15th March 2024
Written by Qdos Contractor
Public Accounts Committee highlights poor customer service and raises concerns over HMRC’s disproportionate approach to recovering tax revenue
The Public Accounts Committee (PAC) has published its
latest annual report on HMRC’s performance, sounding the alarm over poor service levels and “taxpayers’ exasperation over the quality of service and the impact on businesses”.
It makes for damning reading and raises yet more questions about the tax office’s customer service levels and treatment of taxpayers – HMRC’s handling of IR35 is also explicitly called out in the report.
Alongside falling service levels – which “have continued to deteriorate” since last year – the latest report notes that “fiscal drag and inflation have increased pressures on HMRC”.
Before we take a look at the details within the report itself, let’s start with some background…
What is the PAC and what concerns do they have?
The PAC is a collection of MPs who look at government projects and programmes, how they are delivered and whether the public is receiving an adequate level of service for the money that those services cost to run.
HMRC’s activities are one of many areas that the PAC audits, usually annually. The bad news for HMRC is that its performance levels have fallen lower than last year; to an “all-time low”, in fact.
What does the PAC say about HMRC’s enforcement of IR35?
The PAC shares the opinion of many contractors (and businesses) in its assessment – that HMRC’s “approach to tackling IR35 is deterring legitimate economic activity”.
A combination of “HMRC’s tough approach when taxpayers make mistakes” and “a lack of confidence in how to apply the rules” mean that IR35 “is deterring companies from using contractors”. The PAC also “raised concerns that the complexity of the rules was driving some companies overseas”.
To address these concerns, the PAC wants HMRC to:
- Provide the PAC with detail on active IR35 litigation, and tax liabilities at stake
- Assess how IR35 enforcement has impacted contractor engagement in different sectors
What about HMRC’s treatment of taxpayers?
The way HMRC treats taxpayers is also under scrutiny, and “whether HMRC’s pursuit of some IR35 cases through the courts was fair and proportionate” is up for debate.
Recent months have shown how aggressively HMRC pursues individuals suspected of non-compliance; Kaye Adams and Gary Lineker are just two examples.
The PAC has also “heard about cases where taxpayers are being pursued repeatedly for often trivial amounts” of tax. How HMRC chooses to “balance its resources can appear at odds with the risks it is managing”, the PAC says, and the tax office must “pursue all forms of non-compliance sufficiently”.
As a result, the PAC wants HMRC to carry out “sufficient checks to protect taxpayers from being pursued too forcefully”, and ensure efforts to recover tax debts are “proportionate to the size of the debt and the circumstances of the taxpayer”.
Did the PAC have anything to say about service levels?
Yes, quite a lot. The PAC believes that “service levels are at an all-time low”, with HMRC resorting to “closing customer support channels”. This has left almost two-thirds of customers facing long call waiting times, averaging over 10 minutes.
In addition, the PAC is “not convinced that customers have an easily accessible and responsive route” to resolving queries. Similarly, HMRC “is too keen to point to the long road to digitisation as an excuse for poor services to customers now”.
To remedy this, the PAC recommends that HMRC ensures “customer services are sufficiently resourced in the short as well as the longer term so that it can meet its service standards” until its digital offering can “adequately” service taxpayers.
A final thought
For many self-employed workers, the themes uncovered in the PAC report won’t come as a surprise; in fact, they will be all too familiar with them.
Poor service levels, long call waiting times and aggressive policing of non-compliance have become the norm, after all. However, the publication of the report does come with one potential upside: the PAC, assembled by Parliament, carries significant authority.
Its report should help to increase the pressure on HMRC to deliver much-needed improvements across the board. With IR35 compliance activity under scrutiny, this is an area worth keeping an eye on.
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