UK tax debt ‘massive and growing’

The amount of money owed to UK tax authorities is ‘enormous and still growing’, MPs have warned.

According to the public accounts committee, £17.3 billion is owed to HM Revenue and Customs, with the figure rising 22 per cent over 2007-08.

At least £4.5 billion of that total is more than a year old, MPs note.

Edward Leigh, chairman of the committee, called on HMRC to try “every means it can” to tackle the growing problem of tax debt.

“HMRC has been slow to take advantage of the key techniques used by other organisations to manage debt owed to them,” he continued.

“It has started to make more methods of payment available to taxpayers – such as credit cards and direct debits – but it could take advantage of the latest developments in payment technology. Its debt collection activities also tend to be conducted on a 9 to 5 basis which is not always the best way of contacting tax debtors.”

Thirty per cent of tax payments were made after they were due, the committee revealed, arguing that debts arise when people or businesses forget to pay, do not understand the need to pay or deliberately try to avoid or delay payment.

MPs are also calling on HMRC to do more to “change the behaviour” of taxpayers who persistently pay late.

They recommend the department offers newer methods of payments and begin to risk score its debtors.

Mr Leigh added: “The department has decided that it cannot afford a new IT system to link all the tax records of an individual taxpayer. But linking of debts is crucial to effective debt management and HMRC should introduce a staged programme towards that end.

“The arrangement by which the contractor EDS would pay compensation for its underperforming tax credits computer system on the basis of instalments contingent on winning new business from the government – was always highly unsatisfactory and in practice did not work. It should never be repeated.”