Customer service at HM Revenue and Customs has become so bad that it may be hampering tax collection, with half of the public’s phone calls to its helplines going unanswered in early 2015, according to a damning new report from the public accounts committee.

Reviewing the performance of the Revenue in 2014-15, the cross-party committee of MPs said it had let corporate tax evaders off too lightly and had failed to tackle its “abysmal” performance in handling queries from taxpayers.

Meg Hillier, the Labour MP who chairs the PAC, said: “HMRC must rapidly improve its customer service, previously described by the PAC as abysmal and now even worse – to the extent it could be considered a genuine threat to tax collection.”

Meg Hillier: determined to keep up pressure. Photograph: Jonathan Goldberg/Rex

When the committee took evidence from HMRC’s chief executive Lin Homer in September, she revealed that its response rate to customer calls was “dipping down towards 50% of calls answered” in the first part of this year.



Hillier said: “It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.”

The report called on HMRC to quantify the impact of poor customer service on tax collection and “produce a detailed plan setting out how and when it will provide an acceptable standard of customer service”.

The committee’s tough tone signals Hillier’s determination to keep up the pressure on HMRC, and on corporations that fail to pay their fair share of tax. Her predecessor, Margaret Hodge, acquired a fearsome reputation for grilling company bosses about their tax affairs.

The committee also said HMRC had continued to let corporate tax evaders off too lightly. The report highlights what it calls the “woefully inadequate” number of prosecutions for offshore tax evasion.

“This is a running theme for us: we have been saying for some time, we think there could be more prosecutions,” Hillier said, adding that while HMRC officials tend to stress the high cost and complexity of court cases, the deterrent effect of high-profile prosecutions would be considerable. “A prosecution is public; it’s there for everyone to see”.

The committee also called on HMRC to publish more detailed information about the forest of tax reliefs – from the marriage allowance to the research and development tax credit – and how much they cost the government in forgone revenue.

The independent Office for Tax Simplification has identified 1,156 tax reliefs while HMRC admits to only 400. The report says: “HMRC should identify which reliefs it considers require monitoring and evaluation and publish this information to enable Parliament to decide which reliefs may require further scrutiny or legislative change.”

However, the committee also acknowledged that HMRC is being forced to do more with less, reducing its running costs from £3.4bn to £3.1bn over the past five years, over a period when total tax revenue has been rising. It collected £166.95 for every £1 spent on administration in 2014-15, up from £138.14 in 2010-11.

HMRC said it was disappointed that the committee had overlooked its record results, which it said included collecting a record £517bn in tax revenues and further reducing the UK’s “tax gap” – the difference between what is due and what is collected – to ensure it remained one of the lowest in the world.

“We explained to the committee that we hadn’t provided a consistent level of customer service in the first half of the year and we had recruited around 3,000 new staff to improve service levels,” a spokesman said. “But these customer service issues did not affect our ability to collect tax.

“Last year, we secured £26bn of additional yield across all our compliance work, ensuring everyone pays what they owe. Tackling tax evasion is a top priority for HMRC and last year alone we successfully prosecuted a record 1,200 cases, resulting in 407 years of custodial sentences. We also routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action. We brought in more than £1bn from the first year of applying accelerated payments to avoidance cases and have closed many loopholes and secured tough new enforcement powers.”

• This article was amended on 4 November 2015 to add a statement from HMRC which was received after publication.