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Unprecedented levels of taxpayer debt

The UK National Audit Office (NAO) report ‘Managing the tax debt through the pandemic’, published in November 2021, sets out the NAO’s assessment of how HMRC has managed the rapid escalation in the level of debt owed by taxpayers during the coronavirus pandemic and whether it has adapted sufficiently to the changing nature and scale of that debt.

Statistics

The NAO report and subsequent data highlights a number of key statistics and issues facing HMRC in relation to taxpayer debt.

Meeting of the Public Accounts Committee

The House of Commons Committee of Public Accounts (PAC) met to consider the NAO report in January 2022, publishing its own report in March 2022. Whilst acknowledging the NAO finding that HMRC has taken steps to respond to the increased levels of tax debt, the PAC report is highly critical of HMRC’s efforts to date, highlighting that:

What might we expect from HMRC in response?

There is no question that HMRC will have been stung by the comments made by the PAC at the hearing and in its report. We expect to see a robust response from HMRC in response to the raft of recommendations included in the PAC report. This may take the form of a step-up in the ongoing work to identify and sanction individuals involved with phoenix companies that recommence activities of liquidated businesses in receipt of government pandemic support scheme funding. Such steps could include being able to attach company debts to individuals who serve as directors, engaging with the Insolvency Service to disqualify directors, and requiring upfront financial security from new businesses that have been created as successor businesses.

HMRC may also increase its focus on ‘identifying the insolvency practitioners that phoenix companies prefer to use, and replacing them with more stringent practitioners’.

In light of the political concerns now surrounding the issue of taxpayer debt levels, those with outstanding tax debts should, if they have not already done so, seek advice and, where appropriate, engage with HMRC to mitigate the risk that enforcement action is taken.

For more information, please get in touch with Suze McDonald, or your usual RSM contact.

authors:suze-mcdonald