Research and analysis

Executive Summary: Mid-sized Business Customer Survey 2023

Published 30 July 2024

1. Executive summary

1.1 Introduction

HM Revenue and Customs (HMRC) commissioned Verian to conduct the 2023 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.

For the purposes of this research, Mid-sized businesses are defined by HMRC as those with a UK turnover above £10 million or with at least 20 employees. However, there are additional criteria that can categorise a business as Mid-sized. There are approximately 320,000 Mid-sized businesses in the UK.

The research involved both quantitative and qualitative components:

• a quantitative telephone survey of 1,350 Mid-sized businesses in the UK to generate data representative of the population

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

1.2 Customer experiences

Just over half of Mid-sized businesses had non-routine contact with HMRC (53%) in the last year, which has remained stable over time. Non-digital channels, such as telephone or post, were used more frequently than digital channels where non-routine contact occurred.

The most common reason for non-routine contact with HMRC was technical assistance or guidance in relation to specific taxes or reliefs (37%). This was followed by an error made regarding taxes (21% which increased from 16% in 2022) and an ongoing HMRC enquiry (15%). Mid-sized businesses that contacted HMRC regarding a specific type of tax primarily did so regarding PAYE (45%) or VAT (36%).

Ratings for overall experiences remained stable between 2022 and 2023, but there was a decrease in positive ratings for issue resolution, which influences many other dimensions of experiences.

Around half of Mid-sized businesses with non-routine contact rated their overall experiences with HMRC positively (53%), while one-fifth gave a negative rating (21%). Findings from the qualitative depth interviews indicated that good experiences of HMRC were driven by the perceived benefits of different contact channels, for example the ease and convenience of online methods.

Poor customer experiences were often associated with difficulties when resolving queries, particularly when using HMRC helplines. Fewer than half of Mid-sized businesses that had non-routine contact felt that HMRC was good at resolving queries or issues (48%). Qualitative depth interviews found that perceptions of HMRC’s ability to resolve queries related to the speed with which issues are dealt and clarity of communication.

Despite the challenges Mid-sized businesses experienced when using a telephone helpline, three-quarters with non-routine contact agreed that HMRC staff were professional (73%). The qualitative interviews revealed that while some HMRC staff were perceived to have lacked specialist knowledge to resolve queries, staff were overall viewed as professional.

Among ratings of other dimensions of customer experience, around 3 in 5 Mid-sized businesses rated HMRC's ability to get tax transactions right (61%) as good, which increased from 57% in 2022. However, in general Mid-sized businesses expressed dissatisfaction with the time taken to reach an end result when dealing with HMRC, with just over one-third (37%) finding it acceptable.

Positive ratings for both the quality of information received and the ease of finding information decreased between 2022 and 2023. Around half of Mid-sized businesses rated the quality of information positively (52%, down from 59% in 2022). 2 in 5 found it easy to find tax information (43%, down from 50% in 2022). Around 3 in 5 Mid-sized businesses agreed that HMRC made it clear when everything was complete (58%, an increase from 52% in 2022) and similarly, 3 in 5 agreed that HMRC made clear what steps were needed (62%), which did not change between 2022 and 2023.

1.3 Nature of Mid-sized businesses and their experiences

Mid-sized businesses ranged in size, where a third (32%) had annual turnover below £1 million. Overall, two-thirds (66%) of Mid-sized businesses had turnover below £10 million. Customer experience ratings varied based on the size of the business. Mid-sized businesses with lower turnover or numbers of employees generally reporting more positive experiences. Mid-sized businesses with higher turnover tended to have more frequent non-routine contact with HMRC compared with Mid-sized Businesses with lower turnover (69% with at least £10 million turnover compared with 48% with less than £10 million turnover).

Eight in 10 (80%) Mid-sized businesses used a tax agent, and the majority (89%) of them expressed satisfaction with the advice received. Half (50%) of Mid-sized businesses that used an agent relied heavily on them for their tax affairs, though customer experience ratings were similar regardless of whether a business used an agent or not.

International trading practices were prevalent among Mid-sized businesses, particularly those with higher turnover (59% with at least £10 million turnover compared with 41% with turnover below £10 million). However, trading internationally did not significantly impact customer experience ratings, except for the acceptability of time taken to reach an end result.

The occurrence of a major business event (for example experiencing a substantial change in turnover, number of employees, or merging with another business) among Mid-sized businesses decreased in 2023 compared with 2022. The proportion of Mid-sized businesses that experienced no business events increased from 41% in 2022 to 58% in 2023. Businesses that experienced a major event tended to give less positive ratings across various dimensions of customer experience.

The proportion of businesses subject to a HMRC enquiry or inspection remained stable between 2022 and 2023. Mid-sized businesses with higher turnover were more likely to be subject to an enquiry in the last 5 years (37% with £10 million turnover or more compared with 16% with less than £10 million turnover. Businesses with experience of an enquiry rated their general customer experiences with HMRC lower than those that had not had an enquiry.

1.4 Burdens of compliance

Mid-sized businesses’ perceptions of the ease of dealing with tax-related issues remained stable between 2021 and 2023. Just over half (58%) found dealing with taxes easy, although a small proportion found them difficult, with this difficulty gradually increasing over time (12% in 2021 to 16% in 2023). Just over half (57%) of Mid-sized businesses agreed that HMRC communicates in a way that is easy to understand.

Fewer Mid-sized businesses agreed that HMRC made it clear what was needed to be compliant in 2023 compared with 2022 (from 59% in 2022 to 55% in 2023), especially among Mid-sized businesses with higher turnover. For example, 58% in 2022 to 46% in 2023 among those with £10 million turnover or more compared with 61% in 2022 to 58% in 2023 among those with less than £10 million turnover. Seven in 10 Mid-sized businesses (68%) agreed that HMRC ensured their business paid and received the right amount of taxes.

GOV.UK was the primary source used by Mid-sized businesses to seek information (73%), but use of the Business Tax Account (from 32% to 39%) and HMRC’s online customer forums (from 12% to 17%) increased between 2022 and 2023.

VAT was considered the most difficult area of tax when seeking information and support from HMRC (17%), and still most frequently seen as the main and biggest source of administrative burden. However, there was an increase in the proportion of Mid-sized businesses that found PAYE reporting to be difficult to deal with (17% from 13% in 2022). The qualitative depth interviews found that issues regarding PAYE were due to the time required to ensure everything is correct.

Measures that related to minimising customer costs largely remained stable between 2022 and 2023. However, perceptions that services are tailored to Mid-sized businesses’ needs increased (35%) following a decrease between 2021 and 2022. Half of Mid-sized businesses agreed that HMRC systems integrated well with how they managed tax (54%). Around 4 in 10 agreed that HMRC minimised cost, time and effort, and that HMRC was good at preventing customer mistakes (45% and 41% respectively).

Half of Mid-sized businesses (50%) agreed that the level of tax related administrative burden was reasonable, a decrease from 58% in 2022.

1.5 Perceptions of HMRC and tax administration

There was no change in the perception that Mid-sized businesses can deal with policy change and that HMRC provides the support they need. Two-thirds of Mid-sized businesses agreed that they had the capacity to deal with change to tax policy (66%). Slightly fewer than half agreed that HMRC provided the support needed to deal with change (44%).

There was also little change between 2022 and 2023 in measures relating to trust, fairness and the reputation of HMRC. The majority of Mid-sized businesses trusted HMRC (63%), and slightly more than half of Mid-sized businesses were confident in the way HMRC does its job (56%). Most Mid-sized businesses agreed that HMRC treated them fairly (69%) and that they had a transparent relationship with them (67%). Around half of Mid-sized businesses agreed that HMRC would admit to making a mistake (46%), and similarly around half agreed that HMRC had a good reputation (53%).

The proportion of Mid-sized businesses that thought that tax evasion was never acceptable remained stable between 2021 and 2023 (76%).

One in 3 Mid-sized businesses (31%) thought that tax evasion was widespread, while 2 in 5 thought tax evasion was not widespread (43%) and a quarter did not know (25%). The most frequently given reason for why businesses exploit the rules was that the savings made from avoiding tax help businesses stay competitive (28%). This was followed by the availability of legal schemes to avoid tax (18%) and businesses looking to maximise profit (15%).

HMRC was seen as slightly more effective at dealing with tax avoidance than preventing it. Three in 5 Mid-sized businesses thought HMRC was effective at preventing tax avoidance (58%), while two-thirds of Mid-sized businesses thought HMRC was effective at dealing with tax avoidance (65%).