The UK tax department is struggling to stay on top of 15 simultaneous transformation initiatives and risks being blown further off course by Brexit, the Commons Public Accounts Committee (PAC) warned last week.
While the MPs’ report relies heavily on last year’s audit of the 2016-17 HMRC accounts by the National Audit Office, the committee grilled HMRC chief executive Jon Thompson and his colleagues in November 2017 on some of the issues raised, including internal efficiencies, savings claims and customer service.
The MPs also looked into HMRC’s shift to 13 regional centres and found that the costs had risen by almost £600m (an increase of 22%); yet another example where the claimed benefits were not stacking up once the department attempted to implement change.
HMRC officials revealed that they had around 250 transformation projects in their portfolio – and that Brexit would add another 40 or so. With so much going on and not enough resources in place to support them, HMRC needed to make “difficult decisions”, said PAC chair Meg Hillier. The big risk, as she saw it, was that HMRC would be driven by the need to maximise revenue rather than considering the needs of all taxpayers.
‘Not credible to continue as is’
Thompson responded to the committee in November, “I do not believe it is credible for us to continue with the transformation programme as it is.” As a result, he and his senior managers had undertaken a reprioritisation exercise but were not in a position to reveal the details to the MPs.
The committee examined how the department was reacting to the falling estimates of savings from its regional reorganisation and technology transformation project (including MTD), as revealed in last year’s HMRC accounts.
In response, Thompson said, “The assumptions that were made in 2015 about the reduction in customer contact and customer demand because of the digitisation agenda were extreme…
“Reaching those levels for a sustained period of five years will take a significant amount of work. If we do not reach them, customer services will be at some risk, which is something we have to avoid… we are very conscious of that.”
He claimed that HMRC was beginning to see movements in the right direction, with an 8% reduction in telephony demand, “but that needs to be sustained for four years”.
Professional bodies respond
Responding to the PAC report, ICAEW Tax Faculty chief Frank Haskew commented: “HMRC’s CEO has showed great candour about the problems facing HMRC and that something has to give. This is to be applauded. Government and HMRC now need to engage with taxpayers and stakeholders about what can realistically be achieved given the need to maintain standards.”
But the implications for service levels and the state of HMRC’s IT systems concerned Yvette Nunn, co-chair of ATT’s Technical Steering Group.
“There are serious concerns as to whether HMRC’s digital infrastructure can cope today,” she said. “We have already seen unexpected system failures during the busy self assessment tax season in January 2018, as well as delays in giving agents access to the Trust Registration Service.”
CIOT tax policy director John Cullinane questioned some of the tax department’s claimed improvements in customer service and call handling. While HMRC is claiming clear improvements, the statistics warrant further investigation to see if this is due in part to switching off some services.
“For example, early in 2017 HMRC stopped providing pay and tax details over the phone to agents, because HMRC were being flooded with calls,” said Cullinane. “But they did this before a suitable alternative arrangement was made available. This risks HMRC being seen to say that customer service has improved, when in fact in some areas they are simply providing less of a service.”
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.