UK Parliament Public Accounts Committee urges HMRC to simplify the tax system and modernise services as costs rise and trust falls

The UK Parliament’s Public Accounts Committee (PAC) published a report on the cost of the tax system, calling on HM Revenue & Customs (HMRC) to set out realistic plans to simplify tax administration, address falling trust among taxpayer groups, and modernise customer service and legacy technology so it can make effective use of artificial intelligence (AI). Tax collection costs increased by GBP 563 million (15%) in real terms from 2019-20 to 2023-24, with 240 tax policy changes announced in 2022-24. Over the same period, compliance productivity fell to GBP 1.27 million of returns per compliance worker in 2023-24 from over GBP 1.4 million pre-pandemic, despite a shift towards more senior staff that added over GBP 100 million to salary costs. The report highlights outdated service delivery, including continued reliance on post for around 70% of the 22 million items of correspondence received in 2022-23, limited secure digital communication, and ageing IT that constrains AI adoption and increases vulnerability to malicious use of AI. It also urges HMRC to build taxpayer needs into system design, citing Making Tax Digital as a case where limited consultation contributed to estimated net additional costs of GBP 300 million for VAT-paying businesses over 2019-20 to 2023-24, and where the planned extension to Income Tax self-assessment is expected to leave ongoing costs exceeding savings by around GBP 200 million each year. HMRC was unable to say when legacy IT remediation would be completed because funding for the three years after 2025-26 will not be known until the Spending Review in June 2025.