Press Notice No. 49 of Session 2003-04, dated 25 November 2004
FORTY-NINTH REPORT: THE RECOVERY OF DEBT BY THE INLAND REVENUE (HC 584)
Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
"Tax debt stood at around £12 billion at the end of March 2004. Much of this will be collected within a year, but a core of £3 billion was more than a year old and around £700 million of uncollected debt is written off each year. These are large sums to be tied up at any one time, or lost to the public purse altogether, when they could be paying for public services. It is vital that the Inland Revenue steps up its efforts to speed up debt recovery, through using other departments' records to trace those who owe tax, pursuing all debts owed by the same person at the same time, and seeking greater powers of recovery."
Mr Leigh was speaking as the Committee published its 49th Report of this Session, which examined the Inland Revenue's work to speed up the recovery of debt; prevent the build-up of debt; and applying good practice in debt management.
The Inland Revenue collects over £200 billion a year in tax and National Insurance contributions from 30 million taxpayers ranging from individuals to multi-national corporations. Most people and businesses pay their taxes on time. Because the deadlines for paying different taxes vary the level of debt fluctuates throughout the year. The total amount of debt stood at £12 billion at the end of March 2004, of which £3 billion was more than a year old. Around £0.7 billion of debt is lost in write-offs each year.
The Committee found that the Department should impose a surcharge on persistent late payers and oblige them to pay the tax and contributions they deduct from their employees into a designated bank account. The Department writes off debts of almost £0.5 billion a year because of insolvencies and, of the £3 billion of debt over one year old, around £1.2 billion is owed by insolvent companies or individuals, much of this is tax and contributions deducted by employers from the pay of their employees.
The Department should make maximum use of other Departments' records to find taxpayers it cannot trace, and seek a legal power to require taxpayers to provide up to date contact details. The Department has written off some £55 million a year because it could not trace the taxpayer and a further £300 million of debt over one year old relates to cases for which the Department does not have up to date contact telephone numbers and addresses.
The Department should seek to achieve similar debt clearance rates to the utilities sector. To improve efficiency, all debts should initially be pursued through the Department's Telephone Centre. All debts should moreover be handled through the Department's automated Integrated Debt Management System, which will make it easier to pursue individuals and companies for the various debts they owe on different tax streams at the same time.
The Department should seek additional powers for enforcing debts, similar to those of other tax authorities. These include recovery of debt from a person's salary or from funds held by their bank or other third party without the need to go to court. Recovering debts through court action is expensive for the Department and yet it has had to make increasing use of this method of enforcing debts.
The Department should provide the facility to pay by credit card, passing on any service charge to taxpayers who use this method. It should also be able to require payment by direct debit where the taxpayer has previously defaulted on a tax bill. The Department should provide up to date and accurate information and advice to those in debt on its website and in leaflets in different languages.
The Department's performance measures should include, for all types of tax and national insurance contribution debt, the percentage of taxpayers who pay on time, the percentage of debt collected within 30 days and the percentage of debt collected within 90 days.
The Department should analyse the debt record of different types of taxpayer and use risk scoring techniques to identify the need for early action to support those taxpayers who are more likely to get into debt.
to view Report