Corporate report

HMRC performance update: July to September 2023

Published 2 November 2023

Introduction

HM Revenue and Customs (HMRC) is your tax service – we’re here to support you to get your tax right and make it hard for the dishonest minority to cheat the system.

In 2022 to 2023 we collected £788.8 billion in tax receipts for the Exchequer ^{[footnote 1]} – an increase of 10.2% on last year – money which is spent by the government on schools, the NHS, police and other essential services we all rely on.

We’ve achieved a long-term reduction in the UK’s tax gap from 7.5% in 2005 to 2006 to 4.8% in 2021 to 2022. This means we bring in more than 95% of tax due. It costs us just half a penny to collect every pound of tax revenue.

In 2022 to 2023, our compliance work protected £34 billion of tax revenue that would otherwise have been lost to the Exchequer through error, fraud and other forms of non-compliance.

We are also reshaping the role of customs with our aim to have a world-class customs system – one that uses technology, data and better coordination to reduce costs and friction for businesses and customers. Modernisation is integral to this and in August 2023 we reached an important milestone in our move to a single customs platform with 99.9% of import declarations submitted on the new Customs Declaration Service.

Delivering customer services

We’re determined to deliver a modern, efficient service that makes it easier to pay tax and harder to get it wrong. That means improving guidance and enhancing and expanding our digital services – online via GOV.UK and through the HMRC app – to give customers the quick and easy ways to manage their tax affairs that they expect.

Millions of our customers pay their tax automatically (for example, through PAYE) and those who do need to contact us are increasingly doing so online via GOV.UK and in the HMRC App. Three quarters of our customers had online interactions with us in the last 12 months – and 38% only use our online channels. Satisfaction with our digital services is consistently over 80%.

Last year, almost 97% of Self-Assessment customers filed their tax return online, and our online accounts and app were accessed almost 200 million times. The HMRC App saw a 68% increase in year-on-year growth in new users in April 2023, with more people using it to view their PAYE tax code and annual tax summary, pay their Self-Assessment liabilities, use a tax calculator and, since May 2023, claim Child Benefit online.

For customers who still need to contact us by phone or post – like those who struggle to go online for example, or those who have complex queries that require human intervention – we recognise that service levels remain below our service standards and that this has caused real difficulties for some customers and agents.

The things affecting our ability to meet service standards on telephony and post include:

• the impact of higher inflation on our budget
• growth in the number of customers in the tax system
• an increase in the proportion of customers with complex tax affairs who need more support

In 2022 to 2023 we made a significant improvement in the proportion of customer correspondence that we turn around within 15 working days, increasing to 72.7% from 45.5% in 2021 to 2022. As at the end of September 2023, the figure for this financial year to date was 74%.

The proportion of callers wanting to speak to an adviser who were able to do so averaged at 69.3% between July and September 2023.

But we know that more than 3 million of the phone calls we received last year were about just 3 things that can easily be done online – resetting a password, getting your tax code, and finding your National Insurance number. We also know that around two thirds of all Self Assessment calls, for example, could be resolved by customers themselves online.

It means those people who really need to speak to an expert adviser – including the digitally excluded and the particularly vulnerable – can struggle to get the help they need.

With rising demand and reduced resources, the only way we can meet those service levels for customers who really need to speak to us, is by further improving and expanding our digital and online services and continuing to take bold decisions to encourage even more people to use them.

In order to deliver the service standards our customers expect with the resources we have, our aim is to reduce the volume of contact through phone and post and boost the number of customers self-serving online at GOV.UK or in the HMRC app, without needing to contact us.

This plan will save public money by reducing the costs of administering the tax system, and enable us to focus our advisers on those customers who need extra help. It will also meet the demand from our customers to be able to self-serve online at a time that is convenient for them. So it’s the right thing to do for our customers and for the public purse.

We will continue to deliver a service to customers who are unable to access our services online, or who have complex tax affairs that cannot easily be dealt with through digital and online services. Although in time, we expect this to be a much smaller group of people.

Ways we are changing our customer services

Ways we are changing our customer services include:

• we’ve introduced a new telephone system that uses features such as voice recognition to improve and simplify the customer experience. Migrating our telephony services onto this new platform has enabled us to streamline the range of helpline numbers that customers use to contact us

• our digital assistant automatically helps customers to find the information they are looking for and links the customer to an adviser through webchat if it can’t find the answer. Around 66% of customers who use the assistant don’t need further support. Digital Assistant interactions increased from 74,000 in June 2022 to 312,000 in June 2023

• our new intelligent text message service helps customers resolve their queries online, directing them to the quickest and easiest way to resolve their query. We’re now issuing up to 50,000 SMS messages to customers every week on average and there are 51 different circumstances where a customer can receive one of these messages. Success rates average 67% in moving customers to the online service offered

• our online service dashboard and ‘Where’s my reply?’ tool enable agents and customers respectively to check processing times for queries and requests, reducing the need for progress chasing calls

• we’ve demonstrated our commitment to being responsive to customer needs, an important part of the HMRC Charter, by prioritising tax repayments, as we recognise the importance of people and businesses receiving money quickly. Taking actions like this also helps to reduce the need for our customers to call us to chase progress of their claims

• we’ve prioritised how we deploy our resources to deliver a better customer experience. This included closing our VAT registration phone line from 22 May 2023, so our advisers could get on with processing VAT registration applications instead of answering progress-chasing calls about them. This has resulted in a sustained reduction in the average time taken to process an application. Applications processed in 30 working days, for example, climbed from 64% in June to 71% in August, while applications processed in 20 working days increased from 52% in June to 56% in August

• from 12 June to 4 September 2023, we started trialling a new seasonal model for dealing with Self Assessment queries, which involved directing customers to the digital assistant, backed up by a webchat service and a helpline for those customers who are unable to use our online services or need help to do so. Increased capacity was also available in our Extra Support Team, so that customers who really did need to speak to us about Self-Assessment still could. Our interim evaluation of the trial has found it led to further increases in the use of our online services, and customer satisfaction remained high. Being able to redeploy advisers to high priority work has had other positive impacts for customers, with an additional 350,000 overpayment work items being processed

Managing debt

While most of our customers pay what they owe at the right time, we are seeing more customers getting into debt in the current challenging economic conditions, and the average value of customers’ debts is increasing. The majority of tax debt is owed by small and medium-sized businesses.

The debt balance at the end of September 2023 was £45.5 billion, a reduction from £45.9 billion at the end of March 2023 but higher than the £42.0 billion it stood at in June 2022. There are many external factors that influence the debt balance, which makes it difficult to predict, but we forecast it remaining close to these levels throughout the remainder of 2023 to 2024.

Our analysis shows there has been very little change in the proportion of customers filing their tax returns and declaring their liabilities on time, but there has been a reduction in the number of customers paying on time, which is increasing the volume of new debt. This suggests customers remain committed to complying with their tax obligations but are struggling to pay.

Where customers are unable to pay on time, we do everything we can to help those in short-term financial difficulty who engage with us to get out of debt. We work with them to try and agree a payment plan – called Time to Pay – based on their financial position. By the end of September 2023, we were managing £5.7 billion of debt through time to pay arrangements, supporting 889,000 customers. Around 90% of these complete successfully.

Self Assessment customers with debts up to £30,000 (that they can pay off over 12 months) and employers with PAYE debts up to £15,000 (that they can pay off over 6 months) can set up a Time to Pay arrangement online, without having to call us. And over 178,000 such plans, with a value of over £635 million (including interest), were set up between September 2022 and September 2023. The Self Service Time to Pay scheme was extended to VAT in summer 2023.

For those who can pay but are not doing so, we introduced penalty and interest reform for VAT from January 2023, to encourage payment on time and quicker debt resolution.

Our message to taxpayers is simple: you should pay your tax in full and on time if you can. If you’re struggling, contact us and we’ll do our best to support you.

Supporting trade

We have an essential role to play in ensuring the customs system supports the smooth flow of trade at the border, helping to deliver economic growth.

The government’s vision is to have the world’s most effective border by 2025. We have played a key role in supporting Cabinet Office to develop a new Target Operating Model for the UK border – one that uses technology, data and better coordination to create a simpler border experience, reducing costs and friction for businesses and customers. This model (published in August) sets out, for example, how the Single Trade Window (STW) will help to deliver many of these changes. A new digital gateway that will start delivering in 2023 – with further functionality to be added over the following years, the STW will help us improve how we assess risk at the border and reduce costs and the administrative burden for traders, by enabling them to meet their import, export, and transit obligations in one place.

Importers can now submit all their import declarations through the Customs Declaration Service (CDS). This is an important step towards delivering an efficient, digital and customer-focused customs system. We’ve seen around 63 million import declarations made on the CDS (as of 23 August 2023), representing 99.9% of all import declarations. We’re now focused on making sure the UK’s exporters make the move to the new system by 30 March 2024.

We also continue to support traders moving goods between Great Britain and Northern Ireland in line with the UK’s commitments to deliver the Windsor Framework. We completed delivery of phase 1 on 30 September 2023, enabling traders to claim back or avoid paying duties on eligible goods movements between Great Britain and Northern Ireland; and phase 2 will see us deliver a new solution for moving post and parcels, along with all the other benefits of this new ‘green lane’ by September 2024.

Ensuring the right tax gets paid

We want everyone to pay the tax that is legally due, no matter who they are. Our role is to support people who are trying to get it right, encourage people to take proper care and stop the dishonest minority from cheating the system.

Every year, through our compliance work, we collect and protect billions of pounds of tax revenue that would otherwise have been lost to the Exchequer through error, fraud or other forms of non-compliance. We call this ‘compliance yield’ and our activity to protect this money is a crucial part of ensuring everyone pays the right amount of tax. In 2022 to 2023, we delivered £34 billion of compliance yield.

The National Audit Office recognised, in a report published in December 2022, that our compliance work offers good value for money for the UK taxpayer. It returns, on average, around £18 for every £1 of expenditure on our compliance staff.

To ensure everyone pays the right tax, we have a well-established compliance strategy with 3 elements: preventing non-compliance, promoting good compliance, and being robust in our response to those who bend or break the rules. The changes we’re making to modernise our services are vital to this strategy. They aren’t just about improving customer experience, they also help to ensure customers pay the right tax at the outset, rather than fixing problems after they happen.

For example, peer-reviewed published research has shown that the move to businesses submitting their VAT returns using Making Tax Digital-compatible software, is helping to reduce opportunities for calculation and transposition errors, thereby reducing the tax gap. At Spring Budget 2023, the Office for Budget Responsibility certified a cumulative forecast for additional revenue from Making Tax Digital for VAT of £2.6 billion between 2022 to 2023 and 2027 to 2028, which increases to over £3 billion when added to the additional revenue raised since its introduction in April 2019.

Separate social research on customer experience has also demonstrated that most businesses have experienced at least one benefit from Making Tax Digital, most commonly making preparing and submitting their VAT return faster and feeling more confident they are getting their tax right. 

We’re also using targeted campaigns and prompts, such as highlighting to customers if they enter data that doesn’t align with what we expect.

In 2022 to 2023, through our compliance response work – where we intervene to ensure mistakes are put right, or to tackle deliberate bending or breaking of the rules, we:

• took up 299,000 new compliance checks and completed 280,000, helping get taxpayers back on track

• secured £4 billion through our work tackling avoidance, evasion and other non-compliance by the wealthy – a 60% increase on the previous year

• initiated 396 new criminal cases and more than 12,500 civil investigations into suspected fraud through our serious fraud investigators

• carried out criminal investigations through which 240 prosecutions were brought, securing 218 convictions with a success rate of 91% in court

• recovered £165 million in criminal assets using proceeds of crime legislation and delivered 3,279 anti-money laundering supervisory interventions, issuing over £5.5 million in fines and suspending or cancelling the registration of 27 businesses – playing an important part in tackling economic crime

• secured £656.6 million in unpaid tax plus penalties from one of the UK’s wealthiest and highest-profile individuals

• dismantled one of the UK’s biggest ever illegal tobacco factories, which we estimate would have led to lost tax revenues of more than £130 million per year

1. The figure of £788.8 billion in total tax receipts is based on cash received by the Exchequer in 2022 to 2023, consistent with our annual tax receipts and National Insurance Contributions bulletin. The higher figure of £814 billion which appears in our Annual Report and Accounts 2022 to 2023 is calculated on the basis of accruals. The accrual figure reflects tax revenues that are receivable or will become receivable based primarily on taxable activities by individuals and businesses throughout the 2022 to 2023 financial year, while the cash figure purely reflects actual receipts from taxpayers during that period. Some of the accrued revenues will of course have been received as cash during the financial year itself, most notably in the case of VAT and income tax and National Insurance contributions via PAYE. ↩