Treasury Committee
Wednesday 9th September 2026
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14:15
Julie Minns
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Julie Minns
Select Committee on Wednesday, the 9th of September 2026. Today, we're looking at the work of His Majesty's Revenue and Customs, one of our regular sessions, to examine on behalf of the taxpayer how well the revenue is working in collecting tax and supporting its customers taxpayer. I'm delighted to have in front of us the panel of senior people from HMRC. John-Paul marks is the first permanent secretary and chief executive of HMRC. He's joined from my left to right from Penny, who is the director general for customer compliance at the HMRC.
Carol Bristow is the director general for Borders and Trade HMRC, and Jonathan Athow is the director general for strategy and Policy. So a warm welcome to you all. JP marks, you've been in position now for about a year. You've obviously had quite an eventful summer as well. Never, never uneventful I suppose in your line of work, what are the top 2 or 3 things that you are proud of and a couple of challenges that you still remain for you in your role as Permanent Secretary?
Carol Bristow is the director general for Borders and Trade HMRC, and Jonathan Athow is the director general for strategy and Policy. So a warm welcome to you all. JP marks, you've been in position now for about a year. You've obviously had quite an eventful summer as well. Never, never uneventful I suppose in your line of work, what are the top 2 or 3 things that you are proud of and a couple of challenges that you still remain for you in your role as Permanent Secretary?
14:16
Speaker 1
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Speaker 1
Thank you, chair. Afternoon to the committee. So things that we're proud of, if I start with our compliance operation, Penny can say a bit more through the afternoon. As you wish. But as when we saw you last time, we were talking about the capacity build that we had committed to and the fact that that was a steep, steep curve. We're ahead of that plan, which we're pleased about.
Obviously, you know, we need to consolidate, consolidate that capability and realise the productive output of that. But we've made a really good start and credit and thanks to the team for the hard work. And last year we achieved 50 billion, over 50 billion of compliance shield for the first time. We're aiming for that to be over 60,000,000,000 in 2930. So that's the level of additional tax revenue we will seek to collect with additional capacity and capability.
So far, we judge that on track. If I come on to customer service, moving in the right direction can come on to some of the proof points of that. But complaints is down. A third average speed of answer is less than ten minutes this month. And if we look at the take up of our app, it's up over another 2 million. And we're aiming to take that to 10 million next year if we can. So those two core objectives moving forward, as we would intend.
We talked previously about the transformation portfolio that we've committed to, and we set it out in our roadmap. And, you know, it's high ambition. It's got a significant level of complexity to it remains amber overall. But whereas last year we were talking about some of those transformations, a number of them are now live and making tax digital. Jonathan is one of the SROs of where we've had over half a million sign ups already.
And we can talk a bit more about what happens next there, but it's made a good start.
Obviously, you know, we need to consolidate, consolidate that capability and realise the productive output of that. But we've made a really good start and credit and thanks to the team for the hard work. And last year we achieved 50 billion, over 50 billion of compliance shield for the first time. We're aiming for that to be over 60,000,000,000 in 2930. So that's the level of additional tax revenue we will seek to collect with additional capacity and capability.
So far, we judge that on track. If I come on to customer service, moving in the right direction can come on to some of the proof points of that. But complaints is down. A third average speed of answer is less than ten minutes this month. And if we look at the take up of our app, it's up over another 2 million. And we're aiming to take that to 10 million next year if we can. So those two core objectives moving forward, as we would intend.
We talked previously about the transformation portfolio that we've committed to, and we set it out in our roadmap. And, you know, it's high ambition. It's got a significant level of complexity to it remains amber overall. But whereas last year we were talking about some of those transformations, a number of them are now live and making tax digital. Jonathan is one of the SROs of where we've had over half a million sign ups already.
And we can talk a bit more about what happens next there, but it's made a good start.
14:18
14:18
Speaker 1
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Speaker 1
It's it's gone up now to 7.6 million in total. So up over an additional 2 million, which was, which was over 20% up on the previous year. So a good a good step up, but more to, to go. And it is part of that mission to become a digital first HMRC where 90% of our customer interactions are digital. There are around 80% at the moment. But that is on the trajectory that we are shooting for.
But we've got to make more progress there, particularly around shifting some of our postage activity into our self-serve digital channels in the next 18 months or so. Just on the last two strategic objectives we have on people. Obviously, we're a people organisation. Ultimately, the growth in capacity, as I say, on track, but people engagement in HMRC hit 60% last year for the first time, and obviously a lot to do to focus on building the capability and the confidence to operate new tax regimes, new reforms and operating in a in a digital environment.
We integrated the Valuation Office. Carol can say a bit. More
But we've got to make more progress there, particularly around shifting some of our postage activity into our self-serve digital channels in the next 18 months or so. Just on the last two strategic objectives we have on people. Obviously, we're a people organisation. Ultimately, the growth in capacity, as I say, on track, but people engagement in HMRC hit 60% last year for the first time, and obviously a lot to do to focus on building the capability and the confidence to operate new tax regimes, new reforms and operating in a in a digital environment.
We integrated the Valuation Office. Carol can say a bit. More
14:19
14:19
Speaker 1
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Speaker 1
Customs regime, but , you know, embedded post exit of the European Union now and set up to deliver reforms like low value imports. Your question about challenge, I mean, the debt balance remains a challenge. So debt as a percentage of receipts has come down was around 5%, down to about 4.7, 4.8. Now we're aiming to bring it down as a percentage of receipts back down to what it was pre-pandemic. More capacity to do that, 2400 more debt investment in capacity.
14:20
Speaker 1
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Speaker 1
That includes giving people opportunities, time to pay, so they can do so in a way that is affordable for them. Absolutely. And again, making that easier to access as well. And we've received the investment we need to collect that additional debt to reduce it as a percentage of receipts. But nonetheless, we recognise that as a complex task. And we need to do that with a lot of care. And I suppose the other thing I would raise chair, and I've written to you on a number of complex legacy challenges in the tax system.
We spoke about child benefit last time I saw you. I've written to you on the error to the taxation of the state pension, which we will fix forward and go back to 2021, but also on the threat environment, both external and insider threat. I wrote to the committee on the HMI report as well. So we think we're heading in the right direction. We think our transformation is on track. We can see outcomes improving, but we recognize it.
We spoke about child benefit last time I saw you. I've written to you on the error to the taxation of the state pension, which we will fix forward and go back to 2021, but also on the threat environment, both external and insider threat. I wrote to the committee on the HMI report as well. So we think we're heading in the right direction. We think our transformation is on track. We can see outcomes improving, but we recognize it.
14:50
Bobby Dean
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Bobby Dean
So what we do to estimate that is we have surveys of how much people smoke. We know percent is not is missed. From that you can infer that's roughly the size of the the the illicit illicit market. People tend to tell us they don't smoke as much as they do. So we uplift that. We also know that some people say they don't smoke when they do. So we use some data from our health survey for England, where they swab people's saliva, and that can tell if people are smokers or not.
And one of the things we're now investing in is some research with, with a private sector company looking at whether we can use wastewater, so sewage to detect metabolites of nicotine. So we could estimate how much people are actually smoking. And once you know how much people are smoking and how much is legitimate because we know how much clearances they've been, how much cross-border shopping there's been, we can then work out what the gap is.
So we are constantly thinking about, do. You
And one of the things we're now investing in is some research with, with a private sector company looking at whether we can use wastewater, so sewage to detect metabolites of nicotine. So we could estimate how much people are actually smoking. And once you know how much people are smoking and how much is legitimate because we know how much clearances they've been, how much cross-border shopping there's been, we can then work out what the gap is.
So we are constantly thinking about, do. You
14:50
14:50
Speaker 3
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Speaker 3
a bit of a way off from previous evidence that we have, which put it would put it an awful lot higher than that. And I look at the shops on my own high street, and I would say it's a lot higher. I look at the number of raids. I mean, just going back to what you were saying about, I think you said 3000 interventions. Yeah. My maths might be wrong. Chair, somebody can correct me.
But that's, that's about 100 per constituent. It's probably less than 100 per constituency. I think I've had about 20 or 30 in the last six months. Is 30,000 enough? I picked that up. So we work a lot with partners. I mean, if you take the tobacco instance and it's not the only harm that we would be tackling on the high street, we work with trading standards who have the key role on the on the high street of enforcing on tobacco.
We work further up the supply chain in partnership with them. We're supplying them with intelligence. We're also tackling the organised criminal gangs who supply 95% of the illicit tobacco. So we're doing that, as Carol said, overseas with our fiscal crime liaison officers, there's 50 or more of them in 35 countries, and they work closely with international partners, and we see the effects of their disruption in terms of seizures, not just of tobacco, but of assets of criminal networks.
We then also work inland in the UK, but we are disrupting supply before it reaches the high street. So what we're trying to do is disrupt illegal tobacco factories, supply chains , and really put those priority tax criminals at a risk of their their supply chains being disrupted. When it comes down to then the work that we do on the high street, we work again with with partners right across government. So we coordinated the first cross-government risk assessment of issues on the high street, working with partners right across government.
And we're part of the High Street organised Crime Unit, working with police authorities, the National Crime Agency. on the police. Yeah. I'm
But that's, that's about 100 per constituent. It's probably less than 100 per constituency. I think I've had about 20 or 30 in the last six months. Is 30,000 enough? I picked that up. So we work a lot with partners. I mean, if you take the tobacco instance and it's not the only harm that we would be tackling on the high street, we work with trading standards who have the key role on the on the high street of enforcing on tobacco.
We work further up the supply chain in partnership with them. We're supplying them with intelligence. We're also tackling the organised criminal gangs who supply 95% of the illicit tobacco. So we're doing that, as Carol said, overseas with our fiscal crime liaison officers, there's 50 or more of them in 35 countries, and they work closely with international partners, and we see the effects of their disruption in terms of seizures, not just of tobacco, but of assets of criminal networks.
We then also work inland in the UK, but we are disrupting supply before it reaches the high street. So what we're trying to do is disrupt illegal tobacco factories, supply chains , and really put those priority tax criminals at a risk of their their supply chains being disrupted. When it comes down to then the work that we do on the high street, we work again with with partners right across government. So we coordinated the first cross-government risk assessment of issues on the high street, working with partners right across government.
And we're part of the High Street organised Crime Unit, working with police authorities, the National Crime Agency. on the police. Yeah. I'm
14:52
14:52
Speaker 3
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Speaker 3
So they can they can ask us for track and trace data in particular cases. They are not part of the statutory framework. That is. That is, they don't have statutory responsibilities in relation to track and trace, unlike trading standards, who are part of the end to end system. They actually have an app on their phone for scanning tobacco, and the track and trace data is on their phone. The police forces have to ask us for particular information in relation to particular cases.
We are in discussion with them about that, and we'll continue to have that conversation. And I think it would help. You know, we're keen to we're keen as as you can see from the fact that we facilitated that cross-government risk assessment to use all our data and intelligence collaboratively to create the richest picture we can of what's going on on the high street, so that all of the agencies involved can come to that problem and bring their particular expertise to tackle the parts of it that fall within their remit.
We are in discussion with them about that, and we'll continue to have that conversation. And I think it would help. You know, we're keen to we're keen as as you can see from the fact that we facilitated that cross-government risk assessment to use all our data and intelligence collaboratively to create the richest picture we can of what's going on on the high street, so that all of the agencies involved can come to that problem and bring their particular expertise to tackle the parts of it that fall within their remit.
14:53
Speaker 4
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Speaker 4
One final question. If I if I may, chair, and it goes to this point about information sharing, my understanding in terms of how it works with trading standards is they can use their app, they can go into the shop, they can scan it. But what they don't necessarily have is a, is a is the ability to pull off a complete list of businesses that would be registered with the track and trace in their local authority area, that they could then match against all of the mini marts, all of the vape shops that they know are on that high street and go, do you know what I've got? 20 of the 40 are not on this track and I can now target my, my.
So have I got that correct? That actually I have to use my app individually in each shop to know whether or not it's on. And would it improve things to actually have a list of everybody in a trading standards area that's on the track and trace system?
So have I got that correct? That actually I have to use my app individually in each shop to know whether or not it's on. And would it improve things to actually have a list of everybody in a trading standards area that's on the track and trace system?
14:54
14:54
14:54
14:55
Speaker 1
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Speaker 1
It's quite possible that more could be done, and there's lots of close collaboration going on with councils. So obviously we undertake the valuations the Valuation Office does, and then the councils will issue the bills and collect the money. I think in terms of business rates, fraud and error and data sharing, I think we probably have to take the action to just come back to the committee to set out what already happens in terms of collaboration, to target that.
And if there are a bit like with the track and trace opportunity, if there are things that have been raised with the committee where there's opportunities to do more and we can, then we're very open to that. It's not been raised with with me recently, but I'm very happy to look at it.
And if there are a bit like with the track and trace opportunity, if there are things that have been raised with the committee where there's opportunities to do more and we can, then we're very open to that. It's not been raised with with me recently, but I'm very happy to look at it.
14:55
Siobhain McDonagh
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Siobhain McDonagh
Particularly when it comes to the high street. There are so many agencies involved, aren't there? Selves? The Ministry for housing, Communities and Local Government, the National Crime Agency, local authorities and the police. And I think you said a bit earlier that you were the lead on tackling some of the tax avoidance issues on the high street, but is it clear who is in charge and who shares the intelligence? Because it does seem like constituents and residents are far more clear about organised crime and tax evasion on the high street than HMRC are?
14:56
Speaker 3
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Speaker 3
Yeah. Thank you. So the the High Street Organised Crime Unit, which was set up and announced this spring, brings together all those agencies, both the policy makers and those of us involved in enforcement. And it is looking at the problem in the round. It is both looking at the policy solutions and the enforcement across a whole range of different issues. As I say, based on a holistic risk assessment of all the things that one might see on the high street.
When it comes to intelligence sharing, we are very active and there is an active sharing of intelligence and information. And, you know, we very much drive, for instance, trading standards , work with active intelligence sharing, and their work feeds back into the development of our intelligence. The work that is done on the high street gives us insight, which we then use to develop further our understanding of what is going on in illicit markets. When it comes back to the question of local insight into what's going on, we've actually just recently added to our fraud reporting gateway a new aspect, which is the ability to report specifically worries about tax evasion on the high street.
And that was launched on the 1st of August. And we've seen a really big response to that, which is really helpful, actually, because it helps us to identify hotspots and to narrow down our work.
When it comes to intelligence sharing, we are very active and there is an active sharing of intelligence and information. And, you know, we very much drive, for instance, trading standards , work with active intelligence sharing, and their work feeds back into the development of our intelligence. The work that is done on the high street gives us insight, which we then use to develop further our understanding of what is going on in illicit markets. When it comes back to the question of local insight into what's going on, we've actually just recently added to our fraud reporting gateway a new aspect, which is the ability to report specifically worries about tax evasion on the high street.
And that was launched on the 1st of August. And we've seen a really big response to that, which is really helpful, actually, because it helps us to identify hotspots and to narrow down our work.
14:58
Siobhain McDonagh
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Siobhain McDonagh
Which HMRC have any view about reforms to company house, companies House because at our previous hearings we've heard a great deal how organised crime becomes involved in shops, how those huge turnovers in people taking out leases on shops, landlords are very willing to give it to anybody who's prepared to do it, because that means they don't have to pay the business rates. But clearly the people who are taking over the shops are not bona fide businesses, as a lay person would imagine.
And it is so cheap to set up a business at companies House and to turn over. Would you have any comments or views as HMRC on that?
And it is so cheap to set up a business at companies House and to turn over. Would you have any comments or views as HMRC on that?
14:58
Speaker 1
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Speaker 1
Yes. So there's been a number of. Areas of focus there, and I think you're quite right. The collaboration between companies House, the Insolvency Service, ourselves and then local councils and polices is key. I think there's different elements to it co-ordinating enforcement, recovering money, improving policy, sharing data, better technology. And the government did announce in budget £2,525 million of further funding over five years, for example, to tackle abusive Phoenix ism, as you say, which supported additional staffing for the Insolvency Service.
Again, I think, you know, if it would help for us just to set out precisely the collaboration with companies House, we currently have. There's a lot of engagement all the time going on between the teams, because I know the companies House had been stepping through their own transformation, as you say, to make it, you know, more confident, more assured of who's registering and, you know, trying to ensure that system is working well.
Again, I think, you know, if it would help for us just to set out precisely the collaboration with companies House, we currently have. There's a lot of engagement all the time going on between the teams, because I know the companies House had been stepping through their own transformation, as you say, to make it, you know, more confident, more assured of who's registering and, you know, trying to ensure that system is working well.
14:59
Siobhain McDonagh
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Siobhain McDonagh
How can it be when it's so cheap to register a company and when you can register companies from addresses nowhere near you that you have? No, I mean, I have elderly residents who've come to see me, who've told me that businesses who they know nothing about are registered at their address, let alone on the high street.
15:00
Bobby Dean
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Bobby Dean
So just just coming. So sorry. I don't want to speak for companies, companies House, but I know they are putting in place an identity verification service so that again, the ability to just go on and create false names or false addresses is now a lot harder. So there is an identity verification service that is being rolled, rolled out on that. But again, that's really for companies House. We're really happy to support them.
You know, we want to help build their capability because as you say, they are a bedrock for, you know, for incorporated companies. They're a bedrock of identifying who we're dealing with. And so if we can help companies House, we will do we have sort of provided assistance before and helping them understand some of the risks and how they can improve their systems. But there is a programme I know on on identity verification. But again, that's that's not my responsibility.
Perhaps companies House, you know, we could ask them to give you an update on on where they are. I
You know, we want to help build their capability because as you say, they are a bedrock for, you know, for incorporated companies. They're a bedrock of identifying who we're dealing with. And so if we can help companies House, we will do we have sort of provided assistance before and helping them understand some of the risks and how they can improve their systems. But there is a programme I know on on identity verification. But again, that's that's not my responsibility.
Perhaps companies House, you know, we could ask them to give you an update on on where they are. I
15:01
Siobhain McDonagh
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Siobhain McDonagh
I know from Criterion Capital, who are a very big property company in London, who seem to be involved with a group of people with student visas, become setting up businesses, becoming the leaseholders of shops in prime locations. I mean, just down the road in Whitehall, who routinely then go bankrupt and the individuals concerned are clearly in no way able to run a legitimate business but walk away without paying any tax at all.
15:01
15:01
Speaker 1
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Speaker 1
And what I think it comes back to Jonathan's point around, you know, the investment that's gone in to trying to improve that process in terms of verification. But, you know, I think the point's well made that this is one of the structural risks that we have in the in the tax system, the ease of incorporation, Phoenix ism. And then we're left with a debt that's hard to pursue. A number of things that we've been doing to try and resolve that and including in terms of liability and, you know, getting upstream of that risk.
But the volume is such that it comes back a bit to that, you know, high street intervention and the volume we will try and undertake this year will be more than last year, and the capacity will bring on. But I also take the point that, you know, renewal of the high street needs to start in communities and be led by council, supported by the police office for Fair Trading ourselves, companies House. And it does require that multi-agency approach in communities across the country.
But the volume is such that it comes back a bit to that, you know, high street intervention and the volume we will try and undertake this year will be more than last year, and the capacity will bring on. But I also take the point that, you know, renewal of the high street needs to start in communities and be led by council, supported by the police office for Fair Trading ourselves, companies House. And it does require that multi-agency approach in communities across the country.
15:03
15:03
John Glen
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John Glen
I turn to the issue of making tax digital? I believe HMRC anticipated that 864,000 individuals earning over 50,000 would complete their first quarterly return by the 7th of August, but almost half didn't. And why do you think that would be? Is it to do with the communications, the penalties not changing or awareness around needing the software? What's the sort of your understanding? I know it's only a month since that deadline passed, but it'd be good to get your take on it.
I
I
15:03
Speaker 1
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Speaker 1
think all of those factors are relevant. As you say, year one, no penalties, a new change awareness. We are pleased with Start. The MTD has made in terms of take up availability of software awareness across the industry. But as you say, we've got some quarters to go before we reach the end of year one, and we need to improve the rates a bit. But Jonathan's the SRO of the programme.
It's okay. Jonathan, do you want to give us the very latest numbers?
It's okay. Jonathan, do you want to give us the very latest numbers?
15:04
15:04
15:04
Bobby Dean
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Bobby Dean
Where where we are. So we think awareness is quite is quite high. Around 70% of the first cohort are represented by agents. So accountants that we've got virtually 100% awareness there. So that's that's good enough. Software availability is also very good. Over 130 products, including around 30 free or freemium products. So the software is, is there. I think there are two things that are sort of challenging.
One is the.
One is the.
15:04
15:05
Bobby Dean
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Bobby Dean
So that is a cost. So we do a cost benefit analysis. We will look at all the costs including the cost to businesses. And then we will look at kind of what the additional yield in terms of additional tax revenue is. So we will take all of those things into account in our business case. And so the business case that was presented and the Nao will have looked through would have had all of that estimates estimates in it.
So we fully take account of that. And I think that brings me on to the point I wanted to make, which is this is a very big change. There are many businesses who are actually already using software keeping records in real time, but we know there's a lot of businesses that don't keep businesses, keep records in real time. The sort of the story is of the sort of carrier bag of receipts at the end of the year. That's the sort of behaviour we're looking to change, because we think that's where a lot of the error comes from, from poor record keeping.
And so for those individuals, it's a really big change asking people to keep records on that quarterly basis. So I think it's it's part of the reason for why we've not got more than the numbers we had is that actually it's a big a big change and a big change we are looking to make. And that's why.
So we fully take account of that. And I think that brings me on to the point I wanted to make, which is this is a very big change. There are many businesses who are actually already using software keeping records in real time, but we know there's a lot of businesses that don't keep businesses, keep records in real time. The sort of the story is of the sort of carrier bag of receipts at the end of the year. That's the sort of behaviour we're looking to change, because we think that's where a lot of the error comes from, from poor record keeping.
And so for those individuals, it's a really big change asking people to keep records on that quarterly basis. So I think it's it's part of the reason for why we've not got more than the numbers we had is that actually it's a big a big change and a big change we are looking to make. And that's why.
15:06
15:06
Bobby Dean
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Bobby Dean
So we've put out a lot of lot of guidance and said around 70% of this group are already supported by an agent or a bookkeeper or an accountant. And again, one of the things we've seen and I've been really pleased with is the representative bodies, the Chartered Institute of Taxation, the Association of Accounting Technicians, and others have put out some really good guidance to support people. The low income tax reform group who really deal with unrepresented customers, they put out some amazing guidance.
So there's lots of guidance out there from us and from others to help people. But it is a really big change. So we expect that behavioural change will take some time to bed in. And as as you said, and as JP referred to, there were no penalties in the first year. So we're moving to a new penalty regime where there's no financial penalty. Immediately you get penalty points and after a certain number of points you then get a financial penalty.
But in that first year, we've said there are not even any penalty points because we recognise it's a really big behavioural change. We want to encourage people to comply. We don't want people to worry about compliance in that first year. It's, as I said, because of that, you know, as you say, for people who've been trading in a particular way for a long time, they might need to put in place new systems or new ways of working.
And we recognise that's a significant undertaking.
So there's lots of guidance out there from us and from others to help people. But it is a really big change. So we expect that behavioural change will take some time to bed in. And as as you said, and as JP referred to, there were no penalties in the first year. So we're moving to a new penalty regime where there's no financial penalty. Immediately you get penalty points and after a certain number of points you then get a financial penalty.
But in that first year, we've said there are not even any penalty points because we recognise it's a really big behavioural change. We want to encourage people to comply. We don't want people to worry about compliance in that first year. It's, as I said, because of that, you know, as you say, for people who've been trading in a particular way for a long time, they might need to put in place new systems or new ways of working.
And we recognise that's a significant undertaking.
15:07
15:07
Bobby Dean
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Bobby Dean
A very quick follow up about the penalty points regime. Is that only applicable to the making tax digital regime? So we are going to introduce a penalty point regime more generally, but it will vary according to what your obligations are. So if you have quarterly obligations, which is the making digital, you get four points before you get a financial penalty. If you have an annual. Obligation, such as for those who stay in standard self-assessment, you only have to get two points before there's a penalty.
So it's a penalty point system, but it's correlated with the nature of your obligations.
So it's a penalty point system, but it's correlated with the nature of your obligations.
15:08
Jim Dickson
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Jim Dickson
Thank you . Chair. Just on customer interactions, very important for people's experience of the service and their confidence in the service. You quoted at the beginning, Mr. Marks, that you felt this was going well, that, for instance, 85% of customers are now speaking to an adviser where they wish to to do so. And that's the first time you've actually met that target for seven, eight years or so. Can I ask you how you went about doing that and do you think you can sustain it?
15:08
Speaker 1
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Speaker 1
Yeah. Thank you. So we went about doing it. It starts with supply meeting demand. And that is one of the things that I discussed with the team actually pretty early on when I arrived, because my concern historically was that was not always the case. And as night follows day, if supply doesn't meet demand, backlogs accrue. So that was the first point. You know, as chief exec, as far as I'm concerned, we must always supply our customer service lines.
So supply meets demand as it currently does. And, you know, I'm pleased to say in year one, as long as you get your forecasts right and your deployment right, you should then see, you know, the standard met accordingly. You know, a huge amount goes on underneath all of that, of course, around conformance and adherence and shifts and, and all the product management. But that is the core at the heart of the customer service operation.
Myrtle Lloyd, who we appointed our chief customer officer last year, doing a fabulous job with the team. And I do think it's sustainable. You know, last, last data I've seen for the latest month, we're up at 89% and average speed of answer is below ten minutes of single digit. And for me, that's what the baseline should be. I think that's what the committee, the public, should hold us to account for.
And our job is to make that sustainable. It obviously will depend on a few factors. You know, we still need to be able to afford the supply line as demand changes. So we'll continue to make the argument that that is important. We're confident it is for now, but also the nature of the demand line changes. And it's a function of whether we can shift the channel, support self-serve, reduce complaints. So we strip out the failure demand and have less chasing calls.
And for example, complaints is down a third currently compared to where we were this time last year. And obviously if we respond to letters faster, answer the phone quicker. People don't chase us because they don't need to. So at the moment it's moving in the right direction. But there is a lot of complex demand change ahead of us. You know, we've mentioned LDI, low value imports, high value council tax surcharge, to name a to name a couple. But we're really determined to build this up because we want to improve trust in the system, in the tax system, in this country.
And we know that starts from being a responsive service that people can connect with when they need to.
So supply meets demand as it currently does. And, you know, I'm pleased to say in year one, as long as you get your forecasts right and your deployment right, you should then see, you know, the standard met accordingly. You know, a huge amount goes on underneath all of that, of course, around conformance and adherence and shifts and, and all the product management. But that is the core at the heart of the customer service operation.
Myrtle Lloyd, who we appointed our chief customer officer last year, doing a fabulous job with the team. And I do think it's sustainable. You know, last, last data I've seen for the latest month, we're up at 89% and average speed of answer is below ten minutes of single digit. And for me, that's what the baseline should be. I think that's what the committee, the public, should hold us to account for.
And our job is to make that sustainable. It obviously will depend on a few factors. You know, we still need to be able to afford the supply line as demand changes. So we'll continue to make the argument that that is important. We're confident it is for now, but also the nature of the demand line changes. And it's a function of whether we can shift the channel, support self-serve, reduce complaints. So we strip out the failure demand and have less chasing calls.
And for example, complaints is down a third currently compared to where we were this time last year. And obviously if we respond to letters faster, answer the phone quicker. People don't chase us because they don't need to. So at the moment it's moving in the right direction. But there is a lot of complex demand change ahead of us. You know, we've mentioned LDI, low value imports, high value council tax surcharge, to name a to name a couple. But we're really determined to build this up because we want to improve trust in the system, in the tax system, in this country.
And we know that starts from being a responsive service that people can connect with when they need to.
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Jim Dickson
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Jim Dickson
Thank you. And yeah, just looking at the first quarter stats for the year we're in. Yeah, obviously they they bear out what you say. However, it still is the case that I think almost half of callers do have to wait for ten minutes for more. Presumably that's something that you couldn't be happy with and would want to improve as well.
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Speaker 1
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Speaker 1
That's right. So for me, I always would prefer to see it in single digits because people will tend to abandon their call around ten minutes and ring back again. So obviously that is very frustrating for them. It's fairly a demand for us and, you know, bad service. And as I say recently in March, for example, I think we got it to about seven minutes in the latest month it again below ten. So that would be more akin to about a 90% percentage calls answered baseline.
And just one fact, because I was digging this out, because we're here because quite reasonably, the committee has challenged on the cut off where calls are waiting, and then they just get cut off under the current system. In 2324, that was 56,000 year to date. So far this year it's 374. So still too many. 374 is too many. But you can see the trend. And that's what we're working towards.
And we're just onboarding now our new contact centre system, which will again be a leap forward there. So I'm hoping we'll continue to see that that trend reduce and take that frustration out of the system.
And just one fact, because I was digging this out, because we're here because quite reasonably, the committee has challenged on the cut off where calls are waiting, and then they just get cut off under the current system. In 2324, that was 56,000 year to date. So far this year it's 374. So still too many. 374 is too many. But you can see the trend. And that's what we're working towards.
And we're just onboarding now our new contact centre system, which will again be a leap forward there. So I'm hoping we'll continue to see that that trend reduce and take that frustration out of the system.
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Speaker 1
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Speaker 1
That's certainly, you know, the intent is to make sure the customer contact on whatever channel resolves the enquiry at the first, first resolution wherever possible. So absolutely no point having a self-serve channel that doesn't resolve the problem and then leads to a phone call. So we're working really hard on the development of the app so that customers can check their latest salary, can look at their national insurance record, can check their tax code, can understand why there's been a change.
And as I say, you know, we're really pleased on the app and the increase in usage more to do next year we'll be putting more functionality into the app, including the digital account, for people to see all their correspondence so they can see the history and understand any outstanding actions with us and, and vice versa. So the objective is, you know, customer centric digital services, but being clear also more additional support for those that need it.
And we've recently announced the doubling of our grant funding for the voluntary community sector partners we work with too, because we do recognise for a cohort of our customers, contacting us is a is a challenge that has a level of anxiety to it. And we want whatever the channel advocacy, extra support, telephony, self-serve to be, you know, high trust and higher satisfaction rates, they're moving in the right direction. But we have quite a long way still to go.
And as I say, you know, we're really pleased on the app and the increase in usage more to do next year we'll be putting more functionality into the app, including the digital account, for people to see all their correspondence so they can see the history and understand any outstanding actions with us and, and vice versa. So the objective is, you know, customer centric digital services, but being clear also more additional support for those that need it.
And we've recently announced the doubling of our grant funding for the voluntary community sector partners we work with too, because we do recognise for a cohort of our customers, contacting us is a is a challenge that has a level of anxiety to it. And we want whatever the channel advocacy, extra support, telephony, self-serve to be, you know, high trust and higher satisfaction rates, they're moving in the right direction. But we have quite a long way still to go.
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John Glen
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John Glen
That's right. Yes. I just wanted to go back to this. The the dealing with tax that is missed and the new border target operating model, because there's been significant criticism from the Efra committee. And I just wondered what your response is to the sort of mechanisms you've got to try and improve that. I mean, I remember even back in government in 23, 24, it was a very complicated system to.
Yeah, they obviously are not very impressed with it, but how are we going to see it improve going forward?
Yeah, they obviously are not very impressed with it, but how are we going to see it improve going forward?
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Speaker 1
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Speaker 1
And what that maybe just we're having this conversation earlier. So I think Carol is best placed to talk about the future opportunities on transformation, but maybe just a couple of proof points that I look at to sort of, you know, is the border working as it should from a customs economy perspective? And of course, you know, following the exit from the European Union, a lot of work has gone on to establish the Windsor framework and to put in place the systems.
When we look across the numbers of customers trading through the border, the volume of customers of customs declarations, the total value of import exports in in 2025 of 1.1 trillion, you know, the flows through the border are healthy and the border is available 24 over seven, of course, as an operation. And it's heavily intermediated. And the CDS system is working well, but there are absolutely opportunities to leverage AI and improve it. Carol can say a bit more.
Thank you.
When we look across the numbers of customers trading through the border, the volume of customers of customs declarations, the total value of import exports in in 2025 of 1.1 trillion, you know, the flows through the border are healthy and the border is available 24 over seven, of course, as an operation. And it's heavily intermediated. And the CDS system is working well, but there are absolutely opportunities to leverage AI and improve it. Carol can say a bit more.
Thank you.
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John Glen
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John Glen
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Speaker 6
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Speaker 6
So I think it's worth flagging, as JP mentioned. So the core availability of services within the border is very high after a very profound period of change as a result of the UK leaving the EU, we now have 99.9% availability of services. We have very strong and effective real time operational support for goods that get stuck at the border because they need to be able to move. So I think the overall level of service is extraordinarily high and dealing very effectively with large numbers and large numbers digitally.
So as JP mentioned, this is a largely digital automatic service that works effectively for trade. There's a huge amount that we want to improve in the context of how we can reform the border. And frankly, the challenges hitting the border downstream are likely to be way bigger and broader than the ones that faced us as a result of EU exit. So we've seen a profound shift in terms of broader global use of trade policy, in terms of tariff changes, widening of sanctions regimes internationally, a massive explosion in e-commerce leading to low value imports, which we are in the middle of introducing, as the committee is aware, also a massive expansion and rapid evolving technology landscape and a rise of organised crime that is becoming increasingly sophisticated.
So I think some of the challenges that the border faces are much broader, and our focus then is on making sure that we are dealing with those regulatory and security concerns effectively.
So as JP mentioned, this is a largely digital automatic service that works effectively for trade. There's a huge amount that we want to improve in the context of how we can reform the border. And frankly, the challenges hitting the border downstream are likely to be way bigger and broader than the ones that faced us as a result of EU exit. So we've seen a profound shift in terms of broader global use of trade policy, in terms of tariff changes, widening of sanctions regimes internationally, a massive explosion in e-commerce leading to low value imports, which we are in the middle of introducing, as the committee is aware, also a massive expansion and rapid evolving technology landscape and a rise of organised crime that is becoming increasingly sophisticated.
So I think some of the challenges that the border faces are much broader, and our focus then is on making sure that we are dealing with those regulatory and security concerns effectively.
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John Glen
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John Glen
Can I just you sort of make it real for those that might be watching around what's happened in terms of changes in smuggling and prevention, and, you know, how you're using new technology like drones and so on. I mean, I was listening to the conversation with Miss Minns about the tobacco side of things. There's quite a wide variance between what Mr. Attho asserted around one of you asserted around the percentage that is illicit and what other people observe this.
I think it was about 15% to 45%. And I wanted to specifically ask action on smoking. Health has asked whether HMRC would commit to commissioning an independent review of that methodology because in order to sort of have confidence in what is being missed, it seems sometimes it would be better to go outside of what your terms of reference are. Have you got any comments on that specifically and also more broadly on what are the trends in terms of smuggling,
I think it was about 15% to 45%. And I wanted to specifically ask action on smoking. Health has asked whether HMRC would commit to commissioning an independent review of that methodology because in order to sort of have confidence in what is being missed, it seems sometimes it would be better to go outside of what your terms of reference are. Have you got any comments on that specifically and also more broadly on what are the trends in terms of smuggling,
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Speaker 1
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Speaker 1
Is in terms of smuggling, drones, etc. if I could come in on the measurement point. So as I mentioned, we are commissioning some wastewater analysis that will be a sort of check on this different. analysis on the different sorts of analysis. So this will look at, as I said. metabolites of of in wastewater. There are various academic studies that have used this approach to then estimate the prevalence of smoking.
So this won't be relying on surveys or anything like that or will be actually be measuring a more objective hard data. Obviously, there will need to be some assumptions in that modelling. So it's not completely.
So this won't be relying on surveys or anything like that or will be actually be measuring a more objective hard data. Obviously, there will need to be some assumptions in that modelling. So it's not completely.
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Speaker 2
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understand , what's what you're targeting and what's the big problem out there, of course. So I think if we if we use the example of illicit tobacco, there is, as we mentioned, a sort of 14, 15% tax gap, we think that's come down quite. significantly over concerted efforts. But over 20 years, there is always a question about how effective and how. sophisticated organised criminals are getting in terms of how they are increasing the risk.
So one of the challenges I think we face from our data and risk based intelligence is how do you get a as good a handle as possible, as far up the supply chain as possible to. understand what is happening? A lot of that is human intelligence. A lot of that is. Coming from criminal gangs. It is coming from overseas jurisdictions. It is coming from things which will feel quite traditional and not very AI centric in a technological world.
They are married with lots of. exploitation of technology in this space. So we do lots of analysis of trends when our intervention interventions hit, what is the kind of commodity, the kind of root, the kind of carrier, the kind of haulier? How do all of those things add up to a risk profile that enables us to target and inform our intervention next time, and try and make it more and more effective? We do work quite closely and in.
collaboration with Border Force. They are very interested in making the strongest case for the use of technology at the border. So more use of scanners to be able to more. routinely look without disrupting legitimate trade at how they can scan goods coming across the border. And certainly when we were in Dublin recently, some of us sorry to use this visit one more time, but we saw some very effective use of scanners there on the port side.
And I think a lot of the work that we're doing, both in terms of a range of intelligence functions. exploitation of.
So one of the challenges I think we face from our data and risk based intelligence is how do you get a as good a handle as possible, as far up the supply chain as possible to. understand what is happening? A lot of that is human intelligence. A lot of that is. Coming from criminal gangs. It is coming from overseas jurisdictions. It is coming from things which will feel quite traditional and not very AI centric in a technological world.
They are married with lots of. exploitation of technology in this space. So we do lots of analysis of trends when our intervention interventions hit, what is the kind of commodity, the kind of root, the kind of carrier, the kind of haulier? How do all of those things add up to a risk profile that enables us to target and inform our intervention next time, and try and make it more and more effective? We do work quite closely and in.
collaboration with Border Force. They are very interested in making the strongest case for the use of technology at the border. So more use of scanners to be able to more. routinely look without disrupting legitimate trade at how they can scan goods coming across the border. And certainly when we were in Dublin recently, some of us sorry to use this visit one more time, but we saw some very effective use of scanners there on the port side.
And I think a lot of the work that we're doing, both in terms of a range of intelligence functions. exploitation of.
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Speaker 2
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Speaker 2
And also at the kind of more guidance and support end of the market using AI and chatbots in all of our systems, so that as much of this is as automated as possible. So a blend of a number of things. And at the border seizure of. 1.9 billion illicit cigarettes last year. 1.5 billion from Border Force. So some of the traditional seizures would . Demonstrate we are
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Julie Minns
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Julie Minns
in this space. We always want to do more. Thank you. Do you wish to come in? Can I add a bit? Yes. I mean, I think when you look at the trend over time in terms of criminal attacks, you can see that actually we are reducing the threat from criminal attacks and containing it. And we do, as Carol says, use a huge range of techniques, both kind of data, insight, intelligence.
And we have a huge range of powers as well. including covert and intrusive powers that we use in line with lots of.
And we have a huge range of powers as well. including covert and intrusive powers that we use in line with lots of.
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Julie Minns
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Julie Minns
any extra powers at this point. No. Now is the time to ask. Yes. We're not. We do have a very broad range of powers. And I think what we you know, what we intend to do and what we try to do is use that full breadth of national and international. collaboration to really understand what is driving serious organised crime. You know, the the top of the tree in a tobacco kind of.
context would not necessarily be the same organised crime group that was delivering on the streets. And we keep track all the way through those, all the way through those chains. We, you know, gather insight and.
context would not necessarily be the same organised crime group that was delivering on the streets. And we keep track all the way through those, all the way through those chains. We, you know, gather insight and.
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Harriett Baldwin
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Harriett Baldwin
Thank you for your answer. Thank you very much, Dame Harriett Baldwin. Thank you very much, chair. And I'm very worried about the number of pensioners who are going to be. interacting with your service, because. obviously the numbers are going to go up. substantially because of the freezing of the tax free threshold. I was pleased to hear that. 7.6 million people are now using the app. That's real progress.
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Harriett Baldwin
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Harriett Baldwin
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Harriett Baldwin
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Harriett Baldwin
I think we're accepting that probably the number of app users amongst the pensioner cohort will be somewhat lower than the population at large. And I'm interested with a case that I received in my casework recently where I don't want to sort of focus on an individual case, but I want to try and. generalise some points from the issues that surfaced in that, because my. constituency is. demographic is probably quite high in terms of numbers of pensioners.
It's something that's really showed up in my casework. So one of them was a pensioner in the mid 70s who'd. received a sort of every year, a clear assessment from HMRC suddenly getting a. demand for a past year, like 2 or 3 years ago based on bank data, is that are you are you suddenly getting sort of a lot of cases open. retrospectively because you're now receiving more.
It's something that's really showed up in my casework. So one of them was a pensioner in the mid 70s who'd. received a sort of every year, a clear assessment from HMRC suddenly getting a. demand for a past year, like 2 or 3 years ago based on bank data, is that are you are you suddenly getting sort of a lot of cases open. retrospectively because you're now receiving more.
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Speaker 1
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Speaker 1
Sorry if I could come in. Mr.. So how long have you been using the data? So from since about for about ten years now. Banks have sent us data on the interest that people have received. What we will do is put that together with other information we know. So if you're a pensioner, say you've got savings interest in a state pension from DWP. DWP will tell us how much pension you're getting.
We will then understand how much interest you're getting. If that's below the personal allowance, we don't contact somebody, but if it is above the personal allowance . We will
We will then understand how much interest you're getting. If that's below the personal allowance, we don't contact somebody, but if it is above the personal allowance . We will
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Speaker 1
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Speaker 1
There is this bill that you need, need to pay. You suddenly do more of that sort of . Retrospectively. I think there's sort of two things. One, the state pension has been increasing relative to the the personal allowance, which we've already discussed. And also interest rates went up 2 or 3 years ago, meaning more people were getting more interest. So what we saw in the last couple of years is that as we do that end of year.
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Speaker 1
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Speaker 1
The law abiding taxpayer would have thought that they'd settled their accounts. And then indeed nobody's done anything wrong here. No, it's merely that there is a lag in the system because we don't know what interest people have got until the banks tell us. And we then have to put that into the system. So that does create for some people who are not used to. And again, you're talking about often people who've . Not used
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Harriett Baldwin
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Harriett Baldwin
to dealing with the tax system, they don't know there's an end of year. reconciliation where you're going to get more and more of this. And then and then this particular pensioner obviously ran into the. 45 minute cut off. And then apparently once they sort of figured out what was going on, settled that amount as well. Then several months later, they got a demand from a law firm. And I just wondered if, if, if you're using law firms more and how often you reconcile that data as well, because this person had obviously settled several, several months before and was now getting demands from a law firm.
Is
Is
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Speaker 3
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Speaker 3
If that were to happen, we. So firstly, please do share the case and I apologize that your constituent has had a difficult. experience and. genuinely let us make sure we've learned from that. And we can also come back and provide some reassurance. I'm not aware of of some sort of big. historic look back with saving interest . Data
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Harriett Baldwin
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Harriett Baldwin
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Speaker 1
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Speaker 1
We would collect the tax through that. And obviously there's no Paye worked on the state pension. So that means we do have to ask people for the money. So there is going to be more of that. But we can then also write to you and say what the what how the customer journey works, because it does, you know, we do use debt collection agencies, but that's only a last resort. So the idea that we would be handing people straight over, we can explain the process and hopefully give you reassurance as to how that would, how that would, how that would work.
But we are writing to more. pensioners . Saying
But we are writing to more. pensioners . Saying
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Speaker 4
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Speaker 4
Accepts there will be more pensioners affected by this. Certainly crossover will be next spring when the expected, isn't it? So also there are pensioners, other people on low incomes who would not would have to pay tax if they trip over slightly, but pensioners don't . So well, I appreciate the advice to ministers is private and there'll be a policy and maybe a policy decision. But is that fair that some people on low incomes . Will
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Speaker 4
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Speaker 4
danger of speculating about what might be in the budget, and I hesitate to do so. Mr.. Has a hospital pass that the budget or the budget is coming? Well, we'll certainly be raising it with ministers then. I just wanted to move on to Isa's. This is obviously technically quite challenging. So the policy decision was made, of course, to change the Isa balance. So the. £20,000 limit now has to be from next April.
£12,000 can be held in a cash Isa or. And you could have £20,000 in a in a in an investment Isa but only. But you can have eight, 12, eight basically, or you could have 20,000 in an investment. Isa but one of the challenges here was that actually, after a lot of.
£12,000 can be held in a cash Isa or. And you could have £20,000 in a in a in an investment Isa but only. But you can have eight, 12, eight basically, or you could have 20,000 in an investment. Isa but one of the challenges here was that actually, after a lot of.
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Speaker 3
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Speaker 3
having an encouraging people to invest? So there's been a lot of engagement with the industry to implement this in a way that hopefully will achieve the objectives ministers set out. So, as you say, chair, the. intent of the reduction in the cash Isa limit to. 12,000 for those under. 65 to encourage retail investment and drive better.
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Speaker 4
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Speaker 4
Such that. So we know the technical stuff, but so incentivises that. But isn't it I mean, isn't it rather drive a coach and horses because you can hold 99% in money market funds and still not have the penalty charge. So you only need 1% invested to make it, you know, to, to make sure that it counts as an investment. Isa and the whole point was about having it as an investment, not in money, like cash, like setting. So isn't .
It, doesn't
It, doesn't
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Speaker 1
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Speaker 1
it rather obviate the whole policy just to come in on that? You know, there's been extensive consultation. There's been a challenge of how do you practically define, define, define these issues and we'll get into the technicalities. But ministers have taken a view that this is a sensible place to draw the line, something that I think is broadly drawn industry support. And we do have special. arrangements for people who are holding cash in equity stocks and shares ISAs, because we know sometimes the money will need to be held in cash before it's then invested.
So we think we've got a workable solution that . Achieves
So we think we've got a workable solution that . Achieves
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Speaker 4
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Speaker 4
what Minister Broad broadly achieves ministers aims. And of course, if someone breaches it. Well, so first question is are you confident that with the time frame involved, you know, regulations haven't even been laid, that the industry is going to be ready to make differentiate? Do you expect products to be withdrawn from the market . Because
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Speaker 1
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Speaker 1
constructively and given them. clarity . Still, to change their systems. They will still have to change their systems, but they've, you know, through that early engagement, hopefully we've, you know, it's not just waiting for the regulations. They know what our intentions are. They know where we've set our dividing line between stocks and shares and cash. So I don't think there's any reason to particular concerns. Obviously there's a wide variety of providers out there.
One of the benefits of the Isa market is the large number of providers. I can't speak for all those providers, but we've had a lot of really positive .
One of the benefits of the Isa market is the large number of providers. I can't speak for all those providers, but we've had a lot of really positive .
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Speaker 1
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Speaker 1
Isa's in lots of different places. So will there be extra requirements on Isa providers? We are. introducing a digital reporting requirement. So traditionally the Isa regime was very paper based. Or when it was introduced it was very, very paper based. We're digitising that because we know there is no flexibility to hold more than one Isa, more than one cash Isa, and obviously no single, therefore, no single Isa manager can know exactly what everyone is doing.
So we've got a digital service that we think will enable a better.
So we've got a digital service that we think will enable a better.
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Speaker 1
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Speaker 1
will there be a lag on that information? So we might be dealing with several different providers. Yeah. So there will be a lag. But I don't know. I can't remember the exact parameters. I think we're looking for sort of quarterly data on that. So it's more frequent than annual that will allow us to . Therefore
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Speaker 1
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Speaker 1
would be the penalty if some if somebody breached the limit. So normally we would expect an Isa manager to put that put correct that, particularly if it's in a particular provider, we would expect them to sort of, you know, take money out to make certain it's not exceeding exceeding the limits, but there would be . Tax
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the system. We think that's a reasonable reasonable limit you think will sort of mitigate. Yeah. Well we'll mitigate it. You know again £20,000. Not many people use that full full full allowance even at 12,000. We're not. expecting huge numbers to be using that full allowance. That's, you know, quite a large amount of savings for an individual. So we're not concerned at the moment. But again, as we've got better data, we will.
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Speaker 4
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Speaker 4
understand what the risks are. And if we have to make changes in the future, we will make changes. Going to Dame Harris Point earlier about so you get your bank interest comes as a reconciliation, which you know, because you're tax experts, but average constituents perhaps don't appreciate . That with all
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Speaker 4
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Speaker 4
the pensions hitting the limit, being able to get to a bank branch. Indeed, Dame Harriet and Dame Siobhan, a particular bugbear and obviously a big concern for many constituents. So you've got you've got sorry, you've got the you've got these changes. You've got now the digital information on that you've always had on, on bank interest, but that's more efficient. You can have the digital information on ISAs. So there could be quite a lot of people having finding they breach something and having the HMRC money.
So how are you handling the or have you any thought about how you're handling the relationship with people who wouldn't . Be
So how are you handling the or have you any thought about how you're handling the relationship with people who wouldn't . Be
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Speaker 1
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Speaker 1
intentionally doing anything wrong, but would perhaps find out until after it's happened? And again, some of this we don't know yet because as I said, our digital reporting for ISAs is is not there. So we will need to see what it looks like in real time. But you are alighting on a really important fact that we would like to get more data from third. parties so we can actually get people's tax right in real time, having bank and building society interest so people do not have to report it to us.
People do not have to go into self-assessment. We can do it for them. We would like to do more of that. We think that's actually simpler. Again, assuming we can match the right data to the right person and we're improving the quality of data we're getting. We're now asking for tax. identifiers with some of that. So that will allow us to automate those processes. And therefore if we get that right, we reduce the number of phone calls.
We reduce the number of concerns. So we think there's some real opportunities there. But it also will allow us to.
People do not have to go into self-assessment. We can do it for them. We would like to do more of that. We think that's actually simpler. Again, assuming we can match the right data to the right person and we're improving the quality of data we're getting. We're now asking for tax. identifiers with some of that. So that will allow us to automate those processes. And therefore if we get that right, we reduce the number of phone calls.
We reduce the number of concerns. So we think there's some real opportunities there. But it also will allow us to.
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Speaker 1
Particularly on the digital ISAs, perhaps where there have been elements of non-compliance that we've not been able to see before. Our approach will always be to educate people. You know, a lot of the problems we see are not deliberate misuse of the system. It's people not. understanding about about the requirements. Again, we will just need to, you . Know,
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Harriett Baldwin
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Harriett Baldwin
And VAT compliance, because I noted that over the summer, the Prime. Minister announced a. reduction in the business rates for pubs, clubs and music venues. And I think the. announcement that came with it said that that was going to be paid for by the online marketplace change, is that fair to say? But the. That's not as I understand it. Do you? I think it was originally.
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Speaker 1
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Speaker 1
keen to see it as quickly as possible, I would imagine. Yes, yes. And we will advise ministers both on the nature of that and also the timing and the implement implementation. And obviously this has been something I think the committee has alighted on, or various committees, I think have alighted on before. So this is an area of active work where we've continued to think . About how
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Bobby Dean
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Bobby Dean
subject? I'll come back to you in a moment on that. Thank you. Bobby Dean MP yeah. Thank you. Just looking for a quick update on trade sanctions. I'm not sure who the best person to direct this to. So I might start with Mr. Marks, if that's okay. When we spoke to you in February, we had, I think, 35 criminal investigations. So I guess we just want to know how many do you have currently and how many convictions have you had over that .
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Speaker 3
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Speaker 3
Period, 2025 and 26? In terms of the number of criminal investigations? I think to make sure that we answer your question precisely, we should probably commit to to writing. I have got some data here in terms of the number of. detentions and seizures and voluntary disclosures. We've just done a large compound settlement this week, which you may have, which you may have seen, which Carol has the details on, but I just need to check in terms of.
So, for example, the number of warning letters that we've been issuing with regards to. sanctions in 24, that was 167. And then in. 25 combined, it's 230. But I can check to what extent that then goes through. Obviously, to an extent, some of those will . Be
So, for example, the number of warning letters that we've been issuing with regards to. sanctions in 24, that was 167. And then in. 25 combined, it's 230. But I can check to what extent that then goes through. Obviously, to an extent, some of those will . Be
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Bobby Dean
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Bobby Dean
Yeah. Please do follow us up with the figures. It would also be good to. understand the number of. investigations that are triggered via. self-reporting versus you identifying yourself. I don't know if you have any general comments on that. About what proportion of. investigations that you have are triggered by people sort of. self-reporting versus the ones that you've identified yourselves. Do you . Have any
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Speaker 2
do encourage businesses to self-report as much as possible. And certainly, even though I think that the Russia sanctions in particular have been in place for a long time, our expectation is that businesses do. understand how those Russia sanctions apply, but we still do see evidence of very strong evidence of companies finding they've inadvertently breached, often through complex global supply chains. A record was not kept appropriately. They will come to HMRC, and in those.
circumstances we would tend to use compound settlements to reach an agreement with them and reach a financial settlement. So we do encourage that. And in recent months we have seen two Russia sanction compounds settlements. We've also seen a very big strategic. exports compound settlement as well. So I think we are seeing cases coming through which are evidence of that. self-reporting having the desired effect. We've also seen a criminal prosecution against somebody who was seeking to export luxury goods to Russia.
That's our first criminal prosecution against the Russia sanctions. So I think we have got some examples of clear effect of our activity coming out. I can . Certainly commit to
circumstances we would tend to use compound settlements to reach an agreement with them and reach a financial settlement. So we do encourage that. And in recent months we have seen two Russia sanction compounds settlements. We've also seen a very big strategic. exports compound settlement as well. So I think we are seeing cases coming through which are evidence of that. self-reporting having the desired effect. We've also seen a criminal prosecution against somebody who was seeking to export luxury goods to Russia.
That's our first criminal prosecution against the Russia sanctions. So I think we have got some examples of clear effect of our activity coming out. I can . Certainly commit to
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Bobby Dean
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write to the committee about exactly what we're seeing in terms of numbers to get more data, because I think if there is another areas of sanctions enforcement is that often the capacity of the state is limited. And so actually , there's quite a heavy. reliance on. voluntary or co-operative kind of. investigations and trying to keep, you know, companies that have got goodwill compliant and they kind of fess up and pay their dues if they if they have made a mistake.
But there's, there's not so much resource dedicated to actually find the people that are deliberately trying to evade and probably at the more aggressive end of things. So it'd be good to get some perspective of that. But I think probably best I hand back to the chair and we get maybe some more correspondence in writing, but that's the general theme I want to look at kind of what are the numbers and what proportion of it are .
But there's, there's not so much resource dedicated to actually find the people that are deliberately trying to evade and probably at the more aggressive end of things. So it'd be good to get some perspective of that. But I think probably best I hand back to the chair and we get maybe some more correspondence in writing, but that's the general theme I want to look at kind of what are the numbers and what proportion of it are .
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You seem quite confident that a lot of people are self-reporting level is high. That's certainly I think we would actively encourage firms to do that. And we are seeing firms coming forward and making that case. And certainly, I would reassure the committee. Certainly we investigate cases to a criminal standard in arriving at a compound settlement. Those are complex cases, often through very global complex supply chains. So we do go through very clear and long.
standing ways of making sure that those are properly. investigated to make sure that behaviour was inadvertent, and they're not using the self declaration to somehow hide something else. It is it is. absolutely fair to say that we are also increasing that use of. deterrents and frankly, sort of teaching moments to be able to use that. self-declaration to. We are now naming and have recently changed our policy.
So if you agree a compound settlement with us, we name you with your agreement and the amount that you have paid. And that's been a shift to try and give a. stronger push out to the market that people should self declare. And certainly something like the self and a half. 7.5 million compound settlement this week, we will use that actively to encourage firms to be able to kind of self declare. So we see that as .
A very
standing ways of making sure that those are properly. investigated to make sure that behaviour was inadvertent, and they're not using the self declaration to somehow hide something else. It is it is. absolutely fair to say that we are also increasing that use of. deterrents and frankly, sort of teaching moments to be able to use that. self-declaration to. We are now naming and have recently changed our policy.
So if you agree a compound settlement with us, we name you with your agreement and the amount that you have paid. And that's been a shift to try and give a. stronger push out to the market that people should self declare. And certainly something like the self and a half. 7.5 million compound settlement this week, we will use that actively to encourage firms to be able to kind of self declare. So we see that as .
A very
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Jim Dickson
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Jim Dickson
way of getting to the right result. Thank you. MP thank you, chair. Mr. Marks, you identified at the beginning one of the. challenges when you were asked by the chair what what were the positives, as well as the challenges of the new low value import. regime in which duty is going to be charged on low value items? Can you tell me how. preparations are going for that, and perhaps whether you're learning from other.
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Speaker 3
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Speaker 3
So a significant growth in the. volume and obviously some time to go between now and. October 28th still. But nonetheless, we're confident in delivery. Carol's team doing a huge amount of work to keep us on track in that regard. And, you know, consultation. We had. 165 responses from businesses and customers across . Industry.
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Imports in order to be able to charge the duty on anyway? So as the committee is aware, we are planning to introduce LV in line the low value import, sorry, LV, in terms of how the government has made the announcement at the recent tax update, rather earlier than the budget 25 announcement suggested. So we are on track to deliver this change in October 2028. We are always on the lookout for ways in which we can make sure that we are delivering this at the right pace, but also making sure that what is a very complex, high volume change for a series of intermediaries, they have also got time to make the necessary changes to their system, sometimes their commercial suppliers, to be able to work effectively.
So I think it's worth noting the UK is not simply removing a relief from an existing system, it is actually creating a new customs process for low volume imports. And that means that this is the system which will collect data on those high volumes of goods moving across the border in post and parcels. It will allow us to then risk assess those on the basis of the documentary evidence that we have from overseas sellers and online.
So I think it's worth noting the UK is not simply removing a relief from an existing system, it is actually creating a new customs process for low volume imports. And that means that this is the system which will collect data on those high volumes of goods moving across the border in post and parcels. It will allow us to then risk assess those on the basis of the documentary evidence that we have from overseas sellers and online.
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Speaker 2
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And it will enable us to then make interventions to make sure that the relevant duty is being paid. We, the government consulted after the announcement in July 2026. We've announced the response to that. consultation and draft legislation, which sets out the overall design of the scheme, and I think this will come to your question about exactly how this will work in terms of securing the data and securing the revenue. So essentially, overseas sellers or online.
marketplaces that are. facilitating sales into the UK will be required to. register for the LV system. They will then, before any good is move, be required to fulfil customs declaration line by line data about exactly what is moving so that those goods can be checked before they move the movement of the physical good, which will tend to happen by a parcel operator. They will be required to ensure that they provide to HMRC a reference that will connect the physical goods to the customs.
marketplaces that are. facilitating sales into the UK will be required to. register for the LV system. They will then, before any good is move, be required to fulfil customs declaration line by line data about exactly what is moving so that those goods can be checked before they move the movement of the physical good, which will tend to happen by a parcel operator. They will be required to ensure that they provide to HMRC a reference that will connect the physical goods to the customs.
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Which mirrors the payment mechanisms which exist at the moment for these goods in relation to VAT. So essentially, I think that the purpose of this is to ensure that before goods move, before they are imported into the UK, customs declarations can be checked. We will be able to match the individual physical goods to the data that we hold. The overseas seller will be required to pay in line with that.
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Businesses from from the kind of, as it were, the changeover? I think that is definitely one of the risks on our radar. And certainly one of the things that we're conscious of in terms of speaking to EU member states, we were speaking to the Irish last week. We were also speaking to others to try and find out what their experience has been. Because of course, as as JP mentioned, the EU had a different. system for low volume imports.
They already required customs. declarations for each of those goods, which meant, albeit their system is designed to be in place towards the same sort of timetable that ours is.
They already required customs. declarations for each of those goods, which meant, albeit their system is designed to be in place towards the same sort of timetable that ours is.
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Speaker 2
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Speaker 2
They were able to introduce a transitional arrangement of a flat rate fee because they already require customs declarations. That happened on the 1st of July. We are now in close contact with them to see what they're actually seeing happening in terms of volumes and what is happening to trade patterns. So it's one of the things that we'll be keeping a close eye on, because there is lots of.
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Speaker 2
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Speaker 2
whether there's any assistance available for businesses in making the changeover. So I think we are very mindful that the design of the scheme places most of the burden on large, fast parcel operators and overseas sellers, but there is a long tail of businesses who will and might be impacting this, particularly over the course of a very fast growing industry. So we are very focused on making sure that all.
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