Ever found yourself daydreaming about a ‘Dear John’ letter to HMRC? “It’s not me, it’s you… and your 20 billion in tax administration costs.” Unfortunately, this is one relationship we can’t walk away from, but at Insight Finance Solutions Ltd, we’re here to help smooth over the rough patches.
The latest report from Parliament’s Public Accounts Committee (PAC) has unveiled a few home truths about the challenges HMRC is facing. It’s clear that the tax system is getting more complex, more costly, and, let’s face it, a little harder to love.
It’s Getting Complicated (and Expensive!)
According to the PAC, the cost of administering the tax system is now over £20 billion a year—most of that falling squarely on businesses. In 2023-24 alone, HMRC spent £4.3 billion on tax administration, which is a whopping 15% increase in real terms compared to 2019-20. All that complexity doesn’t come cheap. The PAC is now calling on HMRC to “publish realistic plans to simplify the tax system.” We’d certainly welcome a little less drama in our financial lives.
The Trust Issue – It’s Real
It turns out we’re not the only ones feeling a little let down. Trust in HMRC has been on the slide for a while now. For individuals, trust levels dropped from 52% to 47%, and for agents, it tumbled from 61% to 49% between 2021 and 2023. PAC reckons it’s time for HMRC to take a long, hard look in the mirror and figure out why. We couldn’t agree more!
Productivity: Not Quite Hitting the Mark
Here’s the thing—HMRC’s compliance productivity isn’t what it used to be. Back in the pre-COVID days, compliance returns were £1.4 million per worker, but that’s now dropped to £1.27 million. PAC is calling for action to get things back on track, and we’re all for it. After all, smoother systems mean less time waiting on hold for us all!
The Legacy Hangover
If you thought your old laptop was a headache, spare a thought for HMRC’s legacy IT systems. They’re struggling to keep up with modern demands, holding back progress and making digital communication a bit of a nightmare. PAC has told HMRC to come back with a proper timetable for improvements. Fingers crossed it’s sooner rather than later!
Making Tax Digital (MTD) – Still a Work in Progress
MTD was supposed to be the sleek, streamlined solution to tax woes. But the PAC report says it’s adding costs without much to show in productivity. In fact, HMRC estimates that taxpayers are facing £500 million in transitional costs and £200 million in ongoing costs each year because of MTD for income tax. It’s clear there are some lessons to be learned, and PAC is urging HMRC to really listen to what taxpayers and agents need.
Navigating The Difficult Relationship – We’re Here To Support You!
Caroline Miskin from ICAEW summed it up nicely: “It’s no surprise that the cost of complying with tax obligations is increasing as each year more is asked of HMRC, taxpayers and agents.” At Insight Finance Solutions Ltd, we’re right there with you, making sense of all these changes and keeping your finances as stress-free as possible.
Even if we can’t break up with HMRC, we can at least make things a bit less complicated. If you want to cut through the noise and get back to focusing on what you do best, we’re here to help.
Ready to let us handle the drama? Get in touch today!