‘All-time low’: HMRC customer service deteriorates amid taxpayers’ exasperation

28 February 2024

HMRC appearing to struggle to cope as taxpayer population and tax complexity rise
Significant drop in criminal prosecutions sends wrong message while approach to IR35 rules deters legitimate economic activity

Customer service levels at HM Revenue & Customs (HMRC) are at an all-time low. In a report published today, the Public Accounts Committee (PAC) expresses its disappointment as service levels at the tax authority continued a five-year decline, with written evidence to the PAC’s inquiry about HMRC’s performance demonstrating taxpayers’ exasperation.

Since the PAC’s last report in January 2023, HMRC’s performance has continued to deteriorate. In 2022-23, 62.7% of callers waited more than 10 minutes to speak to an adviser, up from 46.3% in 2021-22. HMRC told the PAC’s inquiry that it did not have the resources to meet rising demand for its phone and post services at expected standards. It instead is directing callers to use digital services which it insists are good quality. The PAC received a lot of evidence to the contrary from taxpayers and their agents. The Committee agreed its report before the publication of the HMRC consultation response which indicated that it will not now require digital interaction until a service is of a suitable standard.

With a twin rise in the taxpayer population and the complexity of people’s tax affairs, the PAC states in the report that HMRC is apparently struggling to cope. At £814.0 billion in 2022-23, tax revenues are at a record high, but HMRC still fell £2bn short of its £36bn target for compliance yield (the additional revenue that would otherwise have been lost were it not for HMRC’s intervention), and expects to do so again in future years.

The PAC’s report notes a significant reduction in criminal prosecutions by HMRC, from 691 in 2019-20 to 240 in 2022-23. HMRC says that it is increasingly selective in using its criminal investigation powers and seeking prosecution (in part due to backlogs in the criminal justice system), but the PAC is concerned that if fewer criminals are prosecuted this sends the wrong message.

At the same time, the PAC scrutinised issues around the IR35 rules on off-payroll working. The PAC is concerned that HMRC’s approach to tackling IR35 is deterring legitimate economic activity, and that a lack of confidence in how to apply the rules, together with HMRC’s tough approach when taxpayers make mistakes, is unnecessarily putting companies off using contractors.

Chair's comment

Dame Meg Hillier MP, Chair of the Committee, said:

“Almost eight years have passed since our Committee challenged HMRC over its telephone lines’ holding message being one of the most streamed pieces of music in the country. Our latest report into its performance sadly illustrates a continued tale of decline in its services.

Our report also poses serious questions as to whether HMRC is getting the balance right between its civil and criminal prosecutions. Our findings show a steep drop in the latter at the same time as we see HMRC going to great lengths to challenge people in court over their employment status. Our Committee has heard the frustration felt by the many taxpayers and organisations who provided evidence to our inquiry loud and clear. HMRC would be well-advised to do the same.”

Further information

Image: HMRC