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AAT welcomes Labour’s promise of investment in HMRC

10 Apr 2024
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HMRC’s troubles with under-resourcing have been noticeable for some time. Here’s a look at the pledged funding and uses.

Yesterday (Tuesday 9 April) the Labour Party’s Shadow Chancellor, Rachel Reeves MP, outlined the party’s plans to close the ‘tax gap’ – the £36bn difference between what HMRC should be collecting on paper, and what it actually does. The gap has never been bigger.

Reeve’s target is to raise £5.1bn per year by the end of the next parliament through new investment in HMRC, which would be in addition to the current compliance yield target (£40.5bn in 2023-24).

As part of these plans Reeves committed new funding of up to £555m for HMRC, which would represent an increase of 12% on the planned HMRC budget for 2024/25.

Measuring up

AAT has long called for increased investment in HMRC to address the shortcomings encountered by its members in its customer service levels. This culminated in a joint letter sent to the Chancellor ahead of the Spring Statement in 2023 in which AAT and nine other UK professional bodies urged the Chancellor to prioritise investment in HMRC’s service levels.  

The letter argued HMRC’s customer service levels had fallen to an unacceptably low level which had ‘significant ramifications for taxpayers, business owners and their agents who are trying to comply with their tax obligations but need to be able to interact with the tax authority in a timely and efficient way.’  

The bodies went on to state that by focusing on improving its customer service and effectiveness, HMRC would ‘help both improve public sector finances and boost productivity in the UK as a whole. ‘  

Positive step as tax becomes election issue

AAT is positive about the fresh support being put behind its long-standing calls for investment into the country’s public revenue service. 

Director of Professional Standards and Policy, Adam Harper, says Labour’s announcement is timely, as customer and public confidence in HMRC has reached critically low levels in recent times. 

“We welcome this announcement from the Shadow Chancellor on her plans to give HMRC more of the resources it needs to do its job effectively. AAT members have been vocal, both in terms of the impact on themselves and on the thousands of clients and small businesses they serve, in identifying that HMRC has been struggling to meet satisfactory service levels,” said Harper. 

“Our hope is that commitments such as this will continue to bring this important issue to the fore in the run up to the general election, and see investment in such a critical public service become a top priority within all parties’ manifestos.

Labour’s HMRC proposals

The opposition Labour Party says it would make additional resources available to HMRC to deliver the following: 

Increased staffing on compliance: an additional 5,000 staff to be recruited and trained to work within HMRC to meet its £5bn target. This would represent a less than 10% increase in HMRC staffing. 

Additional resource for segments with the greatest complexity and return: addressing the view that increasing upstream compliance activity is a better use of resources to improve compliance yields. 

Improved quality control of compliance checks: reducing instances of taxpayer overcharging, which currently contributes towards higher costs for HMRC in repayments and debt interest.  

Improving customer service: as well as improving the rollout of digital solutions, the aim would be to seek to ‘improve the core customer service offer’. 

Investing in digitalisation to improve compliance and customer service: to address the view that the UK is falling behind other countries in terms of the range of data that is automatically provided within tax returns through pre-population. The plans also supported working with businesses, the tax profession and digital service providers to bring a new focus to HMRC’s modernisation, including greater use of AI – with new, achievable timescales for delivery. 

Longer-term investments to update technology in the department: to put in place a plan to replace HMRC’s legacy IT systems over time. 

Taxing times

A timeline of AAT’s calls for investment in troubled HMRC:

  • Autumn 2022: New Time for change policy report shows cross-party support for a fairer, more effective tax system. AAT calls for HMRC to fix gaping flaws in current system.  
  • January 2023: AAT warns that half-measures won’t solve customer protection issues coming from HMRC consultation.
  • March 2023: AAT and nine other UK professional bodies write letter urging the Chancellor to prioritise investment in HMRC’s service levels.
  • April 2023: AAT calls out government for missed opportunity to regulate tax advice standards ahead of Tax Administration and Maintenance Day.
  • May 2023: AAT provides evidence to the Public Accounts Committee inquiry into progress with Making Tax Digital.
  • June 2023: AAT responds to the HMRC consultation on simplifying and modernising HMRC’s Income Tax services through the tax administration framework.
  • July 2023 AAT urges HMRC be given more funding to solve poor performance, customer service 
  • October 2023: AAT provides evidence to the Public Accounts Committee inquiry into HMRC Standard report 2022-23.
  • January 2024: AAT submits a representation to HM Treasury ahead of the Spring Budget 2024.
  • March 2024: Government announces consultation on introduction of mandatory professional membership and supervision, which AAT welcomes.
  • March 2024: AAT comments on the HMRC helpline U-turn.
  • April 2024: AAT welcomes Labour’s promise of investment into HMRC.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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