Accounting bodies: HMRC service levels ‘top priority’ for Spring Budget

HMRC service levels have fallen to an “unacceptably low level” and must be urgently addressed as part of the forthcoming Spring Budget statement, the UK’s accounting industry bodies have argued.

In an open letter addressed to Chancellor Jeremy Hunt on March 1, the ICAEW, ACCA, AAT and several others warned of the severe disruption faced by taxpayers and businesses as a result of the Revenue’s dwindling service levels.

“This has significant ramifications for taxpayers, business owners and their agents who are trying to comply with their tax obligations,” the letter says.

“We increasingly hear from our members about the severe delays, business disruption and frustration that has become a regular occurrence when dealing with HMRC.”

Billions in lost revenue

While emphasising the impact on taxpayers, the letter also notes HMRC’s “critical role in funding the public sector”, pointing to recent Public Accounts Committee claims that £42bn in taxes has not been collected – more than double the pre-pandemic level. Published in January, the parliamentary committee’s report says that the UK’s “eye-watering” tax gap is running at 5.1%, adding that “government is missing the opportunity to recover billions in lost revenue”.

The letter also references the report’s claims that HMRC customer service staff numbers have been cut by 24% in the past five years.

“At a time of economic hardship, this not only affects the amount we can spend on public services, but it also severely restricts economic growth,” it says.

‘Unacceptable’ service levels

The industry plea comes amid growing frustrations around service levels, which typically spike in the run-up to January’s self-assessment tax deadline. Most notably, at the beginning of February, ICAEW CEO Michael Izza called for the immediate creation of an emergency cross-sector taskforce to address HMRC’s stubborn backlog.

In response to the criticism, a HMRC spokesperson said: “We are responding to around three-quarters of correspondence within 15 working days and successfully answering about 70,000 calls a day. Our customer satisfaction is consistently around 80%.”

The ongoing UK strike action is also stoking fears that matters could be made worse, with over 100,000 civil servants set to strike on budget day (March 15) over pay disputes.

Spring Budget – ‘an opportunity’

The open letter goes on to acknowledge the professional bodies’ partial responsibility in “raising the standards” of the tax profession, noting that more than £9bn of the [£42bn] tax gap is comprised of taxpayer error or failure to take reasonable care.

It also points out that a third of tax agents do not belong to professional bodies, and that “responsible businesses” should always ensure that their accountants and tax agents are members of a professional body which has strong codes of ethics and practice”.

But the letter ultimately places the onus on the Chancellor, arguing that the March 15 statement presents an “opportunity to properly invest in HMRC”.

“If the government wants to meet its economic objectives and boost productivity, it must invest in improving customer service and effectiveness at HMRC.

“We urge the Chancellor to treat this as a top priority in his upcoming Budget.”

The open letter has a total of ten signatories: ICAEW; ACCA, AAT; CIMA; CIPP; CIOT; ATT; ICAS; STEP; ICB.