The priorities and challenges for HMRC in 2016

Lin Homer

Speed read

In 2016, HMRC will continue with its plans to become a smaller, but more highly skilled department, based in 13 regional centres, in order to give customers the modern services they expect, at a lower cost to the taxpayer. Making tax digital is central to HMRC’s long-term strategy, and the digital transformation will be at the heart of the department’s activity this year; for example, by April 2016 every individual and small business will have their own online tax account. HMRC will continue to clamp down on avoidance and evasion in 2016. The department received a good settlement in the recent Spending Review. In return, HMRC has committed to secure an additional £1bn of tax revenues from its transformation work and a total of £7.2bn in cumulative additional revenues from evasion and compliance by 2020/21.

The last year saw HMRC

again deliver an improved performance in many key areas. In 2014/15, HMRC brought in tax revenues of £517.7bn (an increase of almost £12bn on 2013/14), secured a record compliance yield of £26.6bn and reduced the tax gap to 6.4%.

We also reached the £1bn mark in terms of money brought in from tax avoiders through our accelerated payments powers – but while there were some impressive achievements, 2015 also brought significant challenges.

Transformation plans

We know that during the first part of the year customer service wasn’t good enough. Implementing process and technology changes, which will ultimately transform the quality of service, caused some problems. We therefore took major steps to improve things, including the recruitment of 3,000 new staff into customer service roles. Recent figures have shown that we are moving in the right direction. The average waiting time on our helpline is now just five minutes.

Nevertheless, if we are to continue to build on the improvement we’ve made, we need to transform more radically. That’s why we announced in November that we intend to become a smaller, but more highly skilled department, based in 13 regional centres.

Our transformation plans have strong government support. During prime minister’s questions, the prime minister said: ‘Everyone in this House wants to see HMRC raise more money and make sure that people and companies do not avoid their taxes. That does mean reform, and it means making sure that HMRC is even more effective in raising the taxes on which our public services depend.’

In November’s Spending Review, the chancellor announced an investment in HMRC of £2.1bn over the next five years. That pledge endorses our blueprint for HMRC’s long-term future and digitisation will be at its heart.

The drive to digital

In December, we revealed our ‘making tax digital’ roadmap, outlining how we will make fundamental changes to the tax system to fit everything into the four key foundations for our digital future:

tax simplification;
tax all in one place;
making tax digital for individual taxpayers; and
making tax digital for businesses.

By 2020, businesses and individuals will be able to register, file, pay and update their information at a time that suits them. For the vast majority, this will mean the end of the annual tax return and represents a fully digital way of working. The next 12 months will see us make significant strides towards that. By April 2016, for example, every individual and small business will have their own secure, online tax account that enables them to interact with HMRC digitally. We’ve already launched personal tax accounts for individuals and 86% of customers file their tax return online, while more than three million customers have signed up for business tax accounts, which will soon be available to all businesses.

Contrary to some reports, the new system won’t require businesses to fill out four tax returns a year. We will expect businesses to keep digital records and to update HMRC on a quarterly basis, but these updates will be submitted through software or apps and will often be integrated into businesses’ digital record keeping. Updating HMRC directly in this way will be secure, light-touch and less burdensome than the tax returns of today. In a real-time economy, we should match tax more closely with the related transactions. Many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to hold on until the end of the year or longer to find out how much they have to pay.

Continuing this digital transformation will be at the heart of our activity in 2016. The overall customer experience of dealing with us is going to be very different. Although, at the time of writing, we’re answering 89% of calls and have reduced the average waiting time to five minutes, the intention is to completely overhaul the way that most people interact with us.

By allowing taxpayers to carry out many tasks online, there will be less need for them to pick up the phone. We’re already enjoying success through our customer service Twitter channel; the @HMRCcustomers feed has been hugely popular, both in terms of number of users and positive feedback, having resolved nearly 23,000 queries online.

We are also looking to incorporate a secure messaging service, virtual assistant and live webchat into the digital tax account. We’ve already started offering the latter for technical issues and the feedback has been overwhelmingly positive; and we’ll start to trial a taxes-specific version more widely in 2016. The virtual assistant is in the early trial stages. This will be refined over time as we analyse how people use webchat, in terms of how they pose questions and naturally type.

For those who still need to call us, we are piloting ‘robotics’ in our call centres. This is a piece of software which gathers together key pieces of information from a number of sources, presenting them to the adviser as a dashboard when people ring up. Some calls, which previously took up to ten minutes, have been reduced to 20 to 40 seconds in duration. Moreover, almost all items of post we receive in personal tax are now scanned electronically, allowing staff immediate access so that when you call up, the adviser can see your letter.

As well as making our customer service more accessible, our digital strategy in 2016 is designed to boost voluntary compliance, increasing the amount of tax we collect. Compliance is something we want to design into all of our products and processes next year and we’re making sure it’s a part of everyone’s job.

Countering avoidance

The Spending Review provided a good settlement for us, especially when you factor in the investment it promised, adding to that in the Summer Budget. In return, we have committed to secure an additional £1bn of tax revenues from our transformation work and a total of £7.2bn in cumulative additional revenues from evasion and compliance by 2020/21.

HMRC will continue to clamp down on avoidance in 2016. Our Counter Avoidance team enjoyed a strong year in 2015 and hopes to build on that in the next 12 months. We have already issued more than 30,000 accelerated payments notices and expect to have doubled that number by the end of the year.

Also, draft legislation was published on 9 December for a number of measures that seek to clamp down on the appetite for, and supply of, tax avoidance schemes, by increasing the deterrent effect of engaging in tax avoidance.

Like every government department, HMRC is not immune to having to make savings and will need to do more with less in 2016, even if the efficiency savings required of us on this occasion are less than those in the 2010 Spending Review. So it will be a busy year, but I’m confident the necessary savings can be made without reducing levels of service.

The revised roadmap

Following on from, and aligned with, the Spending Review, HMRC will publish the summary version of the single departmental plan (SDP) in early January. This is a single, clear roadmap outlining our evolved strategic objectives. It is vital that we prioritise effectively, based on a clear understanding of how our resources can be best deployed, to ensure we are being as efficient as we possibly can.

However, our role isn’t just to be efficient; we also need to be a professional and engaged organisation. A key part of this is about making sure that our people have access to modern workplaces and training facilities.

Currently, we are distributed across 170 offices around the country, many of which are expensive, isolated and outdated. This makes it difficult for us to collaborate and modernise our ways of working. The 13 new regional centres – to be created over the next five years – will enable HMRC to give customers the modern services they now expect, at a lower cost to the taxpayer.

We need to invest in our folk by providing them with the tools, skills and facilities they need and also to continue to invest in our leadership and management capability.

Final thoughts

This is a huge year for HMRC, and I hope that in 12 months’ time, HMRC will be reporting that our modernisation programme is on track and we are giving customers an improved service. There’s plenty of work to do between now and then, but the organisation is up for the challenge.

Issue: 1291
Categories: Analysis , Compliance , Tax policy & administration , hmrc , Lin Homer , The view from HMRC

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