HMRC blames Brexit for shortcomings in service delivery

HMRC says that the pressure of preparing for Brexit has adversely affected business operations including call centre targets

In its annual report, it says the delivery of customs and border-related programmes and work with other government departments in preparation for the UK exiting the EU has required the diversion of significant resources away from other parts of the organisation.

HMRC employs 58,700 staff, with 5,400 working on building the customs, VAT and excise systems needed for Brexit. It spent £261.7m of its £4bn total budget on the preparations, in line with the £261m allocated by the Treasury but still necessitating a clawback of £700,000 from other business activities.

Outgoing chief executive Jon Thompson blamed the focus on Brexit for delays to improvements in digital services and worsening performance in responding to taxpayer queries both by telephone and post.

The average time to answer a call rose to five minutes 14 seconds, jumping significantly from four minutes 28 seconds last year and above the target of five minutes. The percentage of callers waiting more than 10 minutes to speak to an adviser rose to 19.7%, up from 14.6% last year and higher than the target of 15%. This was despite the number of calls falling by 8.7% to 42.7m.

And the percentage of customer post turned around within 15 days dropped from 80.7% last year to 76.6% against a target of 80%, despite the number of postal items falling from around 18m to 17m.

HMRC is continuing to reduce its office space, aiming to consolidate operations into 13 regional centres, five specialist sites and the head office in London. This year four regional offices were expanded to accommodate Brexit-related work, and HMRC says it will be retaining some smaller sites for longer than originally planned.

Digital transformation has been a key objective of HMRC since the 2015 Spending Review when it committed to spend £1.8bn between 2016-17 and 2019-2020. The NAO said that the transformation plans were ambitious but thanks to reprioritisation to release resources, it felt the delivery timetable was more realistic now.

However, it notes that Brexit preparations forced HMRC to delay the rollout of the income tax and corporation tax elements of Making Tax Digital, as well as close the Compliance for the Future programme which would have focused on internal systems and processes used by compliance, the Solicitor’s Office and Legal Services.

HMRC is piloting a Making Tax Digital (MTD) service for income tax to enable Self Assessment obligations to be fulfilled using compatible software. Self-employed individuals with sole trader income or buy-to-let income can use software to keep their business records digitally and send income tax updates to HMRC throughout the tax year instead of filing a Self Assessment tax return.

And HMRC wants to migrate individuals away from multiple income tax processes into a single income tax process, operating in real time on new tax platforms and interacting with a taxpayer’s digital tax account. HMRC’s ambition is to start to migrate individual tax processing from April 2021 to the new tax platforms.

The number of senior staff in the organisation grew by 9% during the year, rising from 405 senior civil servants to 440, with most of the new appointments driven by transformation work and Brexit, it said. There are 3,680 apprentices in the organisation, or 5.5% of the workforce, with 1,631 new apprentices recruited this year, representing 30% of the 5,500 recruited during the year. Median salary is £25,216, up from £24,502.

HMRC collected £627.9bn in tax revenue in 2018-19, compared to £605.8bn the year before. Repayments were slightly up on last year, rising to £116.2bn compared to £110.1bn last year, with three-quarters of repayments (£91.7bn) related to VAT.

Tax compliance activities yielded £34.1bn for HMRC against a target of £30bn. Of that, 39% resulted from HMRC identifying past non-compliance and 27% from disrupting fraudulent repayment claims and other criminal activity. HMRC estimates that its compliance work has saved £7.6bn (22%) by influencing taxpayers’ future behaviour. And 11% was saved by closing tax loopholes and improving HMRC processes to reduce tax evasion and avoidance.

Tom Reeve | 19-07-2019

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