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The overall level of customer service provided by HM Revenue & Customs (HMRC) has reached an all-time low. We are disappointed that services have continued to deteriorate since our last report, with 62.7% of callers waiting more than 10 minutes to speak to an advisor, continuing five years of decline. The Committee received an unprecedented number of written submissions about HMRC’s performance, demonstrating the extent of taxpayers’ exasperation over the quality of services and the impact on businesses. Fiscal drag and inflation have increased pressures on HMRC, at a time when it was already dealing with the consequences of the pandemic. As the taxpayer population increases, along with the complexity of their tax affairs, it looks like HMRC is struggling to cope. At £814.0 billion in 2022–23, tax revenues are at a record high, but HMRC still fell short of its compliance yield target.
Taxpayers typically want to do the right thing when it comes to paying tax, but HMRC has now resorted to closing customer support channels to prevent people from contacting it to sort out their tax affairs. It has not been given the resources it needs from HM Treasury to meet the service standards that customers expect. HMRC is too keen to point to the long road to digitisation as an excuse for poor services to customers now.
HMRC says it is committed to treating taxpayers fairly, but the judgements it makes on where to balance its resources can appear at odds with the risks it is managing. It has gone to great lengths to challenge people in the courts over their employment status, yet elsewhere the number of criminal prosecutions has dropped from 691 in 2019–20 to 240 in 2022–23. HMRC must be seen to pursue all forms of non-compliance sufficiently. It is only as a result of prompting by this Committee and the National Audit Office that it has uncovered the extent of error and fraud in research and development tax relief for small and medium-sized companies. Its latest estimate for 2020–21 is that error and fraud was £1.1 billion, three-times greater than it previously thought.
We acknowledge that HMRC is making progress in tackling the extent of money owed in unpaid taxes, but note it is still struggling to keep pace with the amount of work given an increasing tax burden and ongoing cost of living pressures. With so much to tackle and increasing use of private agents, it is important that taxpayers can contact HMRC if they feel they are treated unfairly. HMRC must ensure it maintains sufficient accessibility in the system for people to raise concerns and have these dealt with in a timely manner.