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Number of tax debts up by 2.8m

20 November 2008
Categories: News , National Audit Office , Tax debts , Admin
But HMRC has improved arrears management, says NAO

HMRC have improved how they manage debts owed by taxpayers, according to the National Audit Office (NAO) — but the total number of arrears has risen by 22%.

A new report from the NAO shows that the amount of money owed to the Revenue dropped in 2007-08 to 3.8% of tax collected, from 4.3% the year before. The total number of debts, however, rose by 2.8 million to 15.8 million.

The NAO said the escalation reflects both an increase in the number of UK taxpayers and a change in the Revenue's priorities as it focuses on higher value debts while having fewer resources.

In 2007-08, HMRC collected around £450 billion in tax and National Insurance contributions from the UK's 35 million taxpayers, shows the audit office's study.

In March this year, £21.5 billion was outstanding on the taxman's debt management systems: £17.3 billion was in outstanding tax, interest and penalties, while the remainder was overpayments of benefits and tax credits.

HMRC's debt management and banking directorate collected around £310 for every £1 spent in 2007-08: an increase of 10% on previous 12 months.

But the department cannot reliably measure the relative cost-effectiveness of different debt collection activities, said the NAO, which added that the Revenue is yet to introduce some of the debt management measures recommended by the Committee of Public Accounts.

These include risk profiling, a single IT system for arrears management, linking together money owed on different taxes by a single taxpayer, and a more efficient telephone centre operation.

The Low Incomes Tax Reform Group welcomed the NAO report. The organisation's chairman, John Andrews, expressed concern about the 'lack of resources in many instances where HMRC have failed to make progress'.

He added that 'this calls into question the Government's programme of "efficiency savings" through reduced staffing levels'.

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