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What's gone so wrong at HMRC?

Business owners and accountants have become well-acquainted with the chaos at HM Revenue & Customs (HMRC) for some time. But what's gone so wrong at the tax office that has left business owners waiting hours to get through to an adviser?

business owner on the phone to tax office

The push for a digital tax system has left some waiting months to receive basic tax information.

The 'seasonal' closure of the self-assessment helpline until September has drawn particular ire from business owners who needed to send their quarterly tax return by 31 July. It comes just a short while after the permanent closure of the HMRC VAT registration helpline.


It is just a snapshot of the disarray the tax office has found itself in and now one insider tells This is Money about the reality of working there.


This article is as reported by This is Money' 2/8/23


Digital tax push goes off course

In 2016, HMRC announced its flagship digitisation programme, Making Tax Digital, requiring businesses and individuals to keep digital records and report their income quarterly.

It was meant to maximise tax revenue, save the Government cash and improve customer service.

But in the seven years since HMRC rolled out the programme, which has gone £1billion over budget, you'd be hard-pressed to find any such improvement.


Many say that customer service has deteriorated to an unacceptable level and business owners have spent hours on the phone trying to get through to a customer service adviser, only to be told they must go online.


One business owner told This is Money he was left waiting over three months to receive his VAT number, which had cost him a third of his income.


Since then, This Is Money has heard from more readers who have been left in the dark.

One reader has been left waiting for months to receive their VAT number before being told they'd have to wait 10 days for it to be posted.


It means they will have waited 70 days to receive their VAT number and has said they expect to only be set up properly by September and start invoicing, six months after setting up the business.

Despite HMRC's push to moving its customers to the online portal, business owners have to wait to receive confirmation of the VAT application via post, rather than its secure online system. HMRC says this is an an anti-fraud measure.


Another business owner said they had been waiting for over four months for their VAT number and it's having a knock-on effect on their business. 'I have good, regular customers that have been waiting as long as four months to reclaim VAT that I've charged them and [they're] starting to lose patience which could be very costly to my business,' they said.


Accountants are equally as frustrated with the system. One told This is Money they had spent over nine hours on the phone to HMRC across one week, looking to chase a VAT registration.

Heather Rogers, This is Money's tax columnist said: 'The digital services are limited at HMRC, especially if something has gone wrong. It is in these situations, that direct contact is necessary. Chatbots on tax issues do not work.


HMRC seem to be drowning. Taxpayers and advisers are too. (Heather Rogers)


What's gone so wrong at HMRC?

The pandemic seems to have been the main catalyst for the problems.

A report by the committee of Public Accounts, published earlier this year, found post and call handling had fallen significantly during the pandemic.


In 2021-22 HMRC responded to 39.5 per cent of mail within 15 days, compared to 70.3 per cent in 2019-20. The average speed of answering calls was 6:39 minutes in 2019-20, which rose to 12:22 minutes in 2021-22.


An HMRC insider, who works in customer services, told This is Money anonymously: 'Before Covid it was perfectly fine, there were enough people and it was a good job. 'There were busy periods but it wasn't constant. Then Covid hit and things went haywire.'


The relentless push to digitise the tax system seems to have backfired, despite HMRC's insistence in the report that the digital push would improve customer service. This does not seem to have been the case. The HMRC employee said that while the pandemic had not helped matters: 'it can't be held accountable… it was three years ago.'


Instead they point to a change in the way customer services advisers are managed, and each region of the UK being given their own sole skillset. They say it has meant trained advisers in different locations 'now have redundant skills'. However, an HMRC spokesman said: 'We have a flexible workforce spread across the country who are ready to adapt to meet the needs of our customers. Where they are based is completely irrelevant.'


Others suggest HMRC's home-working policy since the pandemic has slowed processes down, which is unproven. The chair of the Treasury Committee has already written to HMRC about the temporary closure. It has asked whether it is related to HMRC's homeworking policy, and whether it had been introduced because of staffing issues.


Harriett Baldwin MP said: 'Given the potentially significant impact closing the self-assessment helpline may have on taxpayers, we're looking for clarification that HMRC has fully considered the costs and benefits of this decision.'


An HMRC spokesman told This is Money: 'All our staff here are held to the same standards whether they are working from an HMRC building or from home. 'Hybrid working is now part of HMRC's offer to colleagues, giving them the opportunity to work from home for two days per week - subject to our operational requirements' The declining numbers of staff, which has occurred at the same time as the digitisation programme, seems to be the core issue though.


The average number of staff has fallen from 25,500 to 19,500 in five years and the closure of the VAT registration and self-assessment helplines will do little to plug this gap. A letter to the Chancellor from leading industry figures, including the chief executive of the Chartered Institute of Taxation, said 'a major underlying problem is insufficient resourcing and underinvestment in HMRC's systems'.


Our source said the tax office is 'drastically… hilariously understaffed'.

HMRC says the seasonal closure of the self-assessment helpline will free up 350 advisers to assist with 'urgent' enquiries.


But an extra few hundred advisers is likely be of little help to the thousands of business owners who need to file their tax returns.


The anonymous HMRC employee told us: 'They've been trying to push digital [but] it's just not a very good service.'


Victoria Atkins MP, the Minister responsible for the UK tax system, wrote to the Association of Accounting Technicians and said HMRC are currently dealing with 70,000 calls a day and customer satisfaction is consistently around 80 per cent.


Rogers said: 'This is demonstrably not the case in my experience, nor the undersigned of the letter sent [to the Chancellor] in March, which demonstrates the frustration we are all feeling.

'It also doesn't square with HMRC's announcement, that the helpline will be closed for the summer to move staff onto dealing with amongst other matters, the backlog of post. On HMRC's website, on the summer closure of their telephone line, it states that they will be dealing with only 6,600 urgent calls a day.'

'I dread logging into work'

Business owners might have been left reeling by the abrupt summer closure of self-assessment, but an HMRC insider suggests staff were also left in the dark.


'We didn't know what was happening [with the closure of the helpline]... we found out when we logged on that day.' HMRC did not respond to this claim.

business owners looking for an accountant

What can business owners do?

This issue highlights the needs more than ever for business owners to find a trusted accountant, who can deal with all this for them. Business owners simply don't have the time to deal with this and want to focus on running their business. Xero found that by having a trusted expert, business owners save on average 6 hours per week. (Xero 2020)



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This article is as reported by This is Money

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