HMRC is broken. What’s the fix?

Two of Ian Hornsey’s clients, both now living in Australia, have had ongoing issues with HM Revenue and Customs for seven years. They’re now “jumping up and down in frustration”, the Managing Director of Devonports LAS Accountants & Business Advisors says.

“They’re suffering penalties and interest charges,” says Ian, also Chair of the IFA Members Advisory Committee and IFA Regional Ambassador for Eastern England. “There’s a simple fix, and HMRC should have been aware of that simple fix. But even my most recent letters have not been responded to for more than four months.”

It makes business very difficult for a practising accountant whose job is to protect their clients while ensuring adherence to the various intricacies of the tax system, he says. And the problem seems to be getting worse, rather than better.

“The biggest problem, of course, is the feedback from HMRC that it just doesn’t deal with the individual,” Ian says.

“Basically, when an individual gets their taxes right by submitting information online, the system works. However, failure comes with the lack of communication when something goes wrong.

In the past, while the general public could reach HMRC via a call centre, agents were able to reach individual tax inspectors. Now, agents too can only reach a general call centre.

This change has been part of a reduction in the service from HMRC so drastic, he says, that it may as well not exist.

Understanding HMRC’s problem

HMRC is simply in a challenging place right now.

“In every country, the tax authorities and other government departments are strapped for cash,” Ian says. “So, it’s part of a bigger problem. It’s about the economy, and that’s a difficult one to solve.”

IFA CEO John Edwards says the IFA has been in a process of consulting with members around HMRC’s operations, particularly as the government department has been on a journey of technological transformation.

“There’s a lot going on behind the scenes to make that transformation happen,” John says. “We’ve had dealings with HMRC on behalf of members, including a consultation in February where HMRC was keen to listen to the needs of tax agents.

“Certain things have worked well, but several things have not worked so well.”

What we have right now, John says, is a system that is “not quite adequate to meet the needs of the tax agents as we go forward”.

That has been causing problems for tax agents, and for individuals and small businesses.

“From our meeting in February, I can see they’re trying to address certain things. But I think they’re also creating their own problems in doing things like restricting the agent-dedicated line,” John says.

“There’s also a period of several months where HMRC has said it will only deal with queries on self-assessment penalties and PAYE problems, which doesn't help accountants and tax agents in all of the other work they’re doing for their clients.”

Ian agrees, saying taxpayers facing fines and unexpected tax bills now have to deal with an agency that doesn’t offer access to technical people.

“That's a real problem,” he says. “Everything has to be referred to people that even tax agents can’t talk to. That creates anxiety for taxpayers.

“At the same time, I think we also have to respect that there was a lot of government assistance during the pandemic, all administered by HMRC. Now, a new challenge for HMRC is investigating fraudulent claims. So, we also have to be mindful of that. There is a lot of pressure in government right now.”

Accountants are stuck in the middle

As the government continues to pressure HMRC, including in Parliament, to improve its performance, the IFA also has an ongoing seat at the table, representing the wishes of members.

“There are various discussion groups we have been taking part in,” Ian says. “HMRC is trying to be seen to go out to the institutes, and to involve us, and to listen to our message.”

Representatives from HMRC also attend most IFA conferences to give updates and listen to feedback.

The challenge, John says, is that HMRC is such a large and complex organisation. The team at IFA has been working on ensuring it is speaking with the right people, to have the greatest potential effect on the rapid development of relevant solutions.

“We are at the table and we do have a voice,” John says. “The IFA has a role to play in advocating to HMRC and amplifying the voices of our members whose clients are, in the main, micro and small businesses. Those micro and small businesses with between 0 and 49 employees form the backbone of the UK economy, representing more than 99% of all businesses in the UK. The roles of our members' clients and of our members have never been more important than right now.”