it without needing to seek help from HMRC.
Experiences of ICAEW members
ICAEW continues to receive evidence of unacceptable HMRC service performance on a daily
basis. The problems are across all HMRC service areas and include extreme waiting times on
helplines, calls being cut off and long delays in responding to post. Members are increasingly
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commenting that the quality of service that they receive when they do speak to an adviser or
receive a written reply has deteriorated significantly with HMRC advisers unable to deal with the
issue and giving incorrect information.
Appendix 1 includes a selection of case studies of feedback ICAEW has received from members.
These case studies, from across HMRC service areas, illustrate the impact that poor HMRC
service performance is having on taxpayers, businesses, and their agents.
Most HMRC helplines are operating reduced hours. Prior to the pandemic many of the major
helplines were open in the evening and at weekends. This is no longer the case and there does not
appear to be a plan to restore the previous hours.
Poor service performance increases the risk of tax not being collected and is an administrative
burden on taxpayers, their agents and also HMRC. The impact of this burden on economic growth
and the associated costs are difficult to quantify but is nonetheless real.
Self Assessment
The situation is currently most acute in the area of income tax self assessment (SA) and
individuals’ PAYE. This is partially seasonal, but the situation has been exacerbated by HMRC’s
decision to restrict the SA helpline and the agent dedicated line (ADL) to a limited range of queries.
Agents are unable to phone HMRC about any individual’s PAYE issue (including, for example, an
incorrect tax code) and cannot phone about problems with registering or deregistering for self
assessment. These issues cannot be resolved by agents online. SA repayments are often made
promptly but if they are flagged for checking, they take many months to be resolved. This renders
the service level agreement and the information on HMRC’s Where’s my reply and dashboard tools
much less helpful than might appear to be the case.
R&D
Members are also expressing considerable frustration about the quality and handling of enquiries
into claims for research and development (R&D) tax relief. While HMRC should take appropriate
action to tackle abuse of any tax relief, the current high-volume approach is causing many valid
R&D claims to be rejected or withdrawn. Members report significant delays in the handling of
enquiries exacerbated by not being able to chase progress or resolve misunderstandings as
enquiries raised by the team in Individual and Small Business Compliance have no named point of
contact. Where the claimant company had made a repayment claim, these delays can have a
significant impact on its cash flow.
Employers’ PAYE
Our members who are employers and payroll agents tell us that they do not have confidence in
HMRC’s employer liability and payment (L&P) records due to persistent errors that have arisen
since PAYE real time information was introduced. They tell us:
• HMRC’s employer L&P account figures do not agree with employers’ records of liabilities
and payments made;
• referrals of figures that do not agree to HMRC’s Charges Resolution team are not dealt with
in a reasonable time;
• HMRC’s Debt Management & Banking (DMB) continues to chase for payment after a
dispute is raised; and
• employers and payroll agents cannot view the figures in HMRC’s enterprise tax
management platform (ETMP) in the same format as HMRC.
We have numerous real-life examples that we would be happy to share. We are in discussion with
HMRC about some of them.
External evidence of the issues
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A significant body of evidence is available from HMRC performance data and public statements
including the Charter annual report and HMRC’s annual report and accounts for 2022-23. The
report by the Comptroller and Auditor General in HMRC’s annual report and accounts highlights
the problems as does the annual Adjudicator’s report. The Public Accounts Committee (PAC)
launched its annual enquiry into HMRC’s accounts on 27 July 2023 and has collected evidence but
has yet to report. Its report into HMRC’s performance for 2021-22, published in January 2023,
concluded that taxpayers and their agents were still not receiving an acceptable level of customer
service and that the move to online services will not happen quickly. It made a series of
recommendations for improvements and asked that HMRC’s CEO responded to the PAC within
three months. HMRC replied on 12 May 2023. The Treasury Select Committee has also held an
evidence session and exchanged correspondence with HMRC. More recent data from HMRC does
not show any real improvement and there has been a further deterioration in telephone
performance.
Outlook
The First Permanent Secretary and Chief Executive, HMRC, set out HMRC’s position in stark
terms in the letter to the Public Accounts Committee dated 12 May 2023 referred to above, saying:
“Our existing resource levels will not enable us to handle current forecast demand – which is set to
increase significantly – for our phone and post services in line with our service standards.” A
reduction of £1bn to HMRC’s budget (2023/24 £5.7bn, 2024/25 4.7bn) was confirmed at Autumn
Statement 2023.
The prospects of improvement in service levels in the short to medium term seem remote. HMRC
considers that the solution lies in online self-service by taxpayers and agents. In the annual report
and accounts it states that it wants a 30% reduction in the volume of contact through phone and
post by 2025 (compared with 2021/2022).
However, HMRC’s digital services are not comprehensive, don’t work well and can be difficult to
access (for all and especially those with particular accessibility needs or lacking identity
documents). Digital services for agents lag behind the development of services for taxpayers.
Developments such as the single customer account show promise but will take years before they
make a significant difference to phone and post demand. HMRC is severely constrained by the
complexity of moving taxpayer records from legacy systems to new platforms. Developments such
as Making Tax Digital for income tax self assessment (MTD ITSA) are not expected to improve
customer service levels (HMRC’s main rationale is that the MTD ITSA will help to close the tax gap
associated with error and failure to take reasonable care). MTD ITSA, even if it can be delivered by
the intended go live date in accordance with the latest plans is likely to lead to increased demand
for telephone support while it is being introduced. There is an arguable case for redeploying
investment and resources allocated to MTD ITSA to improve other HMRC digital services.
Budget representations
ICAEW has also submitted a formal representation to HM Treasury ahead of the Spring Budget
taking place on 6 March 2024.
In that representation ICAEW’s key tax policy recommendations are:
• Deliver a tax strategy for modern simplified and digital tax system.
• Review tax cliff edges and remove disincentives to improving growth and productivity.
• Design all tax policy changes with the aims of simplifying the tax system and reducing the
admin burdens on both taxpayers and HMRC.
• Invest in digital tax services to address gaps and improve data access reducing demand for
phone and post services.
• Review HMRC’s capabilities to address the current and future demands and improve
service standards.
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• Review the VAT recovery rules for businesses where they do not own the goods but have
an economic interest in them (eg, when handling goods as third parties or leasing).
• Incentivise HMRC to improve its performance and provide equitable redress to taxpayers
that have incurred extra costs due to delays.
We look forward to hearing from you and we are very happy to meet you to discuss them.
