HMRC's quality of service for personal taxpayers

25 May 2016

HMRC’s digital strategy aims to improve the efficiency and quality of its customer services by moving more personal taxpayers online thereby reducing demand for more costly to handle telephone and postal contact. HMRC, through substantial staff reductions, decreased the cost of its personal tax operations between 2010-11 and 2014-15 by £257 million.

The National Audit Office’s (NAO) report ‘The quality of service for personal taxpayers’ finds that while HMRC maintained or improved customer service up to 2013-14 it then misjudged the cumulative impact of its complex transition and released too many customer service staff before completing service changes.

The NAO found that the quality of service provided by HMRC for personal taxpayers collapsed in 2014-15 and the first seven months of 2015-16 when average call waiting times tripled. Services have subsequently improved following the recruitment of additional staff but whether this performance is sustainable depends on HMRC achieving successful outcomes from its programme ‘Making Tax Digital'.

Between 2010-11 and 2014-15, HMRC cut staff in personal tax from 26,000 to 15,000. To achieve the reductions, it planned to increase automation of the PAYE system, operate on a more flexible basis so staff could move between different services, and move customers from traditional channels to less expensive contact through the expansion of digital services.

HMRC expected to have reduced demand for contact with customers towards the end of the spending review period. It introduced two new services, automated telephony and paperless self-assessment, in 2013-14, but demand for telephone advice did not fall. To live within its budget, it released 5,600 staff from personal tax in 2014-15, reducing customer service capacity. HMRC believes it was over-optimistic about the cumulative impact of the change and had not built sufficient contingency into its plans.

The NAO makes the following recommendations in its report:

HMRC will need to learn and apply the lessons of the last five years and build realism into its assumptions if it is to provide a consistently effective service to taxpayers. It should:

a. Base future decisions on spending on an assessment of the full impact they will have on the delivery of its objectives. HMRC needs a better understanding of the direct and indirect impact of different spending decisions. When it reduces costs, it must take a realistic view of the consequences for customer service and the potential risk to tax revenue.

b. Set targets that strike a balance between its running costs and costs borne by customers. HMRC has not met its pledge to answer 90% of calls by 2015 or to answer 80% of calls within 5 minutes. It should build greater resilience in its call centre services so it meets or exceeds the service standards it sets. In setting targets for future years it should take into account its own running costs and the cost to taxpayers.

c. Be clear and open about how the configuration of its service to taxpayers will change. HMRC should be transparent about how it intends to reduce costs and what it expects of taxpayers. It should provide taxpayers with a good service for all channels.

d. Estimate the administrative burden on personal taxpayers and the voluntary sector and use this to inform its decisions. HMRC estimates the burden on businesses of complying with their tax obligations, but not on individuals or the voluntary sector. Alongside savings to customers from new services, HMRC should take into account the additional costs its savings measures could impose on taxpayers, such as the cost of increased time spent waiting on the telephone.

e. Explore how the behaviour of taxpayers might be affected in response to changes in the way HMRC intends to deliver its services. As part of this work, it should model the impact on tax compliance of planned changes to the way services are provided.

Read the full report The quality of service for personal taxpayers.