HMRCSR0010

 

Written evidence submitted by Association of Accounting Technicians

 

  1. About AAT

1.1                AAT is the UK’s leading qualification and professional body for technical accountants and bookkeepers. We have around 51,000 members in over 100 countries and approximately 75,000 students studying our qualifications. 

1.2                Founded in 1980, AAT is a registered charity committed to increasing the availability of high-quality accountancy education and raising professional standards. We aim to advance public education, promote the study of accountancy, prevent crime, and promote and enforce standards of professional conduct for accountants.

1.3                Over 600,000 small businesses are supported by more than 6,000 AAT licensed members to help build the businesses’ financial capabilities.

1.4                An AAT Accountant is a qualified accounting professional with the practical and technical skills needed to support businesses with their accounting activities. Typical job roles include: Financial Accountant, Commercial Analyst, Senior Finance Officer, Payroll Manager, VAT Accountant, and Tax Supervisor.

 

  1. Executive Summary

2.1                HMRC is failing to meet its obligations under its Charter and it is harming taxpayers and UK productivity. The latest annual report showed customer satisfaction declining and telephone services falling well below target. As a result, accountants and tax advisers are facing severe delays and disruption which is harming businesses and taxpayers alike.

2.2                The temporary closure of the self-assessment helpline over the summer is not a sustainable approach to this problem. While the impact of the helpline decision should be thoroughly assessed, the approach of closing one service to address backlogs elsewhere should not be adopted elsewhere as it could risk further backlogs and administrative burdens on HMRC.

2.3                HMRC urgently needs extra investment in their customer services. The tax authority has had to contend with significant demands in recent years but with declining resources. The government must invest in customer services now to reverse the trend and ensure HMRC meets its Charter’s responsibilities.

2.4                Beyond investment, there are other solutions that the government could consider to reduce the burdens on HMRC. Digitisation should be progressed without any further delays, co-designed more with software developers, and accompanied with targeted support for those who are digitally excluded. A long-term strategy for HMRC, including tax simplification and workforce planning, would also help HMRC ensure it has the workforce necessary to meet required service performance.

2.5                The government must consider what it wants the role of HMRC to be in the future and focus on those core priorities, while considering what other bodies could support remaining functions. For example, professional bodies could contribute much more to HMRC’s compliance responsibilities if there was a compulsory requirement for all paid-for tax advisers and accountants to join a professional body. This would alleviate the pressures on HMRC resources so it could prioritise improving customer service performance and other priorities.

 

  1. HMRC’s customer services – state of play

3.1                HMRC’s customer services are vital to achieve the government’s objectives to close the tax gap, protect finance for public services and improve productivity. However, HMRC’s declining performance in this area has been a growing concern among AAT members and the wider accountancy profession for some time.

3.2                Accountants and taxpayers routinely face severe delays, business disruption, and productivity losses as a result of an unresponsive and inefficient service provided by HMRC. More worryingly, as shown by this year’s annual report, the problem seems to be getting worse.

3.3                HMRC’s Charter annual report showed that complaints to HMRC in 2022 increased by 14% when compared to the previous year. Customer satisfaction was also down by 3% and the proportion of telephone adviser attempts handled declined from 77.3% in 2021 to 71.1% - well below HMRC’s stated target of 85%.

3.4                Around the same time as the annual report, HMRC announced its decision to temporarily shut down its self-assessment helpline over the summer for three months so that it could repurpose staff to deal with backlogs elsewhere. While more time is needed to assess the impact of this decision, it is not a sustainable solution, especially when certain requests still require speaking to an HMRC official. It could see further pressures on backlogs for HMRC later on, discourage early filing of returns, and if the same approach was replicated elsewhere, result in further disruption and uncertainty.

3.5                The latest Charter annual report shows that HMRC’s customer service levels are declining and, in places, well below targets. This is causing serious delays and disruption to businesses and is harming the UK’s productivity. The decision to temporarily close the self-assessment helpline to repurpose staff elsewhere is not a sustainable solution nor an approach that should be considered elsewhere.

 

  1. Investment is needed urgently

4.1                It would be wrong to suggest that HMRC is solely to blame for its declining performance against the Charter. As highlighted by the Public Accounts Committee, HMRC customer service staff numbers have been cut by 24 per cent in the past five years and there have been instances where HMRC has closed telephone lines as it could not cope with demand.

4.2                At the same time as this resource pressure, HMRC has faced new burdens and responsibilities with Brexit and the COVID-19 pandemic at the same time as it continues to work on large transformation programmes, like Making Tax Digital (MTD). This is counterintuitive as an effective and efficient tax authority is fundamental to boosting public finances, closing the tax gap, and improving productivity.

4.3                AAT members have become increasingly frustrated with the delays and lack of response from HMRC on a range of different queries, whether its agent registration, claiming repayments, or chasing letters on behalf of clients which they often do not charge for and bear the costs themselves. In particular, repayment delays are severely restricting cash flow for some businesses, especially SMEs.

4.4                In March 2023, AAT and nine other professional bodies for accountants and tax advisers wrote a joint letter to the Chancellor urging him to use his Spring Budget to invest in HMRC so that it could have sufficient capacity to improve its customer services[1]. While the Budget did not contain any new funding in this area, this remains a key ask of the sector, and we would urge the committee to support greater investment in HMRC’s front-line services to reverse the worrying trend of declining service levels.

4.5                Declining performance against the Charter cannot be solely blamed on HMRC which has had to contend with constrained resources, hugely disruptive one-off events (like the COVID-19 pandemic), and large transformation programmes like MTD. There is an urgent need for greater investment in HMRC’s customer services function so that both taxpayers and businesses can be served efficiently as well as help reduce the tax gap and boost public finances.  

 

  1. Beyond investment 

5.1                While HMRC are in clear need of extra investment in customer service resource, there are other options that the government and HMRC should explore that could still help improve the tax authority’s performance.

5.2                Digitisation can have a big role to play which, when delivered effectively, can reduce the administrative burden on HMRC staff so they can be focused more on service levels. The Single Customer Account could have enormous benefits and MTD, when it has been eventually delivered, has shown how it can greatly improve the experience of dealing with the tax authority.

5.3                There remains a good appetite among AAT members to use MTD further. A survey last year conducted at AAT found that 95% of AAT Licensed Accountants expressed a desire to register their clients for MTD for Income Tax Self-Assessment (ITSA).

5.4                While the programme has faced severe delays and criticism, any further delays or postponement of MTD for ITSA would be a regressive move. Instead, HMRC needs to engage much closer with software developers to ‘co-create’ workable solutions and ensure the next stages of MTD meet its stated deadlines. Any further delays could irrevocably damage trust in the programme and potentially see technology eventually outpace it before its introduced.

5.5                While AAT is supportive of MTD, it is not a replacement for effective customer service and there must be a dedicated resource to support those that are digitally excluded. While this vulnerable group includes elderly people, there are other vulnerable groups that HMRC should focus efforts to support, such as people with neurodiverse conditions who are disadvantaged with a digital-only solution.    

5.6                Looking forward, the government must also consider a long-term strategy for HMRC in order for it to plan and allocate resources effectively to ensure it can meet the expectations set by government. Such a strategy could include a plan for how HMRC can recruit effectively over the long-term to ensure it can meet its Charter responsibilities as well as ensuring customer service functions are resourced sufficiently to quickly adapt to surges in requests.

5.7                Tax simplification, not just of tax policy but also administration of tax, should also be a core focus of a long-term strategy which could both improve customer satisfaction and compliance rates as well as ease pressures on HMRC staff.

5.8                A long-term strategy will also need to consider the fundamental purpose of HMRC and what its role should be in the future. The Charter performance is just one sign among many that HMRC is being asked to do a lot more with less, and it would be sensible for the government to focus HMRC’s efforts on core priorities, such as digitisation and customer service, and explore how other responsibilities could be carried out in different ways or by other organisations.

5.9                Compliance is a good example where HMRC could benefit from professional bodies taking a more involved role in ensuring accountants and tax advisers are compliant with tax rules and meet professional standards. This would not absolve HMRC from responsibility on compliance but instead help share the burden so that its resources and staff can focus on driving up performance on other priorities.

5.10            This solution would need to require all paid-for tax advisers and accountants to be a member of a professional body, something which AAT’s Accountable campaign[2] has been calling for over the past decade. A compulsory requirement to join a professional body is already the case for over 200 professions in the UK and AAT contends that adding paid-for tax advisors and accountants to that list would also provide significant benefits to the taxpayer.

5.11            A third of the accountancy and tax advisory profession does not belong to a professional body, yet they are responsible for two-thirds of tax complaints to HMRC. Compulsory professional body membership would therefore help address resource pressures, but it could also offer additional benefits to taxpayers.

5.12            Members of professional bodies are required to keep their knowledge on tax legislation and practice up-to-date through Continuing Professional Development (CPD), hold appropriate levels of professional indemnity insurance, and to meet professional and ethical standards. Furthermore, if a complaint is made about a member firm, the relevant professional body can investigate it and take necessary remedial action – including fines and expulsion from membership. This would help stop bad actors in the profession from harming taxpayers and small businesses as well as improve compliance.

5.13            Compulsory professional body membership would help raise standards in the profession as well as compliance which could make a considerable difference to HMRC’s resource constraints and enable it to dedicate resources to areas like customer services. Solutions like these will become increasingly needed to ensure HMRC is fit for purpose in the future.

5.14            While extra investment is clearly needed, there are other solutions that the government should consider which could help alleviate the pressures on HMRC. Digitisation needs to proceed without further delay or disruption but must also consider the needs of digitally excluded groups, such as those with neurodiverse conditions. A long-term strategy could support HMRC to effectively plan and prioritise its resources, while focusing on workforce planning and tax simplification. This strategy should also consider the future role of HMRC and explore how other responsibilities can be carried out with support from other organisations, such as a compulsory requirement for accountants and tax advisers to join a professional body. This would help alleviate burdens on HMRC around compliance as well as offer greater protections for taxpayers and raise the standards of the profession at large.

 

October 2023


[1] https://www.aat.org.uk/prod/s3fs-public/assets/Open-letter-HMRC-service-levels-ahead-of-Spring-Budget-2023.pdf

[2] For more information on AAT’s Accountable campaign, visit: https://www.aat.org.uk/prod/s3fs-public/assets/make-tax-advice-accountable-policy-briefing.pdf