The private company running HM Revenue and Customs’ 0845 telephone helplines is making hundreds of thousands of pounds in profit from taxpayers' calls, tax chiefs have admitted.
Lin Homer, head of HMRC, said Cable and Wireless make “less than £1 million” in profit on the premium-rate numbers, which can cost 41p a minute.
Giving evidence to MPs, Mrs Homer said HMRC does not take a cash profit from the helplines, but gets some free “additional services” from the telecoms company as part of its contract.
HMRC’s use of premium-rate numbers has added to public anger over its poor record in dealing with inquiries.
National Audit Office found last year that taxpayers spent £33 million calling premium-rate tax helplines during 2011/12.
Questioned by MPs on the Public Accounts Committee, Mrs Homer confirmed that Cable and Wireless turns a profit on taxpayers’ calls, but refused to say how much.
“They make a small amount of profit,” she said. “It is considerably less than a million,”
Despite repeated questions from MPs on the committee, Mrs Homer refused to give more details of the profits on the contract.
“We are renegotiating this contract over the next 12 months. I am loathe to give out how much I am prepared to pay for this in a public committee,” she said.
Margaret Hodge told Mrs Homer that using premium numbers was not acceptable.
“I think it is unacceptable that a public service expects the public to use an 0845 number,” she said.
Mrs Homer insisted that profits on phonelines will fall as HMRC moves towards cheaper “03” numbers this year.
When MPs suggested that the profits for company suggested it was “bad contract” for HMRC to sign, Mrs Homer said: “It was made in the time it was made.”
Amyas Morse, the head of the National Audit Office also suggested that HMRC had withheld information about profits on the phone lines, telling Mrs Homer that he had repeatedly asked for the data and not been given it. “I am surprised that it has only come out today,” he said.
HMRC’s various helplines take around 80 million calls a year, although an NAO study last year showed that around a quarter go unanswered.
The cost the public of waiting for calls to be answered and being put on hold was £103 million, the NAO estimated.
Mrs Homer said that performance on answering calls was not good enough, but is improving. “I don’t think we are satisfied with where we are at, but we have to build from where we are,” she said.
She also told the MPs that administering controversial cuts to Child Benefit will cost HMRC less than expected because more people than forecast have opted out of the system.
Around 300,000 people have chosen to give up child benefit instead of filling in a tax return, she said. “The numbers who have opted out are higher then we expected.”
That should cut the administrative costs of the change for HMRC from the £22 million first expected to around £11 million.
Mrs Homer also admitted that hundreds of thousands of people affected by the Child Benefit cut had not received a letter from HMRC telling them about it.
However, she insisted that tax authorities had never intended to reach everyone, instead relying on advertising campaigns and websites to inform such people.
“We knew that we would not catch everyone,” Mrs Homer said, admitting that HMRC does not know exactly which people are affected by the cut.
“One of the issues for us is that our databases are not up to date people move, they take new partners,” she said. “We are never going to be completely up to date.”
* One million letters to the taxman were left unanswered last year, Mrs Homer admitted.
She said that during her travels throughout the country she was constantly confronted by mounds of mail.
“There was a time when we had one million letters around,” she said. “I have had people saying: ‘Six, nine, 12 months ago this room was full of post’.”
She said while the organisation had made inroads on the problem, she admitted there were still about 100,000 letters that had yet to receive a response.