Corporate report

HMRC's annual report and accounts 2022 to 2023: performance overview

Published 17 July 2023

HMRC Annual Report and Accounts 2022 to 2023 - reader survey

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An overview of our performance in financial year 2022 to 2023, including information about our vision, objectives and the way we operate.

About HMRC

Our purpose and vision

HMRC is your tax service. We collect the money that pays for the UK’s public services and give financial support to people.

Our vision is to be a trusted, modern tax and customs department.

Our values

• We are professional
• We act with integrity
• We show respect
• We are innovative

Our strategic objectives

• Collect the right tax and pay out the right financial support
• Make it easy to get tax right and hard to bend or break the rules
• Maintain taxpayers’ consent through fair treatment and protect society from harm
• Make HMRC a great place to work
• Support wider government economic aims through a resilient, agile tax administration system

Our Charter

The HMRC Charter sets out the standards our customers can expect when interacting with us and the experience we want to deliver. The Charter commits us to:

• getting things right 
• making things easy 
• being responsive 
• treating customers fairly 
• being aware of customers’ personal situation 
• recognising that someone can represent customers

How we are organised

We are led by Jim Harra, our First Permanent Secretary and Chief Executive, and Angela MacDonald, our Second Permanent Secretary and Deputy Chief Executive. Our department is made up of 4 core customer-focused groups, supported by corporate services, as set out below.

Our core customer groups

Customer group	Purpose of customer group
Customer Services	Supports customers to pay the right tax and get the right benefits and helps those who have built up debt to pay what they owe
Customer Compliance	Ensures the right tax is paid and intervenes when there is a risk of that not happening
Borders and Trade	Supports UK international trade and the collection of taxes and duties on imports, working closely with Home Office Border Force
Customer Strategy and Tax Design	Develops and delivers policy reforms to the UK tax system to support government priorities, underpinned by high quality customer insight and analysis and working closely with HM Treasury

Our corporate services

Corporate service	Purpose of corporate service
Chief People Officer Group	Develops and oversees implementation of HR policies that make HMRC a great place to work, with overall responsibility for our workforce planning, recruitment, talent management and learning activities
Chief Finance Officer Group	Includes our Finance and Commercial functions, as well as Estates and Banking services provided to HMRC and other government departments
Chief Digital and Information Officer Group	Designs, develops and runs digital and information services for our people and our customers while ensuring we hold data in a way that is secure and meets legal requirements
Solicitor’s Office and Legal Services	Provides legal services to HMRC
Transformation	Manages HMRC’s change portfolio and leads on some of the largest and most complex change programmes
Communications	Provides communications advice, support and services to HMRC and incorporates HMRC’s Sustainability Team

As well as the groups described above, our full departmental group includes:

• Valuation Office Agency (VOA): an executive agency which gives the government the valuations and property advice needed to support taxation and benefits
• Revenue and Customs Digital Technology Services Limited (RCDTS Ltd): a non-profit making company wholly controlled by and operated for HMRC which supplies the department with IT services

Our departmental group had over 67,500 full-time equivalent employees at the end
of financial year 2022 to 2023, 63,700 in HMRC and RCDTS Ltd and 3,800 in the VOA.

2022 to 2023: our year in numbers

The progress we made towards our vision of being a trusted, modern tax and customs department in 2022 to 2023.

Strategic objective 1: Collect the right tax and pay out the right financial support

£814 billion total tax revenues

4.8% latest UK tax gap estimate for 2021 to 2022

£34 billion additional tax generated through tackling avoidance, evasion and other non-compliance

12.2 million children supported through Child Benefit payments

912,000 customers being supported to pay their tax debt in manageable instalments with Time
to Pay

Strategic objective 2: Make it easy to get tax right and hard to bend or break the rules

4.8 HMRC app rating on the Apple app store

56.5 million logins on the HMRC app

99% businesses over the £85,000 VAT threshold that are registered to file returns using Making Tax Digital-compatible software

72.7% of our customer correspondence turned around within 15 days

Strategic objective 3: Maintain taxpayers’ consent through fair treatment and protect society from harm

79.2% customer satisfaction with our phone, webchat and digital services

27 tax avoidance promoters publicly named along with details of their schemes

99,000 fewer HMRC-related telephone scams reported

£165 million recovered from criminal assets

Strategic objective 4: Make HMRC a great place to work

84% colleagues feel they are treated fairly at work

86% colleagues understand how their work contributes to HMRC’s objectives

85% colleagues based outside London

3 new regional centres opened

Strategic objective 5: Support wider government economic aims through a resilient, agile tax administration system

£718 million of support paid out in Cost of Living Payments to eligible tax credits customers

62% IT services migrated from legacy data centres, as we move to more resilient cloud platforms

97.8% of import declarations being made through our new digital Customs Declaration Service

58% reduction in greenhouse gas emissions since 2017 to 2018

Chief Executive’s Review of 2022 to 2023 

HMRC is your tax service – we’re here to support you to get your tax right and make it hard for the dishonest minority to cheat the system.

As Chief Executive – and someone proud to have spent their entire career in the tax department – I see first-hand every day the vital public service that my colleagues provide. I want to thank them for their hard work during the last financial year.

There’s no doubt that our work is important to the nation. The revenue we generate, £814 billion in the financial year 2022 to 2023, is spent by government on the schools, NHS, police and other essential services we all rely on.

We’ve also successfully maintained a long-term reduction in the UK’s tax gap (the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually collected) from 7.5% of total theoretical tax liabilities in 2005 to 2006, to 4.8% in 2021 to 2022.

Of course, we do much more than this. We also help families and the most vulnerable in our society by paying Child Benefit and Tax-Free Childcare and ensuring workers are not paid below the National Minimum Wage, and we help the UK’s economic growth with our work on freeports and a customs system that supports the smooth flow of international trade.

Transforming our service to meet changing taxpayer needs

Our aim is to be a trusted, modern tax and customs department – one that collects revenues and keeps the tax gap low while fitting as seamlessly as possible with how people live their lives and run their businesses.

To achieve this, we’re becoming an increasingly digital organisation: the vast majority of our customers pay their tax automatically or deal with their tax and customs affairs through online services, without needing to contact us directly – and satisfaction with our digital services was 82.7% in the last financial year.

In 2022 to 2023, more than 8 million VAT returns were successfully submitted using Making Tax Digital-compatible software that talks directly to our systems. This included over 99% of returns from businesses over the £85,000 threshold, and 98% from those under the threshold.

Studies have shown that this change is making it quicker and easier for businesses to manage their tax affairs – and it’s predicted to deliver additional revenue of over £3 billion for public services up to the end of 2027 to 2028 by reducing taxpayer errors.

Meanwhile, demand for our digital services is growing. Around 97% of Self Assessment customers who completed their returns by 31 January 2023 filed online – and our digital personal and business tax accounts, and the HMRC app, were accessed 198.7 million times in 2022 to 2023, compared with 61.6 million in 2016 to 2017.

But it’s also true that 2022 to 2023 was a challenging period for us across many of our traditional phone and post services. Our customer base is growing, with more customers having increasingly complex needs. For example, the number of higher rate taxpayers - who may need more active management in the system - increased by 17% between financial years 2015 to 2016 and 2022 to 2023 and is likely to grow further. We’re also seeing more small business customers getting into tax debt, and the average value of customers’ debts increasing.

In addition, we face an ever tighter departmental budget, creating significant operational challenges for us. Put simply, it’s getting harder to meet our service standards using the same approaches that may have worked in the past.

In response, we’re driving forward vital changes to make us more efficient in serving customers and managing their compliance.

The key to doing this is through quicker and easier online services. We want to reduce the volume of contact through phone and post by 30% by 2025 compared with 2021 to 2022, enabling many more customers to resolve their issues quickly and easily online, and freeing us up to help those who need extra support.

In 2023, we’re improving the digital experience for our customers by adding a range of services into the HMRC app and online, and updating the way customers interact with their digital account so it fits around their tasks and needs. For example, Child Benefit customers can now complete their claim fully online for the first time ever – and we’re adding more digital features including making it easier for customers to change their personal details and request their National Insurance Number online. Although later than originally planned, we’re also preparing to extend Making Tax Digital to Self Assessment customers in phases from 2026.

At the same time, we’re playing a key role in developing the government’s Target Operating Model at the UK border, which will set out a roadmap for new import controls and a technological transformation that makes it easier for traders to fulfil all their import, export and transit obligations. We’re also continuing to support traders moving goods between Great Britain and Northern Ireland, in line with the UK’s commitments to deliver the Windsor Framework.

We know the tax system can be complex. Following the closure of the Office of Tax Simplification we will make simplifying the tax system integral to our approach to developing tax policy. Simplification is now very much part of our core day to day work.

All these changes will help to make things easier for our customers and support growth for businesses. Crucially, they will also enable us to operate more efficiently and focus our support on those customers who cannot use digital services or have complex needs.

Making tax easier with the HMRC app

More and more customers are using the HMRC app - with over 56 million logins and over 1 million new users in 2022 to 2023. We’ve developed it to give people simpler access to more information and are regularly adding more services. Customers can view their PAYE tax code and annual tax summary, manage details for tax credits and Child Benefit and use a tax calculator. Self Assessment customers can also file their return and pay their tax bill via the app, with 130,000 having done so as of January 2023.

Supporting traders with the new Customs Declaration Service

From 1 October 2022, importers started submitting all their import declarations through our modern Customs Declaration Service (CDS) platform, marking the end of 30 years of using the old Customs Handling of Import and Export Freight (CHIEF) system. By the end of 2022 to 2023, 38.8 million import declarations had been made on CDS. We are now supporting businesses to declare their exports on CDS as well.

Supporting customers to get their tax right

In the short term, we’re reviewing how we deploy our resources to ensure we maximise value for the taxpayer – and this means changing the way we meet customer needs.

I’m disappointed that we didn’t hit our key customer service standards this year and I recognise the inconvenience some customers will have experienced at times.

We’re working hard to improve all our service levels. For those customers who need direct support through our post services, I’m pleased that in 2022 to 2023 we made a large improvement in the proportion of customer correspondence that we turn around within 15 working days, increasing to 72.7% from 45.5% in 2021 to 2022.

We’re determined to do all we can to be responsive and to help customers get things right – but that has to mean migrating an ever-increasing number of our customers onto our digital services and away from our phone lines so we are in a much better position to provide specialist support to those that need it, while improving the customer experience.

As we make these changes, the standards set out in our Charter will remain at the heart of what we do. We’re also helping customers to find the answers they need more quickly and easily. For example, customers using our digital assistant are automatically finding the information they are looking for in more than two thirds of cases, with the remainder being handled by HMRC webchat advisers, and our new telephony platform is continuously improving the way we handle phone calls. We’ve also introduced an online performance dashboard, where customers can check current service levels and processing times, reducing the need for progress chasing calls.

Delivering Help for Households

As your tax service, we are able to support many urgent government priorities, the impact of which stretch well beyond the tax system. This year we played a major role in providing Help for Households – including delivering Cost of Living Payments of up to £650 to eligible tax credits customers.

We’ll continue this support into 2023 to 2024, with 3 further payments of up to £900 for eligible customers.

Ensuring the right tax gets paid

To ensure everyone pays the right tax, we have a well-established compliance strategy with 3 elements: preventing non-compliance, promoting good compliance, and being robust in our response to those who bend or break the rules.

The changes we’re making to modernise our services, which I’ve described above, are also vital to this strategy. They aren’t just about improving customer experience, they also help to ensure customers pay the right tax at the outset, rather than fixing problems after they happen.

For example, the move to businesses submitting their VAT returns using Making Tax Digital-compatible software from April 2022 is helping to reduce opportunities for calculation and transposition errors. We’re also using more targeted campaigns, prompts and nudges, such as highlighting to customers if they enter data that doesn’t align with what we expect.

This is all vital to maintaining a low tax gap while achieving ever greater cost efficiency. And we’re building on what is already a strong record: each year, around 95% of the tax that’s due gets paid, and the vast majority of our customers pay in full and on time.

In 2022 to 2023, we delivered £34 billion of compliance yield – our term for money that would have been lost to the Exchequer if not for our compliance work. While it’s lower than we aimed for this year, it’s higher than the 2 previous financial years.

Of course, protecting taxpayers from those who bend or break the rules will always remain a vital part of a trusted tax system. We’ve already invested in over 4,000 new compliance officers in 2021 to 2022. We’re also focusing our criminal investigations on serious frauds – and we’ve seen the average value of our criminal cases rise to £6.2 million, almost 3 times what it was in 2016 to 2017.

Tackling tax debt

Amid challenging economic conditions, the level of tax debt has grown since 2019 to 2020. We’re supporting customers to get out of tax debt. At the end of 2022 to 2023 we were managing £5.7 billion of debt through time to pay arrangements, in which customers pay off their debt in affordable and sustainable instalments.

Around 90% of these complete successfully. For those who can pay but are not doing so, we introduced penalty and interest reform for VAT from January 2023, to encourage payment on time and quicker debt resolution.

Modernising how HMRC works

To achieve our aims, we need the right people, skills and technology combined with the right ways of working using the best tools and data systems. We’ve taken important steps forward in these areas over the past financial year.

We opened 3 more regional centres in Glasgow, Manchester and Nottingham – taking us to 12 operational centres in total, with 2 more due to open in Newcastle and Portsmouth. We’re also sharing office spaces with 12,000 civil servants from 39 other departments and organisations, fully supporting the government’s ‘Places for Growth’ agenda.

These modern workspaces put us in a strong position to create jobs and career opportunities in every part of the UK. Of our over 67,500-strong workforce, 85% are now based outside London, including more than half of our senior civil service roles.

We’ve also been working hard to make our IT infrastructure more secure and resilient, to underpin our online services. In the last year, we broke up our largest IT contracts into a range of smaller, service-focused ones. This was the culmination of many months of work and gives us greater access to the latest technology. We’ve also completed 62% of migrations from legacy data centres as we move to cloud-hosting.

We run one of the largest and most complex IT estates in the UK, so updating our technology will always be a continuous process. But thanks to our work this year, our systems will perform better and be easier to update – benefitting customers and colleagues alike.

Looking ahead

We’ve faced some tough operating conditions during 2022 to 2023 and there is important action we still need to take to meet rapidly changing customer needs and economic circumstances. We also understand the need to work with our customers and stakeholders to fix problems and find shared solutions.

Our long-term aim is clear: offering more and better online services so they simplify things for our customers, doing more to remove the causes of unnecessary customer contact and improving compliance.

I’m confident that by working together according to our values and our Charter principles, we’ll continue making a vital difference for our customers and for the UK as a whole.

Jim Harra

Chief Executive and First Permanent Secretary

6 July 2023

Our key performance metrics

Where we have an internal target or service standard, this is shown in brackets

Compliance yield

• 2022 to 2023: £34.0 billion (£36 billion)
• 2021 to 2022: £30.8 billion

Tax credits error and fraud

(2021 to 2022 data is latest available)

• 2021 to 2022: 4.5% (5%)
• 2020 to 2021: 4.7%

Customer satisfaction

• 2022 to 2023: 79.2% (80%)
• 2021 to 2022: 82.0%

Customer correspondence cleared within 15 working days

• 2022 to 2023: 72.7% (80%)
• 2021 to 2022: 45.5%

Net easy score

• 2022 to 2023: +59.8 (+70)
• 2021 to 2022: +65.5

Telephones: adviser attempts handled

• 2022 to 2023: 71.1% (85%)
• 2021 to 2022: 77.3%

Debt balance

• 2022 to 2023: £45.9 billion
• 2021 to 2022: £41.6 billion

Time to Pay arrangements

• 2022 to 2023: £5.7 billion
• 2021 to 2022: £5.4 billion

Employee engagement index

• 2022 to 2023: 59%
• 2021 to 2022: 59%

Managing risks to our delivery

HMRC’s Executive Committee has identified and manages 9 key risks to the delivery of our strategic objectives.

HMRC’s 9 key risks

• Capacity, capability and engagement
• Security
• Exploiting information
• Customer experience
• External perception and loss of trust
• Data protection
• Delivering our change portfolio
• Funding and affordability
• Technology resilience and reliability

During 2022 to 2023, we made steady progress in mitigating and managing our key risks. For example, we launched a new customer design standard to ensure the customer is at the centre of future changes. We also completed a national rollout of a new telephony platform to improve customer and staff experience and enhance our analysis and planning.

As one of the largest guardians of personal data in the UK, we take our data protection obligations seriously. By modernising and securing our IT estate, we are working to reduce risks associated with older technology.

During the year, we significantly improved data security and management systems to prevent unauthorised access and improve our ability to delete, supress or stop processing personal data if required. We have enhanced detection and monitoring in our IT systems and raised awareness of phishing scams. We enhanced security for 59 systems with data protection risks and we also migrated 62% of our services from legacy data centres as part of our move to modern strategic hosting platforms, reducing our risk of IT outages.