Source · Select Committees · Public Accounts Committee
Recommendation 5
5
Accepted
Require HMRC to research customer needs and design appropriate digital tax systems.
Conclusion
It is of the utmost importance that HMRC learns lessons from its experience of implementing Making Tax Digital (MTD) and puts customer needs at the heart of plans to improve digital services. The previous Public Accounts Committee reported in 2023 that HMRC had lost sight of the need to put taxpayers at the heart of changes to the tax system. MTD was imposed on businesses without much consultation, and without businesses knowing what the administrative costs were going to be. HMRC completed the rollout of MTD for VAT in 2022, and plans to extend it from 2026–27 to many Income Tax Self Assessment taxpayers. HMRC estimates that MTD imposed net costs on VAT traders of around £300 million over the period 2019–20 to 2023–24. In February 2024, HMRC estimated that extending MTD to Income Tax Self Assessment will impose transitional costs of over £500 million on taxpayers, and will impose ongoing costs on taxpayers which will exceed their ongoing savings by 6 around £200 million each year. There is no strong evidence to date to suggest productivity improvements or other benefits for most VAT traders following the introduction of MTD. recommendation HMRC should ensure it conducts sufficient research into customer needs and design digital programmes and systems which meet those needs. HMRC should evidence its assessment of customer needs in its business cases and in public documents, including Tax Information and Impact Notes.
Government Response Summary
The government states that HMRC already conducts extensive customer research, uses customer insight in its design processes, and assesses formal change against Customer Guardrails. Customer impacts are recorded in impact assessments and published in Tax Information and Impact Notes (TIINs).
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative surveys, with thousands of customers each year. In 2024-25, HMRC delivered 18 commissioned and 15 in-house social research projects. Additionally, user research is a core activity of HMRC’s digital programmes. In 2024-25 HMRC conducted user research with 1,835 participants. Findings were used to inform design decisions on products and services. HMRC currently uses customer and user insight as part of its end-to-end change lifecycle for designing new services or making changes to existing ones. This is a critical aspect of design to ensure the department builds solutions that address customer needs and a foundation for evaluating the impact of the service to identify areas of improvement or new opportunities for innovation. As part of its business case process, HMRC assesses formal change against Customer Guardrails, a framework for ensuring customer needs are thoroughly considered. Evidence of identified customer needs, including assessment of impacts on customer costs and benefits, is then recorded through completion of an External Customer Impact Assessment document. This forms part of the documentation required by HMRC governance boards. Customer impacts are published in the ‘Summary of Impacts’ section of Tax Information and Impact Notes (TIINs). Where a measure or policy change is driven by customer need, this can be set out in the ‘Background to measure’ or ‘Policy objective’ sections of a TIIN as appropriate.