The quality of HMRC service has hit ‘an all-time low’ with wait times on phone lines five times longer than just four years ago and online services unable to fill the gap
In the face of funding pressures, HMRC has pressed on with attempts to reduce costs despite its poor performance, meaning that the tax authority and taxpayers ‘have been caught in a declining spiral of service pressures and cuts’, warned a highly critical report from the National Audit Office (NAO).
HMRC is not expecting to meet its telephone performance target this tax year and has not made clear what level of service taxpayers should expect, added NAO.
This was despite spending £881m on the HMRC customer service directorate in 2022-23 and having 21,282 full time equivalent staff. But the outlook for taxpayers is not good, as HMRC has indicated that it is going to have to cut staff by 14% this tax year.
The message is to avoid HMRC helplines wherever possible, and there are signs that many taxpayers do just that with 60% of taxpayers using online services, webchat and the HMRC app to complete transactions.
This still leaves 40%, or at least 14 million taxpayers who could prefer to use the phone to contact HMRC. The only saving grace is that millions of taxpayers avoid ever having to contact HMRC unless they have a problem.
Despite HMRC’s plans to go ‘digital first’, it admits that an estimated seven million taxpayers will still need support to use online services.
But awareness of HMRC’s online services is limited, with NAO reporting that ‘many of HMRC’s customers do not know about its digital services, so it may be able to increase uptake by improving awareness’.
HMRC’s advertising and communications budget to promote digital services has been increased to £3m for 2024-25, up from £1m last year but there is a challenge to persuade people that online services are safe to use.
There is widespread fear felt by taxpayers that they might do the wrong thing based on their own information sourced from the HMRC website especially as most people are not tax experts.
The NAO stressed that ‘despite recent improvements, HMRC does not know enough about how effectively digital services meet customers’ needs’.
For example, less than a third of customers in 2023-24 completed transactions covering fixed-rate expenses, or tax relief for expenses of employment using the interactive P87 form.
‘The high level of avoidable contact that HMRC reports shows that it has not yet optimised its digital channels to meet customers’ needs,’ NAO said.
Taxpayers cumulatively spent 798 years, or seven million hours, on hold waiting to speak with HMRC in 2022-23 – more than double the 365 years spent waiting in 2019-20.
The average wait time was 23 minutes for the majority of 2022-23 when it was just five minutes four years ago, highlighting the rapid deterioration in HMRC service. Advisers answered 22% fewer calls compared with 2019-20, but these took 21% more time to handle on average.
In addition, NAO said: ‘Many avoidable customer calls are caused by HMRC itself for reasons including process failures and delays, and customers chasing progress.’
One of the shocking figures in the report was that HMRC estimated 72% of calls in 2023-24 were caused by ‘failure demand’, which included calls caused by HMRC’s process failures or delays, taxpayers chasing progress and taxpayer errors. This proportion had increased from 65% in 2018-19.
Another sign of the increasing complexity of the tax rules resulted in the length of phone calls with advisers go up from 11:24 minutes in 2019-20 to 13:48 minutes in 2022-23.
While the total number of telephone calls has reduced, the total amount of time HMRC advisers are spending on each call has increased. This means HMRC’s workload has reduced more slowly than reductions in call volumes.
More taxpayers have complex affairs, for example, working for multiple employers simultaneously or as freelancers, meaning they have less straightforward needs, while fiscal drag has also brought more people into the tax system.
As HMRC comes under increasing pressure to respond to a growing demand for help on its phonelines, it has had to abandon plans to cut six helpline services in 2024/25 after an outcry from all the professional bodies and even the Chancellor Jeremy Hunt.
The NAO warned that ‘the move to digital service has not eased pressure on traditional services as much as HMRC expected. The quality of service provided by HMRC telephone and correspondence has been far below the levels expected in recent years, and has not met annual targets.’
In 2022-23, HMRC advisers answered 20.5m calls, out of 38m call attempts.
With HMRC’s call-handling workload falling less than expected, it has not been able to make all the staff reductions it planned. Due to budgetary constraints, it now needs to cut staff numbers by 14% in 2024-25, despite only achieving a 9% reduction over the last five years.
This brutal job cutting programme may now be put on hold, however, as this week the Treasury gave HMRC an emergency £51m of funding to address the phone line chaos.
Gareth Davies, head of the NAO, said: ‘HMRC’s telephone and correspondence services have been below its target service levels for too long.
‘While many of its digital services work well, they have not made enough of a difference to customers, some of whom have been caught in a declining spiral of service pressures and cuts. HMRC has also not achieved planned efficiencies.
‘HMRC must allow more time for these services to bed in and understand the difference they make before adjusting staffing levels.’
The NAO recommends that HMRC develops more realistic plans for cutting the services it is replacing with online services and adopts a more customer-focused approach to encourage the take-up of new services.
It must also ensure that as well as the need to develop not new digital services it focuses on improving its existing digital services, particularly where performance or customer satisfaction is low.
The NAO also said that there should be less reliance on old fashioned means of communication like letters, stating that HMRC should ‘increase opportunities for customers to send correspondence and documentation through secure electronic networks, including HMRC portals, which are cheaper, or faster than postal correspondence for customers to use and easier for HMRC to track and administer’.
For future spending reviews, HMRC should only plan to make staff cuts from changes to its digital services once improvements have taken effect and the benefits can be estimated with confidence.
HMRC should also reduce avoidable and expensive forms of contact, for example by increasing opportunities for customers to send correspondence and documentation through secure electronic networks, and learn from the implementation of its digital projects.
