Spring Budget: HMRC gets extra £140m to chase tax debts

DWP in line for funding boost to speed up processing of disability benefits

HM Revenue and Customs has been allocated an additional £140m to spend on reducing tax that is owed to the government but has yet to be paid. 

The cash, set out by chancellor Jeremy Hunt in Wednesday's Spring Budget, will “expand HMRC’s debt management capacity to support both individual and business taxpayers out of debt faster and collect tax that is due”, according to HM Treasury's Red Book.

The move is part of measures to reduce the tax gap – the difference between tax owed and tax collected – by a further £4.5bn by 2028-29. It comes on top of a £163m boost announced in the Autumn Statement, which Hunt said at the time would enable the tax agency to raise an additional £5bn across the forecast period.

At the end of March last year, tax debt stood at £43.9bn – up £4.7bn on the previous year and significantly higher than in pre-pandemic years. The tax gap for 2021-22, which is the most recent year for which figures are available, was £36bn.

A policy-costing document supporting the Red Book said the latest £140m allocated to HMRC would be effective from 1 April 2025 and would allow the department to “use additional and flexible third-party debt collection capacity”.

In December last year HMRC second perm sec Angela MacDonald told members of parliament's Public Accounts Committee that the department had contracts with a “broad variety” of desk-based debt collection agents.

“Those debt collection agents do exactly the same job as our own people,” she said. “They are not bailiffs.”

MacDonald said debt collection agencies the department worked with were delivering returns in the region of £32 for every £1 spent.

After the Autumn Statement, HMRC anticipated that the £163m allocated for additional tax-debt-recovery capability would pay for an extra 700 staff, which it said would be a mixture of in-house officials and agency specialists.

DWP gets extra resourcing to speed up processing of disability benefits

Wednesday's Spring Budget also contained a pledge to increase resouring for the Department for Work and Pensions to help it process disability benefits claims more quickly.

The funding will “increase system capacity to meet increased demand, and therefore enable people to get the right support in a timely manner”, the Red Book said.

The supporting policy-costing document said the measures would boost the handling of both new and existing claims. It said that the increased capacity could result in a reduction in the value of awards paid to some recipients because more reviews could be completed, potentially highlighting cases where claimants’ conditions had improved.

The document suggested the measure would have a cost of £110m in 2024-25 and £35m in 2025-26 before breaking even the following year and being a positive contributor to the Exchequer to the tune of £45m in 2027-28 and £150m in 2028-29.

Hunt’s Spring Budget speech did not set out the precise level of funding that had been allocated to DWP for the capacity improvements. The department was unable to confirm a figure at the time of publication.

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