Taxpayers spend total of 800 years waiting to speak to HMRC

UK taxpayers spent the equivalent of 800 years on hold to HMRC in 2022/23, according to a report published by the National Audit Office (NAO).

The report found that funding pressures, job cuts and a push to reduce costs by encouraging people to manage their tax affairs online had all led to a poor call-handling performance by HMRC.

The average time spent waiting on the phone to speak to an adviser in the 11 months to February 2024 was almost 23 minutes – well above the five minutes recorded in 2018/19.

Altogether taxpayers spent 7 million hours, or 798 years, on hold to HMRC in 2022/23, according to the report.

Customer service is in a ‘declining spiral’ at HMRC, which had not met its goals for responding to taxpayer correspondence or telephone calls for several years, the NAO added.

The government has recently announced an extra £51 million in funding to help HMRC improve its telephone helplines.

Gareth Davies, Head of the NAO, said: ‘HMRC’s telephone and correspondence services have been below its target service levels for too long.

‘While many of its digital services work well, they have not made enough of a difference to customers, some of whom have been caught in a declining spiral of service pressures and cuts. HMRC has also not achieved planned efficiencies.

‘HMRC must allow more time for these services to bed in and understand the difference they make before adjusting staffing levels.’

For more information, visit our website at www.nhllp.com

HMRC to receive extra £51 million in phone funding

The government has announced an extra £51 million in new funding to bring HMRC’s phoneline service back up to the published target of 85% of calls to its advisers being answered.

Last year, 75% of people who phoned HMRC had to wait an average 24 minutes for anyone to answer with 650,000 calls abandoned before they were answered.

In response, HMRC told the Parliament’s Public Accounts Committee that it did not have the resources to meet rising demand for its phone services.

The extra funding was confirmed in a written statement from Nigel Huddleston MP, Financial Secretary to the Treasury.

Victoria Todd, Head of the Low Incomes Tax Reform Group (LITRG), said: ‘The government is right to give HMRC extra resources to better manage demand for its telephone helplines.

‘We hope this will mean that taxpayers can have greater confidence that their queries will be answered, and they can continue to comply with their tax responsibilities.

‘Moving more taxpayers online is a laudable aim, but more work is needed to improve HMRC’s digital services to support that shift. It is likely going to take HMRC some time to deploy this additional resource, meaning things may get worse before they get better.

‘In the longer term, funding to maintain customer service levels by phone and post needs to continue until such time as HMRC’s digital services are good enough to give taxpayers who can use them the support they need.’

For more information, visit our website at www.nhllp.com

300,000 file tax returns in the first week of the tax year

Almost 300,000 self assessment taxpayers filed their return in the first week of the new tax year, HMRC has revealed.

The early filers were almost 10 months ahead of the 31 January 2025 deadline.

Almost 70,000 people filed their return on the opening day of 6 April this year.

HMRC is encouraging people to file early and avoid the stress of last-minute filing.

The tax authority says early filing can also help with budgeting. A budget payment plan helps spread the cost of tax bills with weekly or monthly payments.

In addition, refunds of overpaid tax will be paid as soon as the return has been processed.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: ‘Filing your self assessment early means people can spend more time growing their business and doing the things they love, rather than worrying about their tax return.

‘You too can join the thousands of customers who have already done their tax return for the 2023-24 tax year by searching ‘self assessment’ on GOV.UK and get started today.’

For more information, visit our website at www.nhllp.com

HMRC error means self-employed workers could lose out on state pension

An HMRC error could mean that some low-income, self-employed workers lose out on their entitlement to National Insurance-related benefits like the state pension, warns the Low Incomes Tax Reform Group (LITRG).

The issue centres around the payment of voluntary Class 2 National Insurance contributions (NICs) that can be made by self-employed taxpayers with profits under £6,725.1

These voluntary contributions are usually paid by taxpayers as part of their self assessment return and must reach HMRC by the 31 January following the end of the tax year.

HMRC then automatically transfer the NICs to the taxpayer’s National Insurance record to be counted towards their entitlement to benefits.

However, it appears that HMRC did not initiate the transfer until after the 31 January deadline for the 2022/23 tax year.

In the absence of any action, this could mean that taxpayers miss a qualifying year of NICs.

Antonia Stokes, LITRG Technical Officer, said: ‘The issue is unique to the year in question, and our advice to those who might be affected is to first check to see whether they have received a refund from HMRC.

‘We would also like to see HMRC acknowledge the error and proactively offer help to those taxpayers who have been affected, in line with HMRC’s own charter commitments. However, until they do so, there are practical steps that taxpayers can take to maintain their entitlement to National Insurance-related benefits.’

For more information, visit our website at www.nhllp.com

HMRC launches online voluntary national insurance payment service

The government stated that the new service, which is available from 29 April, will make it ‘easier for customers to check for and fill any gaps in their national insurance record to help increase their State Pension’.

It also said that the new Check your State Pension service has been enhanced to include an end-to-end digital solution. The service shows customers by how much their State Pension could increase and outlines the voluntary national insurance contributions (NICs) they would need to pay to achieve this.

The service also allows people under the State Pension age to view gaps in their national insurance record and pay voluntary contributions to fill the gaps.

Nigel Huddleston, Financial Secretary to the Treasury, said: ‘Having peace of mind when planning for retirement is crucial to ensure people can enjoy later life. That’s why HMRC has launched this new online service today, making a real difference for thousands of pensioners in their retirement while providing certainty to those in their middle years and those still planning ahead.’

The Check your State Pension forecast tool can be found here. 

For more information, visit our website at www.nhllp.com

HMRC launches MTD for Income Tax pilot

HMRC’s pilot scheme for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) launches today (22 April).

Accountants and agents are now able to sign up to the pilot and test the programme out. The pilot aims to assess the MTD for ITSA reporting environment, with an initial focus on clients who are self-employed and landlords with annual income exceeding £50,000.

These clients will be mandated to keep digital records and submit quarterly updates on their income and expenditure to HMRC via MTD-compatible software from April 2026.

HMRC has urged accountants and agents seeking to participate in the pilot to ensure that their record keeping software is up to date and compatible with MTD prior to signing up. Accountants’ clients must also have MTD-compatible software.

A spokesperson for HMRC said: ‘Taking part in testing is a good opportunity to familiarise yourself and a small number of your clients with MTD for ITSA well ahead of 2026. This will help you to prepare your business and be ready to support the rest of your clients.’

For more information, visit our website at www.nhllp.com

Umbrella company regulation in ‘precarious position’, warns IPSE

Government proposals to enact a due diligence regime for the umbrella company market are in a ‘precarious position, unless government shows some urgency, the Association of Independent Professionals and the Self-Employed (IPSE) has warned.

The government has said that it is ‘minded to introduce a due diligence requirement to drive out bad actors from labour supply chains’.

HMRC will also publish new guidance later this year, including an online pay checking tool to help umbrella company workers to check whether the correct deductions are being made from their pay.

IPSE said it supports this proposal but warned that a lack of parliamentary time before the next General Election puts the plans in a ‘precarious position’.

Andy Chamberlain, IPSE’s policy director, said: ‘It’s great that government is minded to do something about non-compliance in the umbrella company sector. Contractors want to see a regulated umbrella sector, and we’re ready to work with government to chalk up how a due diligence requirement could work.

‘But we need some urgency from government. It’s been almost a year since it began consulting on the proposals – ones that should have been in place before the off-payroll working rules. With an election on the horizon, the plans are in a precarious position and risk being delayed even further.’

For more information, visit our website at www.nhllp.com

Only five MTD for ITSA software products ready for testing

The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that just five Making Tax Digital for income tax self assessment (MTD for ITSA) software products are ready for beta testing on 22 April.

On 22 April, private beta testing of MTD for ITSA will begin. The ICAEW warns that HMRC has revised the list of software products that support MTD for ITSA, and the new list outlines five developers that are set to release their MTD for ITSA products on 22 April.

Chosen software must be able to create and store digital records of business income and expenses; send quarterly updates; receive information from HMRC; and make your final declaration by 31 January as part of the submission of tax returns.

HMRC recommends checking with the software providers when choosing software to ensure it suits businesses’ needs.

Commenting on the issue, Caroline Miskin, Senior Technical Manager at the ICAEW, said: ‘Choosing the right software is a critical decision. Software products do need to comply with HMRC’s minimum functional standards but these are quite minimal. This means there will be very significant differences between products.

‘Cost is obviously a major consideration. It is disappointing that a wider range of software is not yet available.’ 

For more information, visit our website www.nhllp.com

PAC challenges HMRC on governance and accountability of MTD

The Public Accounts Committee (PAC) has challenged HMRC on the governance and accountability of the Making Tax Digital (MTD) initiative.

MPs in the PAC have called for HMRC to reconsider its response to the PAC’s concerns regarding MTD. Writing to HMRC’s Managing Director, Jim Harra, Meg Hillier, Chair of the PAC, requested additional information on how HMRC intends to address MTD issues highlighted in the PAC’s report on the initiative, which was published in November 2023.

Ms Hillier called for HMRC to outline what it is doing differently to ensure MTD processes work more effectively than they have in the past. The PAC has also urged HMRC to carry out a ‘robust assessment’ of how frequent submissions of self assessment information and digital submissions will affect HMRC’s tax revenue.

In the letter, Ms Hillier commented: ‘You have not attempted to demonstrate consideration of further robust testing of the financial information underpinning your programme, for example, controlled behavioural experiments to ascertain the difference that more regular filing can make to the accuracy of returns. VAT returns were already provided quarterly and cannot provide this assurance.’

HMRC said that it intends to ‘ensure that it strikes the right balance between ensuring competition, quality and access to software for its MTD for VAT and self-assessment customers’.

For more information, visit our website at www.nhllp.com

Government urged to implement reforms to R&D tax system

A report by the Suffolk Chamber of Commerce has urged the government to urgently implement reforms to Research and Development (R&D) tax relief in order to avoid ‘hurting small companies’.

The report found that recent changes by HMRC and a ‘wild west’ regulatory system in regard to who can act as R&D tax advisers are ‘undermining confidence and take-up’.

The Chamber collected a number of case studies and original survey research, which showed that 46% of small companies are deterred from making future claims based on their latest experience.

Chair of the Chamber’s R&D Tax Reliefs Task and Finish Group, Steve Elsom, said: ‘Our original research into local businesses’ experiences shows that the lack of knowledgeable experts at the HMRC, plus the imposition of an overly strict compliance regime is causing many legitimate companies’ most recent claims to be delayed and/or refused, with others fearful that previously successful claims from previous years might now be challenged.

‘Every right-thinking person applauds the crackdown in fraudulent claims, but HMRC appears to be going to extremes in its definition of the term.’ 

For more information, visit our website at www.nhllp.com