PAC report criticises HMRC's customer service deterioration

The report comes a month after a joint study by the CIOT and ICAEW found that more than one-third of contact attempts were made to chase progress on existing enquiries, rather than to make a new enquiry. The CIOT and ATT, who submitted evidence to the committee, have backed calls by MPs for HMRC to fund improvements to customer service.

PAC report - HMRC Customer Service and Accounts

The PAC report has found that, in 2023–24, HMRC answered just 66.4% of customers’ attempts to speak to an adviser, against a target of 85%. With an average call waiting time exceeding 23 minutes, the committee has claimed that HMRC have sought to ‘degrade’ its telephone service to encourage taxpayers to use digital channels. “HMRC’s treatment of taxpayers has damaged trust in the tax system”, said the report. 

HMRC have blamed the limitations of its helpline service on issues with its telephone system technology and said that encouraging customers to switch to digital frees up its lines for vulnerable people and more complex cases. However, the committee has argued that given the difficulties taxpayers face trying to get through on the telephone, “we have doubts that HMRC’s digital services are as good as HMRC claims”. 

Additionally, the report has raised concern about the size of the tax gap, estimated at £39.8 billion in 2022–23. The committee said: “With increasing resources, HMRC must be bolder in how it tackles abuse of the tax system, ensuring it investigates more cases of criminality and brings criminal prosecutions where appropriate”.

The PAC report presents several conclusions and recommendations:

1. Conclusion: In providing telephone services, HMRC does not give enough consideration to the needs of customers. 

Recommendation: HMRC needs to put customers’ needs at the heart of its decision-making, including those of small businesses. HMRC should particularly address the needs of those trying to speak on the telephone and should reinstate a call waiting time target as a key performance measure. 

2. Conclusion: HMRC’s digital services have not sufficiently reduced demand on the phone and 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 now and in the future to meet its performance targets. It should establish “guard rails” to protect services. 

3. Conclusion: HMRC has been too willing to let its telephone services fail in the hope this forces people to use its digital services instead.

Recommendation: HMRC should ensure it understands how far its digital services can replace telephone services and what level of telephone service it needs to retain to meet customers’ needs. HMRC should ensure it meets a minimum level of service for all customers.

4. Conclusion: HMRC does not provide an efficient means for taxpayers to communicate digitally with HMRC.

Recommendation: As part of its digital roadmap, HMRC should prioritise introducing systems for customers to submit files and send secure messages electronically to HMRC. 

5. Conclusion: HMRC’s investment in debt management has not sufficiently reduced the amount of tax owed to it.

Recommendation: Now that HMRC has secured more resources to manage the debts owed to it, it 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.

6. Conclusion: We welcome HMRC’s new goal to reduce the tax gap but we are concerned that it still plans to reduce the number of prosecutions.

Recommendation: HMRC should: a) set ambitious targets for compliance yield that would allow it to achieve annual reductions in the tax gap; b) obtain an estimate that is as accurate as feasibly and practically possible of the offshore tax gap and develop a standalone strategy to reduce it; c) research which interventions are most effective in achieving a deterrent effect for tax evaders and organised criminals; and d) HMRC should develop a strategy to maximise effectiveness of both civil processes and criminal prosecutions and consider setting a target for prosecutions.

Commenting, Sir Geoffrey Clifton-Brown MP, chair of the PAC, said: “Given that citizens have no choice but to engage with HMRC, it has a responsibility to aspire to the highest standards of service. Unfortunately, what we have instead is a tax authority excavating its way to new lows in service levels every year. Worse, it seems to be degrading its own services as a matter of policy. HMRC is an organisation in defensive mode, and needs bold and ambitious leadership to begin to chart its recovery.” 

Letters exchanged between the PAC Chair and the tax authority’s chief executive

Following the publication of the PAC report, HMRC’s Chief Executive and First Permanent Secretary, Sir Jim Harra wrote to the chair of the committee, saying: “I am disturbed by the Committee’s claims that HMRC is deliberately degrading its customer services performance as a matter of policy and that service levels continue to deteriorate. I refute these claims in the strongest terms”. He added that: “HMRC has always deployed its available resources to maximise its performance across all customer services channels and continually strives to meet its service standards”.

Sir Geoffrey Clifton-Brown, chair of the PAC, responded:

“The two reports produced by the National Audit Office and agreed by you as HMRC’s Accounting Officer formed – along with written and oral evidence – the evidence base for our inquiry...

“In the report agreed with the NAO the following findings strongly indicate a focus on degrading the phone service rather than on addressing its failings: 

• HMRC has increasingly sought to restrict the supply of telephone services to manage its workload, with the aim to answer mainly complex queries and deflect more simple queries to digital channels.

• HMRC initially used deflection messages to advise customers of digital services, but it is now also ending some calls after playing a deflection message… 

• During 2023-24, HMRC stopped or restricted the calls it would handle on four of its helplines... 

“It is reasonable for the Committee to raise concerns and draw inferences from the evidence it receives. Our report therefore concluded that “we are concerned that it [HMRC] has sought to degrade its telephone service to drive taxpayers to digital channels”. My Committee could also have pointed to the long-term decline in customer service performance without corrective action being taken.”

Letters can be read here