The HMRC annual report, published recently, shows that many of their key customer services measures in 2022-23 were missed.

The Statistics…

Customer satisfaction dropped 3% to 79% from last year and telephone performance has also declined, with the average wait to get through to an adviser of 16 minutes. 

The average wait-time from January to March 2023 was over 20 minutes, while 63% of callers waited more than 10 minutes. 

The only real positive news in the HMRC Annual Report, which we haven’t actually experienced yet for ourselves, is that HMRC have reportedly improved their correspondence reply time to 73% cleared within 15 days from 46% in 2021-22.

What’s the solution?

As we’ve mentioned before, HMRC claims the solution lies in the use of online services by taxpayers and wants to reduce the volume of contact by telephone and post by 30% before 2025. 

It may sound cynical but, given HMRC’s history of missing deadlines for the implementation of new technology, we feel this achievement is unlikely without further funding or resources. Long wait times for responses from HMRC look likely to continue. 

An update on the Tax Gap…

The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually collected. 

The HMRC annual report showed that HMRC have maintained a long-term reduction in the UK’s tax gap from 7.5% of total theoretical tax liabilities in 2005 to 2006, to 4.8% in 2021 to 2022. For all those who follow the rules and make their payments on time, that’s reassuring news, as it suggests more people are doing the same.

HMRC’s Compliance Strategy

To ensure everyone pays the right tax, HMRC have a compliance strategy with 3 elements: 

• Preventing non-compliance
• Promoting good compliance
• Being robust in their response to those who bend or break the rules

In 2022-23 HMRC delivered £34 billion of compliance yield – the term for money that would have been lost to the Exchequer if not for HMRC compliance work. It’s lower than they aimed for this year, but it’s higher than the two previous financial years, which were of course affected by the Pandemic.

The Future…

In the last fifteen years, following the recession after 2008’s crash and the Pandemic, the UK National Debt has risen to 101.7% of Gross Domestic Product. HMRC have been told to help reduce this figure by recovering as much tax as possible and doing more to bring the tax gap down further. Given the latest annual report, and the recent criticism of HMRC’s performance from MPs, the pressure on HMRC is building.

HMRC are therefore putting more resources into tax investigations. As we’ve mentioned before, HMRC routinely launch investigations into individuals and businesses that results in little to no tax being recovered once the investigation is concluded. Recent statistics have revealed that two in five taxpayers investigated paid no additional tax, though they had to go through the trauma and worry of an HMRC tax investigation.

Since the Pandemic, the number of these investigations is increasing, as HMRC crack down on fraudulent claims for the different types of financial support that was available. We’ve seen this happening amongst our own clients, and thousands of UK businesses are facing this situation every year. There was a huge level of fraud around the Covid support schemes, but now those that followed the rules are having to deal with the repercussions.

The importance of Fee Protection

Our clients are protected from the costs of an HMRC investigation by our Fee Protection scheme. This covers our time costs incurred in defending any investigation relating to a return we’ve submitted on their behalf, as long as it is subsequently found that there has been no fraud. 

Some firms offer an ‘opt in’ scheme, for an additional annual fee, and some institutions, such as the FSB, offer a scheme where a team there can provide a similar service. There are pros and cons of these options, but the beauty of ours is that it’s already paid for, for everyone, and we deal directly with HMRC, so use our knowledge of your affairs to answer HMRC’s questions, and our experience to ‘ring fence’ their questions and reduce the risk of them spreading to other areas.

The costs of defending some HMRC investigations can run into thousands of pounds. Having fee protection in place gives you the reassurance that your accountant’s costs in dealing with the investigation will be covered. If you’re not a client of ours, given the increasing pressure HMRC are under, and the likelihood that the number of random enquiries will continue to increase, we’d strongly recommend you speak to your Accountant and ensure you have some cover in place.

Follow this link if you’d like to find out more about the HMRC annual report.