HM Revenue and Customs (HMRC) has been accused by a public spending watchdog of degrading its own services “as a matter of policy” and damaging public confidence in the tax system. Concerns about a deteriorating service, uncollectable debt and a reduction in prosecutions were highlighted by the Public Accounts Committee (PAC).
The PAC said it is concerned that the tax authority has sought to degrade its telephone service to drive taxpayers to digital channels. But HMRC hit back strongly, with Jim Harra, First Permanent Secretary and chief executive of the revenue body describing the committee’s claims around HMRC’s customer service as “completely baseless”.
Mr Harra said: “The committee’s claims about our customer service are completely baseless. In reality, we’ve made huge improvements to our service standards, with call wait times down by 17 minutes since April last year. We will always be there to answer the phone for those who need extra help. At the same time, more than 80% of customers are satisfied with our digital services, with more and more people using them to quickly and easily manage their tax affairs.”
It is understood that Mr Harra has written to the PAC to rebut the implication that HMRC has deliberately made its customer service worse. HMRC said its latest figures show call wait times have fallen to around 11 minutes, compared with around 28 minutes in April 2024.
But the PAC report said HMRC should take responsibility for how it has failed its customers, act more boldly to tackle tax system abuse, including investigating more cases of criminality, and pursue debts and wealth hidden offshore more effectively. The watchdog said evidence to its inquiry shows trust in the system is eroding.
HMRC has said that encouraging customers to go digital frees up phonelines for vulnerable people and more complex cases. But the PAC report warned that phone access has been restricted before digital services are ready.
Nearly 44,000 customers were cut off without warning after being on hold for more than an hour last year.HMRC’s system could not cope with the volume of calls but customers were not warned they were about to be cut off, nor were they called back.
It comes as, in 2023-24, £5 billion in debts were written off as uncollectable, up from £3.2 billion in 2022-23, with a risk this could apply to an estimated 45% of debt owed to the public purse, the PAC said.
HMRC reported total revenues of £843.4 billion for 2023-24, the highest on record, representing a 3.6% increase on 2022-23. The report also said the tax authority should be bolder in identifying and tackling abuse.
Committee chairman Sir Geoffrey Clifton-Brown said: “Given that citizens have no choice but to engage with HMRC, it has a responsibility to aspire to the highest standards of service. Unfortunately, what we have instead is a tax authority excavating its way to new lows in service levels every year.
“Worse, it seems to be degrading its own services as a matter of policy. HMRC is an organisation in defensive mode, and needs bold and ambitious leadership to begin to chart its recovery.
“There is some hope in our report. HMRC has now secured more funds to allow it to pursue what’s owed to it, and has a welcome new goal to reduce the gap in unpaid tax. We would urge it to use its new resources not to just go after low-hanging fruit, but to do more to recover older debts lest they become uncollectable, as well as to better understand what more may be hidden offshore.
“Further, if it is serious in its plans to reduce its prosecutions, it should also explain what the best means of deterring criminal tax evaders may be.”
The report said HMRC does not consider customers’ needs enough.
In 2023-24, performance reached an all-time low, with 66.4% of customers’ attempts to speak to an adviser answered, against a target of 85%, and average call waiting times exceeding 23 minutes.
The tax authority has been working to become a “digital-first” organisation since 2010, but telephone demand has remained high, with 37 million calls in 2023-24, the PAC said. HMRC has said it has not had enough resources to deal with all the contact it has been receiving with, for example, three million more income taxpayers in the past two years as a result of freezing tax thresholds.
In May 2024, HMRC received £51 million in additional funding to bring customer service to target levels. But the PAC said it is concerned that performance will deteriorate again.
It recommended that the tax body should establish “guard rails”, meaning that when service levels fall more than five percentage points below target levels, it should trigger a corrective response with additional resources deployed if needed, the PAC said.
HMRC should also ensure it meets a minimum level of service for all customers, including the seven million customers HMRC estimates cannot use digital services, the PAC said. In 2022-23, HMRC received 22 million items of correspondence, with around 70% by post.
In the past, the agency has faced large backlogs in processing correspondence, clearing only 45.5% within 15 working days of receipt in 2021-22, the PAC said. In spring 2025, HMRC plans to publish a plan for further development of its digital services.
The PAC said that as part of its digital road map, HMRC should prioritise introducing systems for customers to submit files and send secure messages electronically. The committee also raised concerns over HMRC’s goal to reduce the tax gap – the gap between the tax it estimates is owed and the tax collected.
HMRC can use civil processes to sanction non-compliance, but its use of criminal investigation and prosecution is decreasing, with 344 criminal prosecutions in 2023-24, down from 691 in 2019-20, with HMRC focusing on the most serious and high-value cases, the PAC said.
The tax body should obtain an estimate that is as accurate as possible of the offshore tax gap and develop a strategy to reduce it, the report said.