Last week, HMRC released its annual report, revealing disappointing results in several key customer service metrics for the year 2022-23. Customer satisfaction dropped from 82% to 79%, and telephone performance also suffered, with an average wait time of 16 minutes to speak to an adviser. From January to March 2023, 63% of callers waited more than 10 minutes, with an average wait-time exceeding 20 minutes. On a positive note, HMRC managed to improve its correspondence reply time, with 73% of queries cleared within 15 days, a significant increase from the previous year’s 46%.
To address the issue, HMRC believes the solution lies in encouraging taxpayers to use online services and aims to reduce telephone and postal contact by 30% before 2025. However, considering their past record of missing technology deadlines, achieving this goal might prove challenging without additional resources.
The report highlighted that HMRC have maintained a long-term reduction in the UK’s tax gap (the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually collected) from 7.5% of total theoretical tax liabilities in 2005 to 2006, to 4.8% in 2021 to 2022.
To ensure everyone pays the “right” tax, HMRC’s compliance strategy revolves around three elements: preventing non-compliance, promoting good compliance, and responding firmly to those who bend or break the rules. In 2022-23, HMRC managed to deliver £34 billion in compliance yield, referring to the money that would have been lost to the Exchequer without their compliance efforts. Although slightly lower than their target for the year, it still represents an improvement compared to the previous two financial years.
With the UK National Debt reaching 101.7 percent of Gross Domestic Product in the last fifteen years due to various economic challenges including the “Crash” of 2008, the subsequent recession and the Pandemic, HMRC has been tasked with increasing efforts to recover as much tax as possible and further close the tax gap.
To aid in these efforts, HMRC has allocated more resources to tax investigations following investments in IT infrastructure and employee numbers. While some investigations result in the recovery of little to no tax, recent statistics show that 2 in 5 taxpayers who were investigated paid no additional tax despite going through the trauma of an HMRC tax investigation. It’s a situation faced by thousands of UK businesses each year, one which has stepped up following the Pandemic as HMRC seeks to crack down on fraudulent claims for financial support. This has led to a growing number of UK businesses being randomly selected for investigation, with even sole traders finding their accounts subject to scrutiny.
To protect themselves from the costs associated with an HMRC investigation, many clients opt for Fee Protection insurance. Tax fee protection insurance can save you from the unexpected costs of having your business accounts investigated. Having fee protection in place gives you the reassurance that your accountant’s costs in dealing with the investigation will be covered, as HMRC investigations can run into thousands of pounds in costs – hundreds of thousands in some cases.
If you’re a client and would like to know more about Fee Protection insurance, get in touch with our team.