Entrepreneurs and accountants have been well acquainted with the chaos at HM Revenue & Customs (HMRC) for some time now.
The push for a digital tax system has waited several months to receive basic tax information.
The ‘seasonal’ closure of the self-assessment helpline until September has particularly angered business owners who were required to file their quarterly tax returns by July 31.
It comes just a short while after the final closure of the HMRC’s VAT registration helpline.
Chaos at the tax office: HMRC insider tells This Is Money that the tax office is ‘disastrously’ understaffed
It’s just a snapshot of the disarray the tax office found itself in, and now an insider tells This is Money about the realities of working there.
We look at what went so wrong at the tax office that causes entrepreneurs to wait hours to reach an advisor.
Digital tax burden is getting out of hand
In 2016, HMRC announced its flagship digitization programme, Making Tax Digital, requiring businesses and individuals to maintain digital records and report their income on a quarterly basis.
It was designed to maximize tax revenue, save the government money and improve customer service.
But in the seven years since HMRC rolled out the programme, which has gone £1bn over budget, it would be hard to find such an improvement.
Many say customer service has deteriorated to an unacceptable level and business owners have spent hours on the phone trying to reach a customer service advisor only to be told to go online.
One entrepreneur told This is Money that he had to wait more than three months for his VAT number, which had cost him a third of his income.
Since then, This Is Money has heard from more readers left in the dark.
One reader had to wait months for his VAT number before being told to wait 10 days for it to be posted.
It means they have waited 70 days to receive their VAT number and expect to be properly set up and start billing only in September, six months after setting up the business.
Despite pressure from HMRC to move its clients to the online portal, business owners are having to wait for VAT filing confirmation via post, rather than the secure online system. HMRC says this is an anti-fraud measure.
Another entrepreneur said that they have been waiting for their VAT number for more than four months and it has had a domino effect on their business.
“I have good, regular customers who have been waiting for four months to recover the VAT I charged them, and (they) are starting to lose patience, which can be very costly for my business,” they said.
Accountants are just as frustrated with the system. One told This is Money that they spent more than nine hours on the phone with HMRC in a week, seeking a VAT registration.
Heather Rogers, founder and owner of Aston Accountancy, and This is Money’s tax columnist, said: ‘Digital services are limited at HMRC, especially when something has gone wrong. In these situations direct contact is necessary. Chatbots about tax matters don’t work.
‘HMRC seems to be drowning. Taxpayers and advisers too.’
What went so wrong at HMRC?
The pandemic appears to have been the main catalyst for the problems.
A report by the public accounts committee, released earlier this year, found that mail and phone handling had fallen significantly during the pandemic.
In 2021-2022, HMRC replied to 39.5 per cent of mail within 15 days, compared to 70.3 per cent in 2019-20.
The average speed of answering calls was 6:39 minutes in 2019-20, which increased to 12:22 minutes in 2021-22.
HMRC appears to be drowning. Taxpayers and advisers too.
Heather Rogers, This Is Money tax columnist
An HMRC insider, who works in customer service, anonymously told This is Money: ‘It was fine before Covid, there were enough people and it was a good job.
‘There were busy periods, but they were not constant. Then Covid hit and things went wrong.’
The relentless push to digitize the tax system seems to have backfired, despite HMRC’s insistence in the report that the digital push would improve customer service.
This does not appear to have been the case.
The HMRC staffer said that while the pandemic hadn’t helped matters, ‘it can’t be held responsible…it was three years ago’.
Instead, they point to a change in how customer service advisors are managed, with each region of the UK getting its own specific skill set. They say it has led to trained advisors in various locations “now having excess skills.”
However, a spokesman for HMRC said: ‘We have a flexible workforce across the country ready to adapt to the needs of our clients. Where they are located doesn’t matter at all.’
HEATHER ROGERS ANSWERS YOUR TAX QUESTIONS
Others suggest HMRC’s work from home policy since the pandemic has slowed down processes, which has not been proven.
The Chairman of the Treasury Committee has already written to HMRC about the temporary closure.
It has asked if it is related to HMRC’s work from home policy and if it was introduced due to staffing issues.
Member of Parliament Harriett Baldwin said: ‘Given the potentially significant impact closing the self-assessment helpline could have on taxpayers, we seek clarification that HMRC has fully considered the costs and benefits of this decision.’
An HMRC spokesperson told This is Money: ‘All our staff here are held to the same standards whether they work from an HMRC building or from home.
‘Hybrid working is now part of HMRC’s offer to colleagues, giving them the option to work from home two days a week – subject to our operational requirements.’
However, the shrinking workforce, which has coincided with the digitization program, seems to be at the heart of the problem.
The average number of employees has fallen from 25,500 to 19,500 in five years and the closure of the VAT registration and self-assessment helplines will do little to close this gap.
A letter to the Chancellor from leading industry figures, including the CEO of the Chartered Institute of Taxation, said that ‘a major underlying problem is under-resources and under-investment in HMRC’s systems’.
Our source said the tax office is “drastically… hilariously understaffed.”
HMRC says the seasonal closure of its self-assessment helpline will free up 350 advisers to help with ‘urgent’ inquiries.
But a few hundred extra advisors probably won’t do much for the thousands of entrepreneurs who have to file their tax returns in the coming month.
The anonymous HMRC employee told us: ‘They’ve tried to push digital (but) it’s just not a very good service.’
Victoria Atkins MP, the minister responsible for the UK tax system, wrote to the Association of Accounting Technicians and said HMRC currently handles 70,000 calls a day and customer satisfaction is consistently around 80 per cent.
Rogers said: ‘This is arguably not the case in my experience, nor the undersigned of the letter sent (to the Chancellor) in March, demonstrating the frustration we all feel.
It is also inconsistent with HMRC’s announcement that the helpline will be closed for the summer to encourage staff to deal with mail backlogs, among other things. The HMRC website states during the summer closure of their telephone line that they will handle only 6,600 urgent calls per day.’
‘I dread logging in to my work’
Business owners may have been shaken by the abrupt closure of self-assessment over the summer, but an HMRC insider suggests staff were also left in the dark.
“We didn’t know what was going on (with the helpline closing)…we found out when we logged in that day.”
HMRC has not commented on this allegation.
For customer service advisors, who are paid a full-time salary of £22,845, the stress of work is immense.
Our source said consultants, who receive only a few weeks of training, have dealt with calls from business owners on the brink of a mental health crisis.
“It’s understandable why people are leaving,” they said.
‘It’s drastically different than I expected… I’m dreading logging in.
“We have no power – we are told what is happening and we just had to do it. It feels like yes we are men.’
“I’m frustrated – there are so many things that could be so much better. Those responsible have no idea.’
Are you a frustrated HMRC employee or a business owner left in the dark? Email angharad.carrick@thisismoney.co.uk with HMRC in the subject line
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