The tax authorities have been accused of “rushing” investigations into people accused of not paying the right amount or facing fines for late returns after figures showed that two in three demands were overturned on appeal.
Statistics released by HM Revenue & Customs showed that in the last financial year more than 10,000 people challenged demands for money issued by the government. Of those, 5,881 had the decision completely overturned while a further 670 had it partially overturned. In only 3,475 cases was it upheld.
There has been a marked increase in the proportion of decisions being overturned by HMRC since the start of the Covid-19 pandemic. In the year to April 2020 HMRC considered more than 20,000 challenges to its decisions of which almost half were upheld, compared with less than 35 per cent this year.
The pandemic also had a marked effect on HMRC’s customer services. In the past year more than half of calls about personal taxation took longer than 20 minutes to answer. For those using self-assessment, the response rate was even slower, with 70 per cent of callers waiting for 20 minutes or more.
In the previous year 7 per cent of personal taxation calls and 9 per cent of self-assessment calls were answered in more than 20 minutes.
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People writing to HMRC had even longer waits. It took officials more than 40 working days to respond to a quarter of all correspondence, compared with 5 per cent the year before.
John Hood, a tax partner with the accountancy firm Moore Kingston Smith, said that he was surprised by the high level of decisions being overturned. “These are statutory investigations that only occur when a taxpayer challenges a decision made by HMRC,” he said. “HMRC has been given increasingly stronger powers to enforce and recover tax. It is critical that it does not overstep the mark in their enthusiasm to bring an inquiry or investigation to an end.
“The coronavirus crisis has undoubtedly put immense pressure on HMRC and its people to administer. Investigators, in an effort to conclude ongoing inquiries and clear the decks, seem to have rushed into issuing decisions that have, in the light of day, turned out to be ill founded or not supported by the facts.”
Meg Hillier, chairwoman of the Commons public accounts committee, said that HMRC would need to make progress tackling long phone waits. “HMRC had a herculean task responding to the economic consequences of Covid and the support schemes that were put in place at very short notice,” she said.
“Nevertheless customer service is very important and we will be raising this in our regular sessions with HMRC and want to see that they have a plan in place to improve the situation going forward.”
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A spokesman for the department insisted that “most rulings HMRC makes are right” and said that the high rate of decisions being overturned was mainly related to penalties. “These figures relate entirely to statutory reviews, most of which are against automated penalties and surcharges such as for self-assessment late filing,” they said. “These types of automated decisions accompany high cancellation rates because once we’ve looked into the circumstances we are likely to accept a reasonable excuse.”
On call handling they said that HMRC had moved more than 5,000 customer advisers onto the Covid-19 helpline at the start of the pandemic to deal with the government’s support schemes. HMRC had also had to expand its capacity to set up a trade helpline as the UK left the EU.
