UK Inquiry Tracker

The cost of the tax system

Public Accounts Committee Closed Inquiry

Opened: 15 Jan 2025 Closed: 17 Jul 2025 Parliament page

HM Revenue and Customs’ (HMRC) stated aim is to run the tax system in the simplest, most customer-focused and efficient way. In 2020, the Government published its 10-year strategy to build a trusted, modern tax administration system. The long-term goal is to create a system which prevents non-compliance, and allows … Read more HM Revenue and Customs’ (HMRC) stated aim is to run the tax system in the simplest, most customer-focused and efficient way. In 2020, the Government published its 10-year strategy to build a trusted, modern tax administration system. The long-term goal is to create a system which prevents non-compliance, and allows both businesses and individuals to get their tax right the first time. The PAC has recently scrutinised HMRC’s customer service , underpinned by National Audit Office (NAO) findings in 2024 that delivering responsive customer service continued to be one of HMRC’s biggest challenges. The Committee has also examined tax evasion in the retail sector , challenging HMRC on evident gaps in controls. Overall evasion costs represent an annual £5.5bn hit in lost revenue to the public purse every year. The NAO undertook a 2025 report on drivers of cost in the tax system, which costs HMRC billions of pounds a year to administer while placing administrative and financial burdens on taxpayers, in addition to the taxes they owe. The study sought to help understand how elements of the tax system drive these costs, while establishing what progress HMRC has made in reducing costs and improving efficiency. Based on the NAO report, the PAC will hear from senior HMRC officials on topics including: What costs the UK tax system imposes on HMRC taxpayers and their intermediaries; Challenges in tackling the costliest parts of the system; and How HMRC is using opportunities to reduce costs. Please look at the requirements for written evidence submissions and note that the Committee cannot accept material as evidence that is published elsewhere. Please note that the Committee is unable to consider or assist with individual cases. If you need help with an individual problem you are having, you may wish to read the information on Parliament’s website about who you can contact with different issues . The deadline for submitting written evidence is Wednesday February 19 at 23:59pm. Show less

4 Recommendations

35 Conclusions

1 Report

1 Oral session

3 Letters

1 Event

Activity timeline 7 events

18 Sep
2025

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Twenty-third report from Session 2024-26

15 Sep
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the 23rd Report of Session 2024-25, The…

4 Sep
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the 23rd Report of Session 2024-25, The…

30 Apr
2025

Report published

23rd Report - The cost of the tax system

27 Mar
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary for HM Revenue and Customs relating to providing further information requeste…

6 Mar
2025

Oral evidence

Oral evidence session

6 Mar
2025

Formal meeting (oral evidence session) · The Thatcher Room, Portcullis House

Committee event

Oral evidence sessions 1 session

6 Mar 2025

View on parliament.uk

Justin Holliday · HMRC Lucy Pink · HMRC Sir Jim Harra KCB · HMRC

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
23rd Report - The cost of the tax system	HC 645	30 Apr 2025	39	Responded

Recommendations & Conclusions

39 results

2 Recommendation Accepted

23rd Report - The cost of the tax …

Require HMRC to understand and address declining taxpayer trust, publishing concerns and actions.

Taxpayers’ trust in HMRC is falling. Trust in a tax authority is vital for the authority to effectively discharge its role as it affects the willingness of taxpayers to engage and pay the correct amount of tax on time. HMRC … Read more

Government Response

The government states HMRC already publishes annual survey results and customer feedback. It also commits to publishing a Transformation Roadmap this summer, detailing digital services aimed at improving taxpayer experience.

HM Treasury

The cost of the tax system

Activity timeline 7 events

Oral evidence sessions 1 session

Reports 1 report · click to expand

Recommendations & Conclusions

Require HMRC to understand and address declining taxpayer trust, publishing concerns and actions.

HMRC's compliance productivity has significantly declined despite increased investment.

HMRC's legacy IT systems are outdated, increasing costs and taxpayer burden.

Require HMRC to research customer needs and design appropriate digital tax systems.

Mandate HMRC to assess its readiness for new technology, including AI, and present plans.

Committee took evidence on the cost of administering the tax system from HMRC.

Tax policy changes are increasing the cost of the tax system for businesses and HMRC.

HMRC's costs increased due to funding gaps, IT under-investment, and rising taxpayer numbers.

HMRC bears minimal additional costs for Scottish Income Tax administration, funded by the Scottish Government.

HMRC seeks to minimise business tax compliance costs through integrating digital software and programmes.

Inefficiencies in the VAT system cause unnecessary delays and increased costs for taxpayers.

HMRC does not estimate individuals' total tax administration costs, using outdated measurement rates.

Tax system complexity drives evasion, errors, increased costs, and greater customer contact.

Taxpayer trust in HMRC has declined for most groups since the 2020 strategy launch.

Declining trust in HMRC attributes to substandard services and broader global governmental trends.

Many taxpayers, especially agents, experience difficulty dealing with HMRC, contrary to its Charter.

HMRC prioritises additional support to large businesses for managing significant tax revenue risks.

HMRC’s compliance work effectively reduces the national tax gap.

HMRC lacks sufficient analysis on upstream and downstream compliance costs.

Increased senior staff recruitment drives higher salary costs for HMRC compliance.

HMRC’s compliance productivity has fallen despite increased staffing investments.

HMRC attributes decreased compliance productivity to onboarding new, less experienced staff.

HMRC’s legacy IT systems remediation efforts are behind schedule and over budget.

HMRC’s legacy IT systems pose security, reliability, and cost risks.

HMRC cannot commit to legacy IT remediation completion date due to funding uncertainty.

Prioritise introducing secure digital channels for customers to submit files and messages.

Digital systems can significantly reduce HMRC’s customer service costs by deflecting avoidable calls.

Making Tax Digital increased VAT trader costs without demonstrating clear productivity improvements.

Making Tax Digital imposes significant burdens and costs, risking further system complications for taxpayers.

Extending Making Tax Digital to Income Tax Self Assessment will impose significant costs exceeding benefits.

HMRC acknowledges security concerns with third-party Making Tax Digital software, setting strict specifications.

HMRC expects MTD to increase taxpayer burdens to enhance compliance and productivity, generating revenue.

HMRC identifies future potential to leverage Making Tax Digital software for compliance and productivity.

Achieving AI benefits requires significant business practice changes and foundational investment in skills and data.

Experts recommend HMRC accelerate AI adoption for customer support, staff upskilling, and fraud prevention.

HMRC acknowledges legacy IT systems and poor data management hinder AI adoption and increase cyber risks.

UK tax system lags behind other countries in digital efficiency and comprehensive taxpayer services.

HMRC demonstrates limited use of technology in promoting e-invoicing

HMRC's e-invoicing consultation explores information reporting requirements for businesses

Government Response AI assessment · 35 of 4 classified

Correspondence 3 letters