Research and analysis

Executive Summary: Mid-sized Business Customer Survey 2022

Published 17 July 2023

1. Introduction

HM Revenue and Customs (HMRC) commissioned Kantar Public to conduct the 2022 wave of the Mid-sized Business Customer Survey, which has been conducted annually since 2015. The survey explores Mid-sized businesses’ experiences of dealing with HMRC, measures general perceptions of HMRC and tax administration, and assesses the effects of operational and policy change. The Mid-sized business population excludes around 2,000 of the UK’s largest and most complex businesses, which are covered by HMRC’s Large Business service. There are approximately 320,000 Mid-sized businesses in the UK.

The research involved both quantitative and qualitative components:

• a quantitative telephone survey of 1,408 Mid-sized businesses in the UK, to generate data representative of the Mid-sized business population

• qualitative follow-up telephone interviews conducted with 30 businesses that took part in the survey to explore topics in more depth

2. Breaking down customer experience

More than half of Mid-sized businesses had non-routine contact with HMRC (55%). Non-digital channels, such as telephone or post, were used more frequently for non-routine contact.

Around half of Mid-sized businesses with non-routine contact rated their overall experiences with HMRC positively (52%), while one-fifth gave a negative rating (20%). Qualitative interviews found that poor ratings reflected perceptions of poor customer service rather than the burdens associated with complying with tax obligations. Additionally, qualitative interviews found that Mid-sized businesses tended to base poor ratings on a single negative transaction. Poor experiences were often due to communication breakdowns, including lack of clarity or transparency, delays in response, or misunderstandings at either end.

A Bayesian Belief Network was constructed to further understand the drivers of overall experience. The acceptability of time taken to reach the end result, getting tax transactions right, and the quality of information have a direct influence on ratings of overall experience. Issue resolution was also found to be key to customer experiences, as it directly influences overall experiences and other dimensions.

Around half of Mid-sized businesses with non-routine contact felt that HMRC was good at resolving issues (53%). Negative ratings increased from 19% to 24% between 2021 and 2022. The qualitative depth interviews found that perceptions of HMRC’s ability to resolve queries related to clarity, communication and time, and businesses preferred to resolve issues without needing to call a telephone helpline.

Three-quarters of Mid-sized businesses with non-routine contact agreed staff were professional, although positive ratings decreased between 2021 and 2022 (from 81% to 73%). However, the qualitative interviews found that staff were generally well regarded, with participants valuing HMRC call handlers who made an effort to understand their issue and business.

Around 6 in 10 Mid-sized businesses rated HMRC’s ability to get tax transactions right (57%) and the quality of information received (59%) as good. However, many businesses expressed dissatisfaction with the time taken to reach an end result in dealings, with fewer than half (42%) finding it acceptable.

Half of Mid-sized businesses found it easy to find tax information (50%). Around half of Mid-sized businesses agreed that HMRC made it clear when everything was complete, with a decrease in positive ratings between 2021 and 2022 (from 61% to 52%). Six in ten Mid-sized businesses agreed that HMRC made clear what steps were needed, with a decrease in positive ratings between 2021 and 2022 (from 66% to 61%).

3. Nature of interactions

The most common reason for non-routine contact with HMRC was technical assistance or guidance in relation to specific taxes or reliefs (41%), followed by errors made regarding taxes (16%) and an ongoing HMRC enquiry (16%, which increased from 11% in 2021). Mid-sized businesses that contacted HMRC regarding a specific type of tax primarily did so regarding PAYE (44%, which increased from 37% in 2021) or VAT (40%).

VAT was considered the most difficult area of tax when seeking information and support from HMRC (19%, which decreased from 23% in 2021). However, there were increases in the proportions of Mid-sized businesses that found Research and Development (R&D) tax credits (10% from 3% in 2021) or Corporation Tax (9% from 7% in 2021) difficult to deal with. The qualitative depth interviews found that issues regarding Corporation Tax and R&D tax credits were due to the complexity of the area.

Mid-sized businesses were also asked about contact channels when dealing with HMRC over the last 12 months. More than half used GOV.UK guidance (63%, which continued to decrease from 73% in 2021), telephone (57%) or the Business Tax Account (56%).

The employer helpline (50%) and VAT enquiries helpline (41%) were most commonly used by Mid-sized businesses. The employer helpline saw an increase in use since 2019. There was also an increase in use of the Corporation Tax enquiries helpline (from 15% in 2019 to 21% in 2022) and the import, export and customs helpline (from 7% in 2019 to 10% in 2022). In depth interviews negative customer experiences with telephone helplines were found to be due to long wait times, lack of specialist knowledge, and a lack of continuity in repeat communications.

Two-thirds of Mid-sized businesses rated their experiences of online services positively (66%). Among those dissatisfied with HMRC’s online services, guidance on GOV.UK (35%), the Business Tax Account (26%), and email (24%) were the services most often associated with that dissatisfaction.

4. Segments of Mid-sized businesses

The proportions of Mid-sized businesses with customers or suppliers in the UK, EU, and outside the EU increased in 2022 after decreasing in the previous year. The majority had customers or suppliers in the UK (94% from 90% in 2021), followed by the EU (39% from 35% in 2021) and outside the EU (32% from 27% in 2021).

Most Mid-sized businesses used a tax agent, which increased in 2022 (77% from 71% in 2021). Smaller Mid-sized businesses were more likely to use an agent (79% of those with fewer than 50 employees compared with 70% of those with 50 employees or more). Mid-sized businesses with higher turnover were more likely to use an agent that was a member of a professional body (99% with turnover of at least £3 million compared with 90% with turnover of less than £3 million). Positive ratings of customer experiences with HMRC were similar regardless of agent use.

5. Complying with tax obligations

Just over half of Mid-sized businesses found dealing with tax issues easy (56%) and agreed that HMRC communicates in an easy-to-understand way (56%). More than half of Mid-sized businesses agreed that the overall level of administrative burden relating to tax compliance was reasonable (58%).

One in five Mid-sized businesses had been subject to an HMRC enquiry, inspection or investigation in the last 5 years, including the last 12 month (20%), which decreased from 30% in 2021. Among those that had, 6% had been subject to an enquiry in the last 12 months. Larger Mid-sized businesses were more likely to have been subject to an enquiry in the last 5 years (41% of those with turnover of at least £10 million).

VAT (50%) and Corporation Tax (41%) were the main sources of administrative burden for Mid-sized businesses, with RTI PAYE reporting (34%) and regulatory changes (30%) also identified as burdensome for some. However, in the qualitative interviews Mid-sized businesses recognised that digitalisation of VAT had significantly eased administrative burden. The use of record-keeping software for VAT had increased since 2021 (85% from 82% in 2021).

Just over half of Mid-sized businesses said they used an e-invoicing system (56%).

Two-thirds of Mid-sized businesses agreed that they had the capacity to deal with change to tax policy (67%). Half agreed that HMRC provided the support needed to deal with change (47% which decreased from 52% in 2021).

6. Perceptions of HMRC

The majority of Mid-sized businesses trusted HMRC (64%), although one in ten did not (10%). Confidence in the way HMRC does its job decreased between 2021 and 2022 (55% from 62% in 2022).

Most Mid-sized businesses agreed that HMRC treated them fairly (69%) and that they had a transparent relationship with them (66%), but fewer agreed that HMRC would admit to making a mistake (47%) or had a good reputation (56%).

Two thirds of Mid-sized businesses agreed that HMRC ensured the correct amount of taxes were paid and received (66%), while 6 in 10 agreed HMRC made it clear what was needed to be compliant (59%).

Ratings were lower for measures related to minimising customer costs. Half of Mid-sized businesses agreed that HMRC systems integrated well with how they managed tax (51%). Four in ten agreed that HMRC minimised cost, time and effort, and that HMRC was good at preventing customer mistakes (44% and 43% respectively). Just under a third of Mid-sized businesses agreed that HMRC information and services were tailored to their business (31%), which decreased from 36% in 2021.

One in five Mid-sized businesses (18%) disagreed that HMRC uses its power in a very forceful way. In qualitative depth interviews, treatment from HMRC that was perceived to be unfair was a common source of negative perceptions.

The proportion of Mid-sized businesses that thought that tax evasion was never acceptable decreased between 2019 and 2022, from 93% to 89%. The proportion that thought tax evasion was acceptable in some circumstances increased from 4% in 2019 to 6% in 2022.

One in five Mid-sized businesses (18%) thought that tax evasion was widespread. Just over half thought tax evasion was not widespread (58%) and a quarter did not know (23%). The most frequent reason given by Mid-sized businesses for thinking tax evasion was widespread was personally hearing about it through word of mouth (24%) followed by reading, hearing or seeing it a lot in the media (16%).