Corporate report

HMRC performance update: January to March 2022

Published 18 July 2022

HMRC provides an update on its performance, following publication of its Annual Report and Accounts for 2021 to 2022

Today (18 July 2022) we have published our Annual Report and Accounts for 2021 to 2022, along with our performance data for quarter 4 and monthly performance data for March 2022.

• Our latest figures show that we made solid progress back towards normal operating levels during financial year 2021 to 2022, even as the UK continued to be impacted by the COVID-19 pandemic.

• We generated a record £731.1 billion in total tax revenues for UK public services, as well as helping 2.43 million customers to renew their tax credits on time, 10.3 million customers to complete their Self Assessment returns, supporting more than 12 million children through Child Benefit payments – and protecting £30.8 billion in additional tax by tackling avoidance, evasion and non-compliance.

• We did this alongside protecting 11.7 million jobs through the Coronavirus Job Retention Scheme, and supporting thousands of traders with the introduction of new UK border and customs arrangements, by flexing our resources and taking some tough decisions about priorities.

• Diverting resources to the COVID-19 support schemes and essential tax and tax credit services meant that many of our customer service levels have not been where we would wish them to be, with some customers and agents experiencing delays when dealing with us. We’re sorry about this and we’re fully focused on addressing these issues.

• The economic impact of COVID-19 also affected our debt balance, which peaked at £72 billion in 2020 – but by the end of March 2022 we had brought it down by more than 40% to £41.6 billion. There was also an impact on the additional revenues that we were able to secure through our compliance work, which remained lower than normal for a second year.

• The challenging economic outlook means we expect to see continuing pressure on our services for some time – but we’re focused on recovering our customer services, compliance yield and debt balance, as well as delivering on all our targets in the remaining quarters of the year.

Delivering customer service

We have refocused our operations and made solid progress back towards normal operating levels, but some of our customer service levels aren’t fully back to 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 took action to reduce the stock of correspondence that had built up during the pandemic and to keep our helpline service levels stable. Customer correspondence had increased significantly – but we succeeded in reducing the stock on hand from a 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 large volumes on hand at any given time.

The proportion of customer correspondence that we turned around within 15 working days was at 29.7% in April 2021 (61.9% within 40 days) – and we recognise the frustration this will have caused to customers, especially those who need to use paper for their returns and correspondence. By the end of March 2022, we had improved our turnaround time to 65.4% (79.5% within 40 days). The proportion of callers wanting to speak to an adviser who were able to do so also rose from 66.2% in April 2021 to 71.2% by March 2022, averaging 77.3% across the year.

We began the new financial year in April 2022 in a good position, but with further recovery work to do – and we have continued maintaining service levels across most areas of our business. Since April we have:

• kept goods moving across our borders quickly and efficiently, keeping our clearance times within target (95% within two hours and 100% within four hours)
• made payments on time to all of our 8.6 million tax credits and Child Benefit customers and we are processing changes within 8 days of receipt
• reduced the time it takes to process a new Child Benefit claim from 28 days to four
• 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
• managed 53 million digital customer interactions so far this year, maintaining high levels of customer satisfaction (81% as of 30 June 2022)
• reduced average wait times on our helplines from 19 to 13 minutes (80.7% overall customer satisfaction, combining digital and telephony services)
• remained on track to deliver a successful tax credits peak, where 2.1 million tax credits customers are renewing their claims ahead of the 31 July deadline

The first quarter of the tax year is always our busiest period and we have seen a number of factors affecting demand on our services and our available resources to manage that demand – so some customers have continued to experience issues using our services.

In particular, we have experienced extremely high volumes of repayment claims (90% more than usual) – mostly related to working from home expenses. We have also experienced some IT issues as we make vital upgrades to systems in order to improve service delivery going forward – and some of the resources we would normally expect to have at this time of year have been diverted to urgent priorities including providing support for Ukraine.

The challenging economic outlook means we expect to see continuing pressure on our services for some time – but we’re managing the situation and we’re focused on delivering on all our targets in the remaining quarters of the year.

Protecting tax from error and fraud

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 this compliance work, prioritising our interventions where they would have the greatest impact. 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 but still lower than the £36.9 billion that we protected in 2019 to 2020, which was the last financial year before the COVID-19 pandemic (and also featured two exceptionally large cases). 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 impacted on compliance yield. In 2020 to 2021, reduced levels of economic activity meant that tax liabilities and tax receipts were significantly lower, so we would naturally expect to collect less compliance yield. 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 has led to less compliance yield in both 2020 to 2021 and 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 this year, but this compliance yield is still forecast to be delivered in future years.

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 £41.6 billion at the end of March 2022, which is still £15.9 billion lower than it was at the end of March 2021.

The debt balance has been high due to the economic impact of the COVID-19 pandemic and decisions the government and HMRC made to mitigate this, including allowing payment of VAT from the first quarter of 2020 to 2021 to be deferred and pausing most of our debt pursuit activity during 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. At the end of March 2022, we had £5.4 billion in Time to Pay arrangements - and over 90% of them are paid as agreed.

Some customers’ ability to pay is now being affected by macro-economic conditions, such as supply chain pressures and high inflation, and some still have constrained finances from the pandemic. These conditions may last beyond 2023 to 2024 and we therefore 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 March 2022, around 18% of the debt balance was in a managed position (usually an arrangement to pay in instalments) – an increase of 7% 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 people in 2022 to 2023, to make sure we can provide support to all our customers who need it. 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 three years. In September 2022 we will publish a plan setting out how we’re going to speed up the rate at which we address 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 changing 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 also vital that we keep building trust in HMRC by focusing on 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, we made it mandatory for smaller VAT-registered businesses to join Making Tax Digital and we’re rolling out our new Contact Engagement Programme to colleagues to modernise our digital and telephony tools. We’re working on major cross-government priorities such as a new Single Trade Window, which will revolutionise how customers submit all the information required for imports and exports – and we’re well on the way to delivering a Single Customer Account, which will transform the experience of many millions of taxpayers within the next few years by enabling them to view and manage all their tax affairs in one place online.

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.