Where it all went wrong at HMRC

The tax office was forced into an about-turn when Jeremy Hunt ordered it to keep its helpline open, writes Charlotte Gifford

HM Revenue and Customs was forced into an embarrassing about-turn this week after Jeremy Hunt told it to keep its helpline open.

The tax office announced on Tuesday that it would shut the self-assessment phone line for six months every year, but reversed the decision within 24 hours following a huge backlash from MPs. The tax office had tried to shut the helpline despite evidence this would affect taxpayers. A report found, during a trial of the closure, around 113,000 callers were told they could find the answers they needed online – only for 61pc of those to call back for help within five days.

Harriett Baldwin MP, chairman of the Treasury select committee, said: “The idea that they can interpret those figures as justification for making it even harder to contact them over the phone indicates something is seriously wrong at HMRC.”

Her concerns have been echoed by MPs and trade bodies alike who warn that HMRC’s customer service is at an all-time low. On average callers had to wait 25 minutes on the phone last month before getting through to an adviser. Telegraph Money spoke to former staff who said the problems had been a long time in the making.

An old HMRC leaflet revealed how far standards had fallen over the last three decades. The document said that, in 1994-95, HMRC aimed to answer 95pc of calls within 15 minutes. It exceeded this target, picking up the phone within this timeframe in 99pc of cases. Today HMRC has no such target. In addition, 11pc of letters are unanswered after 40 days. In the 1990s the tax office answered 96pc of letters in 28 days.

Former HMRC tax inspector Ronnie Pannu, of Pannu Tax, said the helpline close announcement this week was “further evidence of HMRCs lack of resources and inability to deal with the demand”.

HMRC is struggling to cope with a huge surge in the tax base which has been exacerbated by the freeze on tax thresholds. Today HMRC services over 35 million taxpayers, 10 million more than in the 1990s. Data obtained by Freedom of Information requests reveals a shrinking customer service team with retention issues. Last year, nearly 1,000 quit within a year of joining. Of them, 68pc were customer service staff.

Overall the number of HMRC workers in customer service has fallen from 24,000 in 2021 to fewer than 22,000 today. Chris Etherington, of RSM, said: “This is a problem of the Government’s making: a heady combination of systemically underfunding HMRC and a consistent failure to address a bloated and overly complex tax system.”

HMRC was formed in 2005 when then-chancellor Gordon Brown merged the Inland Revenue, which dealt with direct taxes, and Customs, which handled indirect taxes. This was on the back of a Government review arguing that the merger would lead to improvements in customer service and efficiency. Some questioned that, given plans to simultaneously cut 10,500 jobs.

The Chartered Institute of Taxation was sceptical that the Government could reduce staff this much “without affecting operational efficiency and customer service”.

HMRC used to have a network of local offices across the UK, as well as 281 walk-in help centres for in-person support. Faced with a tightening budget, HMRC closed these in 2014. The next year it announced it was shutting 170 local offices and replacing them with 13 regional hubs. Many staff were told to relocate or take voluntary redundancy. Mr Pannu said: “I know a lot of people who retired because they didn’t want to commute. There was a huge talent drain.”

Those who have left HMRC for the private sector but still deal with the tax office said they have noticed a drop in standards, driven partly by the shift to remote working.

Mr Pannu said: “Customer service is terrible, and it has gotten significantly worse since Covid.”

Rhys Pippard, of VAT Consulting Associates, said: “I joined HMRC in 2003, at the end of the old days – or golden age some would say. We were out on the job every day visiting businesses. It’s not like that anymore. I’ve dealt with dozens of VAT audits and they’re being done remotely. The staff are just going through the motions. You could be reporting to a VAT manager who’s never worked in VAT in their life. When I was there, you still had people doing things to a good standard – now it’s as quickly and as cheaply as possible.”

Last year 10,000 HMRC staff were not in the office each month. A note said this was because they were either absent, attending meetings in the office without logging in, or working from home. HMRC has always insisted that its working-from-home policy has had no impact on its performance.

Successive cuts and a decline in standards have caused serious delays for taxpayers.

Charles Daly, 80, from Surrey, waited two years for a £3,600 capital gains tax refund after struggling to talk to a human about his issue. “It was like pulling teeth,” he said.

HMRC said: “We generated a record £814 billion in tax revenues in 2022- 23 and the UK has one of the lowest tax gaps in the world. At the same time, we’re delivering a modern and efficient service that’s supporting more customers with more tax affairs.”