19 July 2022
HMRC has published its latest performance statistics for the year to March 2022, two months later than expected, and there are some clear trends that highlight this isn’t the only delay taxpayers are dealing with. Some of the headline statistics don’t appear to add up to reality.
On the face of it, HMRC performance appears to be improving in some areas. In particular, the statistics on dealing with customer correspondence within 15 days of receipt appears to have improved throughout the year from 29.7% to 65.4%. However, how these correspondence statistics are measured has changed during this year to include both responses to iForms and post. It is no longer possible to see a breakdown between these two very different means of communicating with HMRC and one could be distorting the figures of the other.
In contrast to the seemingly positive statistics on dealing with correspondence, customer satisfaction continues to decline. In April 2021, overall customer satisfaction with HMRC’s phone, webchat and digital services was 84%. That is broadly in line with similar customer satisfaction statistics over the last couple of years. It has however started to trend downwards throughout the year to 79.9% at March 2022, its lowest level in the year when pandemic pressures had started to ease.
The deterioration in customer satisfaction is mirrored by an increase in complaints received by HMRC. The number of Tier 1 complaints, the first stage of complaints received by HMRC, was 80,216 in the year to 31 March 2022. This is higher than the prior year (78,542 Tier 1 complaints) and significantly higher than in 2020 (65,625 Tier 1 complaints). As highlighted in a recent Weekly Tax Brief article, a Freedom of Information request obtained by RSM UK confirmed that HMRC has paid an average of £2.37m per year over the four years to 31 March 2021 in financial redress for complaints made by taxpayers
It has got to the point where we are seeing instances of responses from HMRC complaint handlers not only upholding the original complaint for delays and offering financial compensation, but the complaint handlers are also offering additional compensation for their delay in dealing with the complaint itself.
We have seen a number of common issues arising when dealing with HMRC:
- There have been numerous issues for individuals submitting Capital Gains Tax (CGT) returns, particularly if they are unable to do so online. Clients who are digitally excluded, for example, due to age, can face great difficulty and stress when dealing with HMRC to resolve what should be straightforward tasks. Similarly, clients have been told by HMRC that the relevant website doesn’t work outside of the UK, which has led to paper returns being submitted which have not been processed for months, with automatic penalties for late filing of returns still being sent out in the meantime.
- Simple administrative and processing errors are leading to significant delays in processing tax refunds for clients. Recent experience has shown that when clients change their name, for example, following marriage or divorce, cheques for refunds can be sent out in the wrong name, despite all the records being updated and showing correctly on HMRC’s system. It can take upwards of eight weeks for errors of this nature to be resolved.
- There appear to be significant challenges faced by HMRC in relation to dealing with settlements of underpaid tax. It can often be a stressful process for taxpayers when they become aware that they have underpaid tax. Despite wanting to resolve matters and pay any outstanding tax liability, the time taken to reach settlements with HMRC has extended significantly since the pandemic. HMRC was prepared to be flexible due to the exceptional situation and offer time to pay arrangements, but this is no longer the case, which is creating a backlog of cases and there’s a lack of resource to deal with this. A situation which maybe HMRC should consider revisiting in the current economic climate.
The underlying reasons for HMRC’s performance issues are varied but responding to correspondence is clearly an issue, despite the headline statistics suggesting otherwise. Prior to the pandemic, the majority of correspondence with HMRC was by post or by phone. It is now actively encouraging online communication to speed up turnaround, but it seems fair to say that HMRC is ill-equipped to deal with the response times it expects from taxpayers and agents resulting in backlogs. The gremlins that appear to plague HMRC’s attempts at introducing new technology and online systems do not bode well for the introduction of Making Tax Digital for income tax in April 2024 and taxpayers will be hoping things get back on track in the coming year.