The government’s own website (gov.uk) states that:
“Where customers are unable to pay on time, we want to work with them and are always ready to help those who want to settle their affairs. We do not want our customers to worry – we’re here to help and make things as straight forward as possible.”
Now you may think that we spend all our time at M&S looking to criticise HMRC, but the reality is that we know the importance of what they do (we wouldn’t have many public services without taxes to cover their costs) and also the difficulties they face in collecting the tax that is due. With the pandemic and the estimated £6 billion of public money already lost to fraud via the furlough, self-employed income support and Eat Out to Help Out schemes, it’s vital that they not only collect the tax that is due as a matter of course, but also track down those defrauding the country and those who deliberately avoid paying their taxes. Every pound of tax is a prisoner for the authorities and, especially given the imperative to pay for the costs of Covid, they need to ensure they round this money up as quickly as possible.
Consequently, a report from the National Audit Office that says HMRC does not have sufficient staff to recover a payments backlog amounting to some £42 billion is, if we can deploy some famous British understatement, slightly concerning. The main worry is that some companies that took advantage of the Chancellor’s largesse did so knowing that they could suck in huge amounts of public money but never have to pay it back. “Phoenix” companies that are set up under a new name to avoid creditors after an original company has folded are particular culprits and are regarded as a major risk by HMRC. Unfortunately, it seems that the lack of HMRC staff means that many of these people may well get away with it.
Equally concerning, some companies and individuals are struggling to repay tax bills anyway and overall tax debts rose as a result by £26 billion between January 2020 and September 2021, with more than two million now falling behind on payments. This situation was not helped when HMRC paused collections and instead concentrated on supporting struggling businesses and freelancers. All of which helps to explain why the debt pile now stands at the aforementioned, staggering £42 billion.
The good news? Well, HMRC says it intends to recruit 1,000 new, full-time debt collectors and predicts its debt pile will shrink to £35 billion by March next year. Given the difficult state of the recruitment market at present, they need to get a move on…
Vivian Linstrom, M&S Accountancy & Taxation