While the significant volume of corporate information published by HMRC on Monday 18 July 2022 will take time to absorb fully, it includes the following: 

• HMRC’s annual report and accounts 2021/22 (overview and full version)
• Performance updates (overview, March 2022 monthly performance and January to March 2022 quarterly performance) 
• HMRC Charter annual report 2021/22
• Error and fraud in the COVID-19 schemes: methodology and approach (an update for 2022)

Below ICAEW’s Tax Faculty summarises the key points.

Tax collected

HMRC continued delivering major COVID-19 financial support schemes for the first six months; it also saw total tax revenues recover and reach a record figure of £731.1bn. The work of administering the tax system never stopped; however, the impact of the pandemic still dominated the year, and HMRC had to make deliberate choices about what work to prioritise.

Customer service performance

Given the exceptional circumstances, HMRC didn’t set formal performance targets. It acknowledges that many of its customer service levels were not where it would wish them to be. In his performance summary, Jim Harra, First Permanent Secretary and Chief Executive, apologises that some customers and agents have experienced delays when dealing with HMRC. 

HMRC’s stock of correspondence on hand hit a peak of 3.3m items in July 2021 but did reduce to 1.9m (about four weeks’ work) by March 2022. The Tax Faculty understands that this may have increased again since March. The percentage of correspondence turned around within the 15 working day target improved from a low point of 30% in April 2021 to 65% in March 2022.

Call handling performance remained poor. Just over 60% of callers had to wait more than 10 minutes for their call to be answered at both the start and the end of the year, with some better months in between. HMRC highlights that call waiting times improved from a high of 19 minutes in April 2021 to 15 minutes in March 2022. However, some intervening months were better and there is no indication of a steady sustained improvement. The percentage of calls that get answered is also erratic, with only 71% of calls being answered in March 2022 and the figure for the agent dedicated line was only 87%. 

HMRC cites three factors affecting current performance:

• extremely high volumes of repayment claims (90% more than usual), mostly related to working from home expenses; 
• IT issues as it upgrades to systems to improve service delivery; and
• some staff have been diverted to urgent priorities including providing support for Ukraine.

The challenging economic outlook means HMRC expects to see continuing pressure on its services for some time. ICAEW’s Tax Faculty continues to engage with HMRC on service performance and to feedback the experiences reported by members.

The Charter annual report inevitably highlights poor customer service as the greatest concern. However, it acknowledges the efforts that HMRC has made to embed the Charter standards. 

Compliance activity and debt levels

The reduced economic activity created by COVID-19 also impacted the additional revenues secured through compliance activities, which remained at a similar level to the previous financial year at £30.8bn.

The pandemic had a major impact on HMRC’s debt balance, which reached a peak of £72bn in August 2020. By the end of March 2022, that figure had reduced by more than 40% to £41.6bn. HMRC cautions that today’s increasingly challenging economic outlook will mean more taxpayers are struggling to meet their tax obligations. HMRC is clearing record levels of debt, but the amount of new debt being created is significantly higher than before the pandemic.

Key strategic risks

The report lists nine strategic risks and assesses them as follows:

• Capacity, capability, and engagement (Amber)
• HMRC security (Red)
• Exploiting information (Red)
• External perception and loss of trust (Amber)
• Impact of future relationship with the EU on customs and tax administration (Amber)
• Improving customer experience (Red)
• Data protection (Red)
• Delivering the change portfolio (Amber)
• Funding and affordability (Amber). This risk has reduced following a successful spending review bid.

Error and fraud in the COVID-19 schemes

Across the full two-year lifecycle of the three schemes - Coronavirus Job Retention Scheme, Self-employment Income Support Scheme and Eat Out to Help Out - the total value of error and fraud is now estimated to be between £3.2bn and £6.4bn, with a most likely estimate of £4.5bn. This is an error and fraud rate of between 3.3% and 6.5% (with a most likely estimate of 4.6%). The rate is less than the previously published range for 2020/21 alone. Much of the attention has been on the loan schemes run by BEIS rather than the schemes administered by HMRC.