Corporate report

HMRC performance update: April to June 2022

Published 4 August 2022

Today (4 August 2022) we have published our performance data for quarter 1 2022 to 2023 and monthly performance data for April, Mayand June 2022.

• In financial year 2021 to 2022, we collected £731.1 billion in total tax revenues for UK public services, and protected £30.8 billion in additional tax by tackling avoidance, evasion and non-compliance.
• We did this while protecting 11.7 million jobs through the Coronavirus Job Retention Scheme, supporting thousands of traders with the introduction of new UK border and customs arrangements and stabilising services which had been affected by the pandemic.
• Our efforts in 2021 to 2022 to recover customer service levels - which were affected by the need to deploy our resources to priority areas during the pandemic - stood us in good stead for the year ahead. By the end of the year, we had worked our way back to normal volumes of post on hand, clearing a backlog of around 1.5 million items between October 2021 and April 2022.
• During the first quarter of 2022 to 2023, we have worked hard to deliver a good level of service across most areas of our business, including keeping goods moving across our borders quickly and efficiently, maintaining clearance times within target (95% within 2 hours and 100% within 4 hours).
• However, a range of factors have affected both the demand on our services and our available resource to meet that demand, with a resulting impact on our telephony services at times, and also some customer correspondence – in particular repayment claims and appeals. We are sorry that some customers and agents have experienced delays when dealing with us.
• We are now making progress towards the levels of customer service performance we would expect to achieve. Customer satisfaction has remained above 80% since April and the proportion of callers wanting to speak to an adviser who were able to do so increased from 71.2% in March to 78.7% in June. Meanwhile, the average speed of answer on our helplines has improved by more than 5 minutes since the start of the financial year.
• The economic impact of COVID-19 affected our debt balance, which peaked at £72 billion in 2020 – but by the end of financial year 2021 to 2022 we had brought it down by more than 40% from that peak to £41.6 billion.
• In the current challenging economic conditions, we expect some of our customers will continue to need support to pay what they owe and there will be continued pressure on our services for some time, but we are focused on delivering service improvements for our customers quarter on quarter this year despite these challenges.

Delivering customer service

We have made progress towards the levels of customer service performance we would expect to achieve. We began the new financial year in a better position than in 2021 to 2022, but some of our customer service levels still aren’t where we want them to be and we’re sorry to customers and agents who have been affected.

Over the course of 2021 to 2022 we worked hard to reduce the stock of correspondence that had built up during the pandemic from its peak of 3.3 million in July 2021 to 1.9 million by the end of the financial year. To put this into context, that’s around 4 weeks’ work. Given the volume of post we receive (1.8 million items in a typical month and well over 2 million in peak months), it’s normal for us to have this level on hand at any given time.

We also improved the proportion of customer correspondence that we turned around within 15 working days from 29.7% in April 2021 (61.9% within 40 days) to 65.4% in March 2022 (79.5% within 40 days). The proportion of callers wanting to speak to an adviser who were able to do so rose from 66.2% in April 2021 to 71.2% by March 2022, averaging 77.3% across the year.

The first quarter of the financial year is always our busiest period and we have seen a number of factors since April that affected demand on our services and our available resources. We experienced extremely high volumes of repayment claims (90% more than usual), mostly related to working from home expenses. We also experienced some IT issues as we made vital upgrades to improve system security and resilience in the future, and some of the resources we would normally expect to have at this time of year were diverted to urgent priorities including providing support for Ukraine visa processing.

As a result, some customers have continued to experience service levels below what we aim to deliver. Between April and June 2022, our correspondence turnaround within 15 working days dropped back slightly to 61.5% (although our latest figures also show 40-day turnaround remaining steady at 78.9% up to end of May 2022). The average speed of answer on our helplines also increased from 14.49 minutes in March to 18.51 minutes in April but has since improved to 13.10 minutes by the end of June.

The proportion of callers wanting to speak to an adviser who were able to do so improved overall in the first 3 months of the financial year, increasing from 71.2% in March to 78.7% in June. We have also managed 53 million digital customer interactions and maintained high levels of overall customer satisfaction (81.8% as of 30 June 2022).

We expect to see continuing pressure on our services for some time, but we’re maintaining service levels across most areas of our business and we’re focussed on continuing to deliver improvements for our customers in the remaining quarters of the year.

Since April we have also:

• kept goods moving across our borders quickly and efficiently, keeping our clearance times within target (95% within 2 hours and 100% within 4 hours)
• made payments on time to all of our 8.6 million tax credits and Child Benefit customers and we are processing changes within 12 days of receipt
• reduced the time it takes to process a new Child Benefit claim from 28 days to 4
• checked and updated the records of around 45 million PAYE customers to make sure they’ve paid the right amount of tax – with tax calculations being issued to 6.5 million customers who have a repayment or further tax to pay
• enabled 2.1 million tax credits customers to renew their tax credits claim ahead of the 31 July deadline
• continued to address higher than expected volumes of P87 claims (for work expenses). We have made good progress but there are still delays to this service, with an average customer wait time of 35 days. We expect this service to be fully digitised by the end of this financial year

Ensuring the right tax is paid

Every year, 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.

Throughout the pandemic, we continued our compliance work, prioritising fraud and other tax crime, including a number of high profile cases, such as bringing one of the UK’s most wanted tax cheats to justice in early 2021. We protected £30.8 billion in compliance yield in 2021 to 2022, a similar amount to the £30.4 billion that we protected in 2020 to 2021. This figure doesn’t include revenue collected or protected from our compliance work on the COVID-19 support schemes, which is measured separately.

Economic conditions, the COVID-19 pandemic and a number of other factors have impacted on compliance yield over the past 2 years. In 2020 to 2021, reduced levels of economic activity meant that tax liabilities and tax receipts were significantly lower. Tax receipts recovered in 2021 to 2022 to the levels we had forecast prior to the pandemic, but there is a lag from when a tax liability is created to compliance activity and then to yield. The reduced economic activity in 2020 to 2021 led to less compliance yield in both 2020 to 2021 and 2021 to 2022. So far in the new financial year, compliance yield remains at a similar level to the same point in 2021 to 2022.

Our most complex compliance activities often take several years to complete and it’s not unusual for the end date to move significantly, with these variations averaging out over time. There were delays to several cases which we had expected to close during 2021 to 2022, but this compliance yield is still forecast to be delivered in future years.

We want everyone to pay the tax that is legally due: no less, and no more. Our approach is always to target the areas of highest risk in the tax system. A key measure of how well we’re doing is the UK tax gap – the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The latest tax gap figure (for 2020 to 2021) is estimated to be 5.1% of total theoretical tax liabilities, the second lowest recorded percentage ever. It means that even in the unprecedented circumstances of the onset of the COVID-19 pandemic, we secured almost 95% of all tax due.

Tackling the debt balance

After peaking at £72 billion in 2020, our debt balance reached its lowest point since the start of the COVID-19 pandemic in January 2022 at £38.8 billion. Since then, it has increased to just over £42 billion at the end of June 2022, which is still £8 billion lower than it was a year earlier.

The debt balance has been high due to the economic impact of the COVID-19 pandemic and decisions the government made to mitigate this, including allowing payment of VAT and Self Assessment from the first quarter of 2020 to 2021 to be deferred. HMRC also paused most of our debt pursuit activity during the period of the highest level of public health restrictions.

In 2021 to 2022 we saw record levels of new debt created, but also record levels of debt cleared. As a result of the deferral period ending, we reduced the amount of deferred VAT debt from £22.5 billion to less than £1 billion.

We also promoted the use of Time to Pay instalment arrangements, which are available to all businesses and individuals who are in temporary financial difficulty and unable to pay their tax in full on time.

Some customers’ ability to pay is affected by macro-economic conditions, such as supply chain pressures and cost of living rises, and some still have constrained finances from the pandemic. We continue to work closely with our Voluntary and Community Sector (VCS) organisations to help reach those customers who need extra help with HMRC services, assigning £4.98 million in funding to 12 organisations for 2021 to 2024. And we’re getting ready to deliver cost of living payments of up to £650 to eligible Tax Credits customers, from September 2022. These challenging economic conditions may last beyond 2023 to 2024, however, so we expect the debt balance to remain broadly static through 2022 to 2023, with initiatives to reduce it having an impact during 2023 to 2024 and future years.

We will continue doing everything we can to help customers with short-term financial difficulties while at the same time taking steps to enforce payment by those who don’t engage with us or refuse to pay. At the end of June 2022, around 19.3% of the debt balance (£8.1 billion) was in a managed position, usually an arrangement to pay in instalments. This is an increase of around 8.7 percentage points on the pre-pandemic average. We expect the proportion of the debt balance in a managed position to increase steadily in the coming years.

We are recruiting around 2,000 new Debt Management colleagues in 2022 to 2023, to make sure we can provide support to our customers who need it and help us take action where customers do not engage with HMRC or refuse to pay what they owe. This represents both filling existing vacancies, as well as using the additional £62 million we received to fund around 500 additional Debt Management staff over the next 3 years. In September 2022 we will publish a plan setting out how we’re going to speed up the rate at which we reduce the elevated debt balance. This will include more detail on ways of measuring our performance in the current economic climate.

Building a trusted, modern tax and customs department

It’s clear there are further challenges ahead: the outlook for the economy is uncertain and the government rightly expects all departments to become leaner, more effective and more innovative. To operate successfully, we’ll need to be agile and flexible, and tackle risks and challenges as they arise. It’s vital that we keep building trust in HMRC by focusing on meeting our Charter standards.

We’re also laying foundations for the future. The funding we received as part of the government’s latest Spending Review will enable us to continue supporting taxpayers, deliver a secure and efficient customs border, and keep transforming into one of the most digitally advanced tax authorities in the world.

From April 2022, all VAT-registered businesses are mandated to file through compatible software, bringing us a step closer to making tax digital. We’re also working on major cross-government priorities such as a new Single Trade Window, which will ensure traders can submit all the information required for imports and exports easily and in one place. We are well on the way to delivering a Single Customer Account, which from later in 2023 will simplify the digital experience of many millions of taxpayers - putting everything they need to do their tax in one place.

We’re committed to operating an increasingly resilient and effective tax system, making a real difference for our customers and building a trusted, modern tax and customs department.