HMRC defends debt collection outsourcing

A proposal by HM
Revenue and Customs to outsource some of its debt collection service to
private-sector suppliers could force struggling businesses to close, business
groups and unions have warned.

HMRC is set to run pilot schemes including outsourcing debt collection to
low-value debt specialists and selling the debt deemed irrecoverable.

Dave Hartnett, permanent secretary of tax at HMRC, confirmed the pilots were
being conducted to assess how debt could be managed more effectively.

The pilot schemes come amid growing concerns over future HMRC tax debt
operations. It has said it plans to close two-thirds of its UK tax offices.

HMRC declined to reveal the amount of money involved in the pilot schemes,
which are expected to commence later this year with ministerial consent, or the
identities of the private suppliers. It added any tax debt it decides to
outsource would be a ‘relatively small amount of money.’ A spokesman said its
total tax debt for 2007/08 was about £17bn.

Stephen Alambritis, chief spokesman for the Federation of Small Businesses,
said any proposal by HMRC to outsource debt collection should be abandoned as it
could force premature business closures.

He said HMRC had been sympathetic to the plight of small businesses during
the economic downturn through the adoption of the Business Payment Support
Service, but said any proposal to outsource debt collection would ‘go against
that ethos’. He added: ‘There is a strong possibility that businesses will call
it a day when faced with debt collection because they’ll smash down doors and
we’d urge the taxman not to go down this route.’

A spokesman for the Public and Commercial Services union, which represents
HMRC staff, said: ‘The department is looking to outsource that work in a bid to
cut costs and you have to question whether the expertise and knowledge resides
in the private sector.’

Andy Wells, head of tax dispute resolution at Mercury Tax Group, also raised
concerns about outsourcing tax debt. ‘It can only get worse if they put external
people who are not part of HMRC in the frame.’

Hartnett rejected suggestions that outsourcing HMRC’s debt collection
function would result in a more aggressive approach to tax collection.

‘People will have to work to our standards. It’s not a question of us dumping
debt in the private sector. We’ll expect people to behave well and treat debt
respectfully,’ he said.