HMRC blunder means 3.2 million people may have paid wrong amount of tax

Staffing cuts meant call times rocketed for people trying to pay their tax returns

Cutomer services 'collapsed', say the National Audit Office (Getty)

More than three million people may have paid the wrong amount of tax, it has been revealed, amid damning criticism of the tax office’s conduct during a digital transition.

The quality of service provided by HM Revenue and Customs (HMRC) for personal taxpayers "collapsed" amid staff cuts between 2014 and 2015, a National Audit Office (NAO) report has found.

The NAO said HMRC poorly timed the introduction of its digital strategy, which aimed to move more personal taxpayers online and reduce demand for costly telephone and postal contact. Over 5,500 staff were laid off so HMRC could “live within its budget”.

However, the number of calls did not fall and HMRC staff became swamped with people ringing about their paper tax returns in October 2015. Average call waiting times tripled, the NAO said, with some callers waiting up to an hour to speak to someone.

The resulting scramble to cover the phones meant the tax office had to “defer essential work to maintain PAYE records,” the NAO said.

As a consequence the stock of outstanding discrepancies in tax records requiring investigation rose from 2.4 million in March 2014 to 4.6 million in March 2015.

“Of these items, 3.2 million were high priority cases, carrying a risk that employees will have paid the wrong amount of tax.”

Amyas Morse, head of the NAO, said: "HMRC's overall strategy of using digitally enabled information to improve efficiency and deliver service in new ways make sense to the NAO.

"This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably. This led to a collapse in service quality and forced a rapid expansion of headcount.

"HMRC needs to move forward carefully and get their strategy back on track while maintaining, and hopefully improving, service standards".

Gillian Guy, chief executive of Citizens Advice, said: "Waiting on the phone to HMRC has put some people at risk of debt. Long waiting times not only cause frustration and increase the cost of the call, but can also mean people miss important deadlines."

Alex Neill, director of policy and campaigns at consumer magazine Which? said: "Our research for the last two years has shown just how difficult it can be to get through to HMRC and consumers deserve a big improvement in call waiting times.

"Until people have viable alternatives to ringing when they need to discuss their tax affairs, many feel they have no choice but to wait. HMRC must continue to work hard to tackle their customer service and reduce call waiting times."

Ruth Owen, HMRC's director general for customer services, said: "We recognise that early in 2015 we didn't provide the standard of service that people are entitled to expect and we apologised at the time. We have since fully recovered and are now offering our best service levels in years.”

Ms Owen maintained HMRC customer service was better than ever. She added: “Over the past six months we've consistently answered calls in an average of six minutes, and have launched new online tax accounts and webchat for everyone, enabling customers to manage their tax affairs wherever and whenever they want.”