04 Mar 2024

HMRC Customer Service an ‘all-time low’

Ian Davie
Senior Consultant

 

The House of Commons Public Accounts Committee (PAC) issued a report on February 28th regarding HMRC Customer Service, and their assessment is quite damning.

In their own words overall:

  • HMRC did not meet any of the service standards it set to measure its customer service performance in 2022-23 
  • HMRC appear to be struggling to cope as taxpayer population and tax complexity rise 
  • In 2022-23, 62.7% waited longer than 10 minutes to speak to an advisor, up from 46.3% in 2021-22, with HMRC resorting to closing customer support channels to prevent contact to sort out tax affairs, instead relying on digital services and online guidance 
  • PAC expresses its disappointment as service levels continue a 5-year decline 
  • At £814bn the tax revenues are at an all-time high 
  • HMRC fell short by £2bn on a target of £36bn for compliance yield 
  • There was a significant reduction in criminal prosecutions, from 691 in 2019-20 to 240 in 2022-23, which sends the wrong message 
  • On IR35 PAC is concerned that HMRC’s approach to tackling IR35 is deterring legitimate economic activity

In the area of R&D Tax Reliefs the PAC commented on the following: 

  • HMRC has been slow to identify the scale of error and fraud 
  • HMRC approach to tackling offenders does not sufficiently target those committing serious fraud over honest mistakes 
  • The methodology has been improved with a more accurate picture of fraud and error at £1.1bn up from previous £336m 
  • HMRC’s approach on the SME scheme to recovering error and fraud is too reliant on companies correcting their own mistakes and PAC are not convinced that HMRC is bearing down strongly enough on these companies and tax agents representing them 
  • HMRC are now checking over 20% of all claims with compliance checks on 2.5% of claims, saving an estimated £250m 
  • HMRC compliance staff treat companies with suspicion and lack the expertise and training to determine projects qualify as R&D 
  • This approach is discouraging some firms from investing in R&D, though HMRC does not agree that its actions are discouraging R&D investment

Specific to R&D tax reliefs PAC’s recommendations are: 

  • going back sufficiently far to tackle egregious fraud; and  
  • telling those businesses who made honest mistakes to correct their returns or risk investigation 

 

TBAT Innovation’s summary

We all know that HMRC is struggling, it is harder to get hold of someone to talk to and in our experience receive conflicting advice and incorrect facts at times. The volume compliance approach that they are taking for R&D claims is already aggressive in trying to target claims, and caseworkers lack of understanding of R&D is evident in targeting too many good claims and their relentless ‘no R&D here’.  

I disagree with PAC saying that HMRC are reliant on companies correcting their own mistakes, when there is a disconnect from what industry does in the way of R&D and how HMRC are interpreting the guidelines and legislation. The compliance approach is reliant on HMRC challenging the claims, which from our own experience is discouraging companies from either bothering to claim on good R&D, or regretting setting up their R&D in the UK, to even moving abroad to abandon the UK as an environment to carry out well supported R&D.  

If HMRC follows PACs recommendations then we are likely to see more compliance checks going back even further, not just the last claim submitted. Although, from what we have seen I am not certain HMRC have the skills and knowledge to be able to identify and tackle ‘egregious fraud’.  This could result in more good claims being caught up in years of compliance checks.  If you are looking for assistance with a HMRC compliance check, we can offer support.

HMRC needs to find the right path, and make this sustainable and be able to identify the error and fraud that is evident in the SME scheme, but I don’t think they have found it yet. 

 

LONDON, UK January 24th 2019: HMRC, Her Majesty's Revenue and Customs tax return paperwork.

Get in touch

How can we help?(Required)
Send Enquiry

Related Articles

12 Jul 2024

First-Tier Tribunal Case Summary– Get Onbord Limited V HMRC

In a big step forward for R&D Tax Credits, HMRC has recently lost a case at the first-tier tribunal against software company Get Onbord Ltd. This decision is a fantastic demonstration of the realities of software development and the use of existing technologies. We have summarised the tribunal case document and highlighted our key takeaways.

R&D Tax Credits
Bulb
09 Jul 2024

Understanding R&D Tax Relief: Activities and Eligibility in the UK

Explore who can claim R&D Tax in the UK, what activities qualify, and some of the key criteria. Understanding who can claim and what activities qualify for R&D tax can often be quite complex. We shed some light on these aspects, helping businesses navigate the R&D tax relief landscape with greater confidence.

R&D Tax Credits
Bulb

An independent consultancy, highly skilled and experienced

Assists organisations in accessing research and development grant funding across a range of UK and EU schemes and industry sectors.

Get In Touch