Making Tax Digital

The Malaise at HMRC

It is safe to say that HMRC has gambled on "Making Tax Digital" (MTD) a success, removing undue stress from HMRC customer services and creating a more efficient tax office.

Recently, there has been growing criticism of HMRC’s switch to digital reporting in the form of “Making Tax Digital,” otherwise known as MTD. This has also brought into focus what many describe as an ongoing malaise at HMRC regarding helplines, staff training, and inadequate systems.

We can imagine you nodding your head, having tried and failed numerous times to get through to HMRC. These issues have eventually been resolved in the past, but many believe HMRC is literally at breaking point.

HMRC customer service staff numbers are declining

A recent Freedom of Information (FoI) request found that between December 2022 and December 2023, HMRC lost 1143 customer service staff. The staffing figure currently stands at 18,996, but there are concerns that working conditions and substandard systems will force many others to reconsider their positions.

In replying to the FoI, HMRC highlighted the move to online services and the fact that customer advisors can switch between webchat, postal queries, and telephone calls. The idea was simple; by reducing the number of telephone calls, advisers can discuss more complex and time-critical issues with customers. But is this working?

Reduced access to telephone calls

Last year, Jim Harra, the head of HMRC, told MPs that he wants to cut the number of telephone calls to HMRC advisers by 33% before the end of 2024. This comment ties in with a number of complaints from accountants and financial advisers about the closure of personal tax and then VAT helplines at peak times of the year. What may historically been relatively quick phone calls have now been pushed towards online options, not always as efficient/accessible as HMRC would have us believe.

Performance statistics

A report in December 2023 suggested an increase in customer satisfaction numbers across the board and improved performance in all areas:-

 December 2023April – December 2023
Customer satisfaction with phone, webchat and digital services79.8%78.6%
Net Easy – phone, webchat and digital services61.6%59.3%
Webchat adviser attempts handled97.7%95.6%
Telephony adviser attempts handled72.0%67.6%
iForms and post cleared within 15 days75.1%74.8%
iForms and post cleared within 40 days91.4%87.1%
Once and Done – phone, webchat digital services85.8%83.5%

This does not align with online feedback from individuals, accountants, and financial advisers and discussions with HMRC by various professional bodies. When you consider that more than 70% of all self-assessment tax returns are filed in the last two weeks of January, why would you close personal tax helplines?

Are online digital services the answer?

If we look at MTD, we see that in 2016 the original cost of development and implementation was forecast at £222 million. Fast forward to today, and the revised cost stands at £1.3 billion, a 400% increase on the original figure. A Public Accounts Committee (PAC) report also found that circa £2 billion in upfront transitional costs for customers over the first five years were not included in the business case for MTD. So, while the general service provided by HMRC appears to be in decline, there are potentially enormous costs for businesses and individuals to cover in the first five years of MTD.

Unfortunately, several parties have also stepped forward, suggesting that before 2023, HMRC was unwilling to listen to tax experts and software developers with genuine concerns about MTD.

Is there a long-term solution?

At this moment, there are reports of accountants waiting five months for client VAT numbers and six months and counting for a response to complaint letters. Then we have MTD, with rumours of system issues and growing concerns about cost and full-service delivery. A report in 2023 suggested there were 10 million unanswered calls out of 38 million in the previous 12 months. In 2018, there were 4.3 million unanswered calls out of 43 million.

These recent statistics are disappointing, to say the least. However many people are not able to get through to HMRC and don’t register as a call.

The UK income tax self-assessment system, introduced in 1996, is based on the Australian system. Therefore, it makes sense to look across the water to see how the Australian Tax Office is addressing similar concerns.

Move towards adviser-based submissions

The Australian Tax Office recently introduced a new system encouraging individuals to authorise third-party advisers to act on their behalf. This seems perfectly feasible in theory, but what about practice?

While existing relationships will be retained, those using new advisory partners or bringing further advisers on board must use the new system. However, it appears that all is not going well, with an array of concerns emerging:-

  • Additional layers of information make the process more complicated
  • System shortfalls and bugs are being reported regularly
  • Reauthorisation is leading to delayed submissions and potential fines

In theory, the Australian system will reduce the number of relatively minor communications with HMRC, leaving more time for complex and time-critical issues that require a phone conversation. As we touched on above, even with the MTD system, we have already seen a 400% increase in development and implementation costs, and there is still more to do.

There will be an inevitable move to digital services, and the UK will likely encourage individuals to communicate via their appointed agents. However, there will be significant costs, and ultimately, the customer will pay.

Will advisers eventually become HMRC’s only point of contact?

We already know that HMRC is actively looking to reduce telephone calls and push individuals and advisers down the digital route. The next move will likely be in the same direction as the Australian Tax Office, perhaps even learning from their problems. Whether we will ever arrive at a time when HMRC refuses to talk to underlying clients is debatable, but agents and advisers will no doubt be more active in the future.

The government must invest significant sums in the future to reverse the brain drain from HMRC. It is also essential that HMRC is more appreciative of the experience and expertise of accountants and financial advisers and more open to listening to their concerns in the future. We only need to look at MTD to see the potential impact on costs and timetables when the legitimate concerns of those working in the industry are ignored.

HMRC Problems  -Summary

In many ways, 2024 could be the straw that broke the camel’s back, with serious concerns that HMRC is at breaking point and in danger of collapse. We have been here on numerous occasions, but somehow, HMRC managed to persevere and get there in the end. The problems experienced today started building more than a decade ago as the authorities looked to pursue more tax income without undertaking the necessary training and investment.

In theory, a move to the Australian system could be beneficial, but even the Australian tax office is having issues. There is no quick-fire solution, no silver bullet. At this moment in time, we need to see a more focused approach, enhanced investment and proactive strategies going forward rather than constantly fighting fires. Unfortunately, there is likely to be more pain for taxpayers, businesses, accountants and financial advisers before we see any significant improvements. Stopping the long-term decline in service standards is the first challenge – not easy!

If you have been having challenges with HMRC, please contact us and we can discuss your options in more detail.


Chris Wilkins FCCA is a Chartered Certified Accountant, Registered Auditor and the managing partner of Wilkins Southworth based in Barnes, South West London

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