Conclusion 4

HMRC allowed many of its IT systems for administering tax and interacting with customers to become out of date, increasing both its costs and the burdens on taxpayers. In 2020, HMRC recognised its IT systems for administering tax were a significant risk to operations, due to the postponement of maintenance and systems upgrades to secure cost savings. Spending Review 2020 enabled HMRC to spend more on its IT estate but progress in remediation is costing more and taking HMRC longer than expected, with some funding being reallocated to other 5 priorities in 2023–24. HMRC considers that the three key risks that arise from operating legacy systems to be lower levels of security, lower reliability and resilience, and higher costs of system changes. HMRC is now tracking progress on remediation and says it has a plan to remediate remaining legacy systems, but the speed of execution depends on HMRC’s spending review settlement for 2026–27 to 2028–29, which is due to be finalised by June 2025. Last year HMRC acknowledged that it is behind many other organisations in enabling customers to communicate securely through digital channels. It told us that in 2023–24 about 69% of all its interactions with customers were digital. Too much of its communication with customers continues to be by post which can be inconvenient and costly and can discourage customers from using its digital services. Improving its digital systems, and supporting more customers to use them, would help HMRC reduce calls to its helplines, two–thirds of which it estimates are avoidable, as the customer could have carried out the transaction, or found out the information, by using digital services. recommendation a. Within three months of the spending review being published, HMRC should write to the Committee setting out its timetable for remediating its legacy IT systems, the forecast cost of investments and expected savings. It should then report its progress and spending on remediation in its annual reports.