On 13 November, The Times ran a detailed report on ‘the chaos at HMRC’ and said that ‘taxpayers are being hounded for debts they do not owe and waiting up to seven months for their money’.
Typing ‘HMRC delays’ into a search engine produces numerous examples of individuals despairing at being unable to get a response from HMRC to relatively simple questions, particularly about the processing of repayments.
A further article on 27 November warned of ‘More chaos at HMRC as the Self Assessment deadline looms’, with taxpayers waiting months for the basic details needed to log in and file a tax return.
So, what’s the problem and what can taxpayers do?
Complaints about HMRC being slow to answer the phones or respond to correspondence are not new but have been exacerbated by the pandemic.
As HMRC says in its 2020/21 annual report, ‘We diverted some of our skilled advisers from PAYE and Self Assessment to provide COVID-19 support’ – and it is fair to say that it did well to deliver measures such as the Coronavirus Job Retention Scheme (CJRS) and Self-Employment Income Support Scheme (SEISS) extremely quickly in response to urgent need. In the case of CJRS, this involved building an entirely new system for submitting claims, which on the whole was easy to use and delivered cash efficiently to a large number of businesses who qualified for support.
But if HMRC insists on calling us all ‘customers’, it is reasonable that they should be asked to provide a good level of customer service. If I phone my bank or utility company, I can get through in a few minutes, and if I can’t get an answer, I can escalate my problem. In my view, one of the problems with HMRC is that issues just get stuck, with standard answers being repeated and customers becoming more and more frustrated. However, a large part of the underlying difficulty is the continuing ‘efficiency savings’ which HMRC is required to make: its current staffing levels of about 60,000 are some 40% lower than the peak levels found before 2010. While it is good that HMRC should spend its funding carefully, there is surely an argument for investing more to improve customer service – and helping businesses become more efficient by not having to waste time or professional fees chasing for a response.
Tax Justice UK recently set up a petition calling on the chancellor to ‘close tax loopholes and invest properly in HMRC’ – and those with long memories may recall a former Chancellor (Gordon Brown, I think) investing in ‘spend to save’ on the basis that giving HMRC more resources would enable them to collect more tax. Indeed, the statistics in its latest annual report show that every pound spent on compliance activity yields over £17 in additional tax – although there will be an element of diminishing returns beyond a certain point. Of this, the highest yield comes from the largest businesses (£60 yield per pound spent), whereas the yield from small to medium businesses comes in at around £11 per pound spent, although it clearly takes proportionately less resource to investigate one very large dispute compared to several hundred smaller ones.
Perhaps additional money could be best spent on helping smaller businesses, where the tax gap is relatively high at £15.1b (compared to £6.1b for large businesses) and much of this is likely to be due to errors, rather than sophisticated avoidance. And supporting those businesses by answering questions and dealing with refunds promptly would relieve a lot of stress for those with fewest resources of their own.
Meanwhile, what can taxpayers do to help themselves? I realise that most readers of this journal are themselves advisers, but this article is aimed at a wider audience too – so here are a few basic tips (and spreading the word would be a useful thing for us all to do).
The most important task is to work out whether a Self Assessment return needs to be filed (HMRC’s online tool is helpful, see https://www.gov.uk/check-if-you-need-tax-return) and if so, request a unique taxpayer reference (UTR) and activation code as soon as possible. Even in normal times, it takes at least seven to ten days to receive these, as they are sent by post for security reasons – and a surprising number of people wait until late January to start the process.
For anyone who is due a tax refund, beware of potential scams: in particular, do not give your government gateway login details and password to anyone, even someone who claims they can help you get the refund more quickly. Someone who is authorised to act as an agent has their own login details with HMRC and does not need yours (a press release from the Low Incomes Tax Reform Group has more information, which is available to read here).
For those on low incomes, the tax charity TaxAid is a reputable source of help and advice. For others, it’s a case of doing it yourself with HMRC software (which is not bad for a straightforward return) or commercial software or employing an adviser. And please don’t leave that until late January either – all those doing tax compliance work are very busy in the last few weeks before the 31 January deadline, and may not be able to take on new clients.
Perhaps we should all ask Father Christmas – or the Chancellor – to give HMRC more resource so that queries and repayment requests can be dealt with more promptly. And a Merry Christmas to you all.
First published in Tax Journal Thursday 2 December 2021.
If you would like to discuss this further, please contact Heather Self via her profile or using the form below.