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UK National Audit Office highlights unrecovered tax debt

18 February 2014   (0 Comments)
Posted by: Author: Amanda Banks
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Author: Amanda Banks (Tax-News)

A new report from the UK's National Audit Office says that HM Revenue and Customs is owed at least GBP15.1bn in unpaid debt, and that overpayments of tax credits are being created twice as fast as repayments are being recovered.

The report estimates that as of March 31, 2013, just under GBP4bn was overdue from self-assessed income tax, and just under GBP2.3bn from Pay As You Earn income tax. HMRC was owed a further GBP2.5bn in unpaid Value Added Tax, GBP1.6bn in corporation tax, and GBP2bn in other taxes. Overpaid tax credits were responsible for a further GBP2.9bn of debt. 

Of the total amount, GBP1bn is classed by HMRC as "uncollectable" and is not actively pursued, and the recovery of overpaid tax credits seen as particularly problematic. HMRC's expected recovery rate for tax credit overpayments is 31.4 percent, and the report notes the assessment of Parliament's Public Accounts Committee that tax credit repayments create an "unacceptable" burden on people already experiencing financial hardship. 

However, the report adds that the Government is working to "design out" debt in future systems, and that in the future the recovery of tax credit overpayments will be the responsibility of the Department for Works and Pensions (DWP), which also deals with benefit overpayments. HMRC and DWP both have measures in place to deal with cases of hardship. 

The report also says that the amount owed to HMRC has been reduced by GBP5.5bn over the past five years due to write-offs, remissions and more efficient collection. It explains that HMRC has invested in IT and expertise since 2009 to capture and analyze data on tax debtors from its various systems, and that it now has a tailored approach to debt recovery from specific groups of debtors. HMRC is also planning to re-deploy staff to tax debt recovery, to pursue debts that collection agencies have been unable to collect, and to increase debt collection staffing. It is expected these measures will bring in an extra GBP635m by 2016-17.

The overall amount of overdue tax does not include council tax or business rate debt owed to local councils. 

This article first appeared on


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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