Press Release - HM Revenue & Customs: Management of Tax
Debt
20 November 2008
HMRC has improved how it manages debts owed to
it by taxpayers, according to a report by the National Audit
Office. The amount of money owed has reduced from 4.3 per cent of
tax collected in 2005-06 to 3.8 per cent in 2007-08. The age of the
direct tax debt has also reduced. Over the past year the level and
age of debt has increased on some taxes, however, and the total
number of debts has risen by 22 per cent.
HMRC collected around £450 billion in 2007-08
in tax and National Insurance contributions from the UK’s 35
million taxpayers, ranging from individuals to large multinational
corporations. In March 2008, £21.5 billion was outstanding on its
debt management systems. £17.3 billion was in outstanding tax,
interest and penalties whilst the remainder was overpayments of
benefits and tax credits.
The total number of debts has risen by 22 per
cent, from 13 million to 15.8 million in the past year. In part the
increase reflects an increase in the number of taxpayers and wider
trends in consumer debt; but it also reflects a change in HMRC’s
priorities as it focuses on higher value debts with fewer
resources.
In 2007-08, HMRC’s Debt Management and Banking
directorate collected around £310 for every £1 spent, an
increase of 10 per cent on the year before. But HMRC cannot
reliably measure the relative cost-effectiveness of different debt
collection activities.
HMRC has yet to introduce some of the measures
recommended by the Committee of Public Accounts in its previous
report on debt, which have also helped other organisations to
improve their debt management. Measures include risk profiling;
managing debt through a single IT system; linking and pursuing
together debts owed by an individual taxpayer on different taxes;
innovative methods for communicating with customers; and a more
efficient telephone centre operation. HMRC has developmental
work underway, but the scale and pace of change has been restricted
as other programmes take higher priority on funding. Such measures
could however save money, through getting in more revenue and lower
collection costs, and could help the Department better manage the
growing level of debt.
Tim Burr, head of the National Audit
Office, said today:
“HMRC has improved the way it manages
tax debt. But it has made limited progress in implementing some
measures recommended by the Committee of Public Accounts in 2004
that would help it manage the growing level of debt in a more
difficult economic climate. To manage tax debt more effectively,
HMRC should link different debts owed on each tax by the same
taxpayer and prioritise debts which are less likely to be paid
without action by the Department.”
Notes for Editors
- The level of debt fluctuates on a daily basis
as debts are paid and new debts arise. The level of debt reported
in HMRC’s 2007-08 Accounts as at 31 March 2008 was £25 billion. The
level of debt outstanding on HMRC’s debt management systems in
March 2008 was £21.5 billion. The difference is mainly because
these systems exclude some debts which were due but which were paid
almost immediately and there are timing differences in when debt is
downloaded to these systems from the main tax systems. To analyse
trends in debt levels we used the debt management systems
figures.
- Press notices and reports are available from
the date of publication on the NAO website, which is at
www.nao.org.uk. Hard copies can be obtained
from The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Tim
Burr, is the head of the National Audit Office which employs some
850 staff. He and the NAO are totally independent of
Government. He certifies the accounts of all Government
departments and a wide range of other public sector bodies; and he
has statutory authority to report to Parliament on the economy,
efficiency and effectiveness with which departments and other
bodies have used their resources.
Press Notice 51/08
All enquiries to Barry Lester,
NAO Press Office: Tel: 020 7798 7937
Mobile: 077748 181 692