HM Revenue and Customs permanent secretary Jim Harra has said the £163m “capacity boost” allocated to the department in last month’s Autumn Statement will pay for an additional 700 debt officers.
But Harra told a Public Accounts Committee session this morning that the levels of unpaid tax that the officers will be chasing has been “arising at record levels” and that he did not expect to see a major cut in the £43.9bn tax debt owed to HMRC next year.
The perm sec also said that not all of the additional debt officers bankrolled by the Treasury would be working in-house for HMRC.
In 2019-19 tax debt was around £20bn – less than half the current figure. It spiked to more than £50bn in 2020-21, primarily because of self-assessment and VAT charges that were deferred because of the impact of Covid-19.
At last month’s Autumn Statement, chancellor Jeremy Hunt said he expected the extra funding set out for HMRC to result in an additional £5bn in recovered tax debt over five years.
Harra told MPs today that increasing levels of unpaid tax were “not a direct hangover from the pandemic”.
He said that HMRC had “worked through” those debts and that high levels of non-payment of tax in the last couple of years had been driven by the self-employed and small companies struggling to pay their income tax and VAT.
“We see evidence that that is a sign of distress. It’s not necessarily deliberate non-payment,” he said.
“Those taxpayers are often compliantly filing their returns, showing the liability but then are not paying it because they’re finding that difficult.”
Harra said HMRC and private debt-collection agencies the department works with were clearing the debt faster than it is arising and that the debt reported at the end of 2023-24 was expected to be “slightly lower” than it had been at the start of the year.
“In the Autumn Statement we were given the funding for 700 additional debt officers, and we’ll be using that both in-house and with debt-collection agencies,” he said.
“So that gives us an opportunity to further reduce that debt balance. It’s well-known that as debt ages it becomes increasingly difficult to collect, so you have to act as promptly as you possibly can.”
Harra said private debt-collection agencies working on behalf of HMRC had recovered £852m in 2022-23, which he said was a “record”.
HMRC second perm sec Angela MacDonald told MPs that contract changes in relation to the debt-collection agencies the department works with had seen returns increase to £32 for every £1 spent, up from £23.
MacDonald said HMRC had contracts with a “broad variety” of debt collection agents.
“Those debt-collection agents do exactly the same job as our own people,” she said. “They are not bailiffs.”
MacDonald said the external agents did the same kind of desk-based work as HMRC staff, including making phone calls and writing letters to businesses to support them to pay.
Treasury documents supporting the Autumn Statement said the £163m in additional funding for HMRC would allow officials to provide better support to taxpayers unable to pay what they owe – as well as securing payment from those in a better position.