HMRC urged to protect outsourced tax data

The decision by HM Revenue and Customs to trial the outsourcing of part of its debt collection function has highlighted the need for private-sector suppliers to handle taxpayers’ information sensitively.

Last week Accountancy Age revealed that HMRC plans to outsource some of its debt collection to unnamed ‘low-value debt specialists’ and sell debt deemed irrevocable.

The department said any outsourcing would involve a ‘relatively small amount of money’. In 2007/08 HMRC’s total tax owed was about £17bn.

The outsourcing plan has alarmed business groups and unions, who fear that private-sector suppliers could be heavy handed and force struggling businesses to close. HMRC has said it will require suppliers to adhere to high standards.

Nigel Roxburgh, director at the National Outsourcing Association, which represents UK corporate users of outsourcing and suppliers, said although the taxman has already outsourced large parts of its operations, such as IT, tax debt collection could be a sensitive service to hand over to a supplier.

‘[Tax debt] needs careful handling and persistence but firm and continuous politeness,’ he said. He added that HMRC shouldn’t write targets into outsourcing contracts that encourage suppliers to be unnecessarily aggressive with businesses when collecting unpaid tax.

Roxburgh said that outsourcing suppliers need to have sound data security procedures to safeguard taxpayers’ details. In 2007 HMRC was left red faced after losing computer discs holding the personal details of 25 million taxpayers.

Jane Finlayson-Brown, outsourcing group partner at law firm Allen & Overy, said the sensitivity of taxpayers’ information being exchanged means any outsourcing agreement would need to incorporate confidentiality provisions. ‘These agreements are legally binding and usually contain provisions pertaining to the security of data and how it is to be handled,’ she said.

A spokesman for the Public and Commercial Services Union, which represents HMRC staff, said it is in discussions with HMRC about the plan but added industrial action could not be ruled out due to concerns over possible job losses.

An HMRC spokesman said: ‘We will only proceed with a pilot once we are satisfied that the benefits outweigh the risks.’