Failures at HM Revenue and Customs cause eye-watering sums of taxes to go uncollected
In January this year the Commons Public Accounts Committee (PAC) reported that HMRC services were operating at an unacceptable level, with over £42 billion in taxes not being collected.
New Government figures show that his figure had risen to £48.1 billion by 31 December 2022.
Not enough dedicated resources
HMRC has been criticised by the PAC who say that failures at HMRC are leading to eye watering levels of uncollected taxes and people being let down by poor customer service.
The PAC have criticised HMRC for not dedicating enough resources to tracking down lost or stolen revenue, which it says works out as 5% of the country’s entire tax burden each year.
This is damaging relationships between HMRC, compliant taxpayers and the agents supporting them.
PAC demands a three-year-plan
The PAC demanded that HMRC publish a three-year plan to revive its troubled customer services, highlighting that staff numbers had been cut by 24% in the past five years, from 25,500 to 19,500, while performance continued to deteriorate.
Dame Meg Hillier, chairwoman of the PAC, said “The eye-watering £42 billion now owed to HMRC in unpaid taxes would have filled a lot of this year’s infamous public spending black hole, but the public purse will continue missing out on billions of desperately needed revenues. Meanwhile taxpayers battle customer services that need improvement.”
The PAC has urged HMRC to set out “what level of investment” its compliance team would need to track down lost or stolen tax, to set formal targets for what money it should get back, as well as to report more accurately on what money is actually owed.
What does HMRC say?
HMRC says that service levels are improving although this is not the experience of many advisers working with them.
An HMRC spokesman said the department had cut the “tax gap” — the difference between the amount of tax owed and that which is actually collected — by 30%. “We continue to prioritise collecting unpaid taxes, which is why are adding further people to our compliance teams as well as rolling out our digital offer to ensure everyone pays what is due,” he said.
ICAEW also demanding action
ICAEW is also calling for the immediate creation of an emergency cross-sector taskforce to address underperformance issues within HMRC which they claim are impeding economic growth.
Pressure to close the tax gap
With HMRC coming under fire from all angles it’s under considerable pressure to focus on recovering the billions owed to HMRC. In view of this it is unsurprising that HMRC enquiries across the board are being ramped up.
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The information was correct at time of publishing but may now be out of date.