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HMRC channel shift to digital ‘too aggressive’, says NAO

HMRC digital services have not had the anticipated effect on customer service it hoped for, NAO report reveals, as the auditor says the department needs to develop more realistic plans

A National Audit Office (NAO) report, looking at HM Revenue and Customs’ customer service, has found that the move to digital services has failed to ease pressure on traditional services, such as telephone and post.

The report said that while HMRC’s strategy to replace traditional forms of contact with digital ones makes sense, it has failed to have the effect the department was hoping for.

HMRC first began introducing digital services in 2015 through its Making Tax Digital programme. However, while some services are working well, and around 60% of transactions are now digital, it has not gone to plan.

HMRC hopes that moving customers to digital services will reduce the number of staff needed, but this has yet to come to fruition.

“While many of HMRC’s digital services work well, they have not made enough of a difference to customer contact levels. In the face of funding pressures, HMRC has pressed on with attempts to reduce costs despite its poor performance,” the NAO report said, adding that the department has been unable to cope with the demand on telephone calls, and has at times had to close the phone lines to catch up and “compel people to use digital services”.

“HMRC now faces a significant challenge without increasing capacity. Its approach to cutting services as it introduces new digital solutions has been too aggressive,” the report said.

“HMRC needs to allow more time for new services to bed in, understand the difference they make, and then make staff reductions when the benefits are demonstrated, otherwise services will continue to suffer, and unnecessary service pressures and contact will remain.”

The report said that part of the problem is that while the digital services work well for straight-forward transactions, “it is not clear how much digital services are offering a like-for-like replacement to traditional channels for many issues. Gaps remain in what individuals can do online.”

During its research for the report, the NAO tested HMRC’s digital assistant, and found that half the queries the team sampled would need contact with an actual human adviser to solve.

“HMRC should ensure it understands how new digital services will support the shift from telephone and correspondence, and manage increasingly complex queries. When developing and introducing new digital services, HMRC should be clear on what demand or services it is seeking to replace,” the report said.

“HMRC needs to develop not only new digital services, but also its existing digital services, particularly where performance or customer satisfaction is low.”

The department does not have a good understanding of the costs and benefits of digital services, the NAO report said, making it hard to assess their cost effectiveness. The report identified several gaps in the department’s understanding digital services, including what can be handled digitally, the effort that would be saved from moving different types of contact onto digital, and the extent to which digital services affect demand elsewhere.

“HMRC should identify and apply learning from the implementation of its digital projects, including using experienced practitioners to lead projects and designing services to handle complex customer journeys and needs from the outset. This approach should help HMRC support most customers initially and reduce design iterations,” the report said.

The awareness of the department’s digital services is also low. The most recent data from HMRC shows that only 29% are aware of the online Personal or Business Tax Account, and only 21% were aware of the HMRC app.

The department is investing in raising awareness, having upped its external communications budget from £1m in 2023-24 to £3m in 2024-25, but does not hold any data to show if its current awareness campaign has been effective.

Read more about HMRC:

  • Making Tax Digital is meant to overhaul the UK tax system, make it easier for businesses to file tax returns, and reduce error and fraud. How successful has the programme been? Computer Weekly looks at the details of tax digitisation.
  • MPs say HMRC’s Making Tax Digital programme is riddled with widespread and repeating failures, and criticise the programme for failing to be open about the costs and increased burdens on taxpayers.
  • HM Revenue and Customs’ (HMRC) Making Tax Digital programme, which is running several years behind schedule, is expected to cost five times more than planned, National Audit Office (NAO) report finds.

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