HM Revenue and Customs (HMRC) has come under fire from a public spending watchdog for allegedly downgrading its services “as a matter of policy” and eroding trust in the tax system.
The Public Accounts Committee (PAC) raised alarms over worsening service, uncollected debt, and fewer prosecutions. The PAC expressed worries that HMRC is intentionally reducing the quality of its phone service to push people towards digital options.
However, HMRC refuted the allegations, with Jim Harra, First Permanent Secretary and chief executive, labelling the committee’s assertions about customer service as “completely baseless”. Mr Harra defended the agency, stating: “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.”
Mr Harra reportedly penned a letter to the PAC to counter the suggestion that HMRC has intentionally worsened its customer service. HMRC pointed to recent statistics indicating that call waiting times have dropped to an average of 11 minutes, a significant decrease from the roughly 28-minute wait experienced in April 2024.
The PACreport has criticised HMRC, stating it must own up for its customer service failures, get tougher on tax abuses including probing more criminal cases, and chase down offshore hidden wealth more doggedly. The committee found that public confidence in the tax system is waning.
While HMRC argues that pushing customers toward online services will allow phonelines to be available for those vulnerable or with complicated issues, the PAC counter-argues that phone access is being cut prematurely as digital options aren’t yet fully operational. The report urges HMRC to devise a strategy to recover older debts before they’re beyond retrieval.
Figues reveal £5bn in debts were deemed unrecoverable in 2023-24, a steep increase from £3.2bn the previous year, and possibly extending to nearly half of all public purse debt. Despite this, HMRC managed to rake in record revenues of £843.4bn in 2023-24, marking a 3.6% rise from 2022-23.
Moreover, the PAC insists on a bolder approach by the tax authority to identify and address malpractice. Sir Geoffrey Clifton-Brown, committee chairman, lamented: “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 PAC said it had received written submissions from organisations representing taxpayers and agents saying continual failings in customer service had eroded trust in HMRC.
In the first 11 months of 2023-24, HMRC cut off nearly 44,000 customers who had been waiting 70 minutes to speak to an adviser. It did not warn customers their call would be cut off, or call them back, the PAC said.
The PAC has called for HMRC to bring back a call waiting time target as a crucial performance indicator. The watchdog insists that HMRC must provide customers with accurate real-time wait estimates, avoid cutting off calls without warning, and offer a callback service.
Despite HMRC’s push towards becoming a “digital-first” organisation since 2010, phone demand remains high, with 37 million calls in the 2023-24 period, according to the PAC. HMRC has admitted struggling with resources, citing an increase of three million more income taxpayers over two years due to frozen tax thresholds.
In May 2024, HMRC was granted an additional £51m to improve customer service levels. However, the PAC expressed concerns about potential future declines in performance.
It suggested that HMRC should set up “guard rails” so that when service levels drop more than five percentage points below targets, it would prompt a corrective action, including deploying extra resources if necessary. Moreover, the PAC emphasised that HMRC must maintain a minimum service level for all customers, including the seven million who are estimated to be unable to use digital services.
In the 2022-23 fiscal year, HMRC handled 22 million pieces of correspondence, approximately 70% of which were paper-based. Previously, the agency has struggled with significant backlogs in processing correspondence, managing to clear only 45.5% within 15 working days in 2021-22, the PAC reported.
In spring 2025, HMRC is set to unveil a plan for the further development of its digital services. The PAC has suggested that as part of this digital roadmap, HMRC should focus on introducing systems that allow customers to submit files and send secure messages electronically.
The committee also expressed concerns about HMRC’s aim to reduce the tax gap – the difference between the estimated tax owed and the tax collected. While HMRC can use civil processes to sanction non-compliance, its use of criminal investigation and prosecution is on the decline, with 344 criminal prosecutions in 2023-24, down from 691 in 2019-20, as HMRC shifts its focus to the most serious and high-value cases, according to the PAC.
The report also recommended that the tax body should strive to obtain as accurate an estimate as possible of the offshore tax gap and develop a strategy to reduce it.