A decision to cut jobs in HMRC meant that call waiting times for tripled to 47 minutes last October as paper tax returns were due, the National Audit Office said.
The Whitehall auditors said HMRC got its timing badly wrong when rolling out its digital strategy, which involved moving more personal taxpayers online and reducing demand for telephone and postal contact reports The Telegraph.
More than 5,000 were moved away from its call centres at a time when telephone calls were not falling which saw waiting times rising to up to an hour last year, from an average of under 10 minutes in just two years earlier.
One in five callers – 4.2million people – hung up after waiting an average of 16 minutes each last year for an answer.
The cost to the economy of leaving millions of callers hanging on the line – which is officially priced at £17 an hour – was £97million, up by 50 per cent in three years.
The chaos prompted HMRC belatedly to send 2,400 staff to man the phones at its call centres, which in turn meant they had to “defer essential work to maintain PAYE records”, the NAO said.
This meant that the number of discrepancies between PAYE and self-assessment returns doubled, leaving a risk that 3.2million people had “paid the wrong amount of tax”, the NAO found.
HMRC is now hoping to get this down to 20,000 by the end of this year.
The chaos unfolded just as HMRC’s chief executive Lin Homer was preparing to retire with a damehood in the New Year’s honours and a £2.2million pension pot.
Meg Hillier MP, the chairman of the Public Accounts Committee which oversees the work of the NAO, said HMRC officials will be quizzed about the chaos next month.
She said: “The fact they are hanging on the phone waiting is not good enough.
Most taxpayers just want to pay the tax they owe on time, without question. If they can’t get access to the right advice they are the ones who pay the penalty not HMRC.”
Comparing the cost of the delays to the budget cuts, the NAO estimated that the increased cost to customers was £4 for every £1 saved by HMRC over this period.
An NAO survey of taxpayers found one in five rated HMRC’s performance as poor or terrible.
Frank Haskew, head of the tax faculty at the Institute of Chartered Accountants in England and Wales, said: “Taxpayers have been short changed by poor service standards at HMRC’s call centres.
“The ability to get through to the right person quickly to resolve queries has been a major concern for some years now.
“It is worrying to hear that in order to improve call centre performance HMRC has had to move staff from maintaining PAYE records, leaving taxpayers vulnerable to paying the wrong amount of tax.”
Ruth Owen, HMRC’s director general for customer services, said: “We recognise that early in 2015 we didn’t provide the standard of service that people are entitled to expect and we apologised at the time. We have since fully recovered and are now offering our best service levels in years.
“Over the past six months we’ve consistently answered calls in an average of six minutes, and have launched new online tax accounts and webchat for everyone, enabling customers to manage their tax affairs wherever and whenever they want. There’s never been a better or more convenient service for our customers.”