HMRC and the great debt write-off

HMRC continues to write off debt

The taxman has lost out on £27.4billion over the past five years because of the shambles at HM Revenue & Customs, a report reveals. The economic downturn combined with an over-complicated tax code has left the troubled body unable to collect the money. The total is equivalent to £200 per year for each household in the country.

The study concluded that if all last year’s written-off tax of £5.9billion had been collected, it would amount to more than 1 per cent off standard VAT. Despite the alarming figures uncovered by the TaxPayers’ Alliance and, say the Institute of Directors, the situation is getting worse as last year, the amount of uncollected income tax was £1.35billion, which was 52 per cent higher than in 2006/07.

MPs found last month that HMRC was in deep crisis, citing ‘endemic delays’ and staff so overstretched that more than half of calls go unanswered. Letters are ignored for months. Now it has emerged that despite pledges to tackle underpayment, the tax office has been forced to write off massive unpaid bills. HMRC lost out most on VAT, writing off nearly £2billion in the last financial year alone. Missing out on corporation tax, capital gains tax and national insurance as well as losses on alcohol and tobacco duties, and tax credits contributed to the total. Worse still, there is a claim in Richard Murphy’s article below that “it is quite reasonable to presume that the total losses to tax evasion […] amount to at least £70 billion” (a year). The document can be accessed at the foot of this article.

Matthew Elliott, of the TaxPayers’ Alliance, said: ‘We need systematic reform to produce a simpler tax code. Some of this uncollected tax will be down to the recession but there is clearly a long-term problem as well. Tax shouldn’t be so taxing that even HMRC can’t keep on top of it.’ The report said: ‘The system is far too complicated. The tax code has grown massively. ‘The handbooks of tax legislation have sharply increased in length, indicating more and more complexity. Tolley’s Corporation Tax guide is 1,897 pages long. ‘The tax code is so long that it would take Steve Woodmore, the world’s fastest speaker, over five days straight to get through it.’

Remissions are one of two ways in which HMRC gives up trying to collect unpaid tax. They are debts capable of recovery but not pursued on grounds of cost or because of a tax office error. The second, write-offs, are debts with no practical means of recovery, such as from a firm which has gone out of business.

A spokesman for HMRC said: ‘We collect 99 per cent of debt that we are able to. Ninety per cent of money owed that is written off is caused by company liquidations.’

Note the words “that we are able to“. That says it all.

See this article on Universal Credit and the problems that lie ahead

Download this article on tax evasion by Richard Murphy FCA: rm_tax_justice_report_-_july_2010


3 thoughts on “HMRC and the great debt write-off

  1. Pingback: With the benefit of hindsight … « gobbledegooked

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