HMRC set to receive funding to recoup £5bn in unpaid tax debt

27th November 2023

The Government is to provide £16.3 million into HM Revenue & Customs’ debt management team in a bid to recoup £4.67 billion in unpaid taxes over the next six years.

According to Treasury estimates, the injection of cash will help HMRC’s debt management team recoup £515million in taxes in 2024-25. By 2025, over £1billion worth of unpaid taxes will be recovered according to the announcement in last week’s Autumn Statement.

The Treasury says it wants to resolve the tax gap  between what is owed to the national coffers and what is being collected. The government is investing in HMRC’s ability to support individuals and businesses who are unable to pay their tax debts by increasing HMRC’s debt management resource. This will allow HMRC to better target their debt collection activity, pursuing those with tax debts that can afford to pay, and providing support to those that are temporarily unable to pay.

The government is also taking action against those who continue to bend or break the rules, by reducing opportunities for tax fraud in the construction industry and taking strong action against promoters of tax avoidance.

Recent figures from HMRC show the amount of tax owed but unpaid totalled £45.5billion at the end of September. This comprised £7.8billion of ‘managed debt’, while the debt available for pursuit reached £37.7billion, according to accounting group BDO. The majority of this tax debt was owed by small and medium-sized businesses, but the numbers also included personal tax debt.

Dawn Register, Head of Tax Dispute Resolution at BDO, said “While this additional investment in HMRC’s debt management capability is very welcome it’s long overdue and probably insufficient to tackle the eye-wateringly high levels of tax debt currently owed to the Exchequer. What’s clear is that HMRC is likely to get much tougher against those who can pay but are trying to manage their cashflow by dragging their feet.”

“For individuals who are struggling to pay tax bills, it’s always worth getting in touch with HMRC to discuss your situation. If you have debts of up to £30,000 you can apply online for a Time to Pay arrangement. Businesses too are able to set up Time To Pay arrangements for certain taxes online. For example, instalment plans can now be set up for some VAT and employers payroll liabilities.”

“However, these online facilities don’t yet apply to some important taxes such as corporation tax so, in time, we would hope to see these extended.”