HMRC launches ambitious plan to clear tax debts in a month

The taxman is aiming to keep debt in check with an ambitious plan for tracking unpaid money – while it continues to bail out struggling UK businesses to the tune of £5bn.

HM Revenue & Customs said it was the first tax department in the world to use the “roll rate” system, which will hold HMRC to clearing a debt within a month or shift it into the next 30-day period. The move allegedly increases HMRC effectiveness in collecting debts at an early stage. In the current climate, it is no surprise HMRC is implementing this measure, which was unveiled in its 2010 Business Plan.

It is trying to maintain a delicate balancing act between pushing through swingeing staff cuts as part of UK efforts to pin down public sector costs, deferring tax bills with the Time to Pay scheme – currently at £5.2bn – and reducing tax losses by £4bn in 2010/11.

“[HMRC] will become the first tax administration in the world to measure tax debt performance by tracking the speed at which we clear cases at 30-day intervals,” the department said in the document.

The 2010/11 target is to reduce the debt remaining at 30 days by 8% and at 90 days by 13%. HMRC sources said the taxman does not yet have figures for how much money the reductions equate to.

In addition to this, HMRC also wants to reduce the level of tax credit error and fraud by £1bn by 31 March 2011 and by £1.4bn by 30 June 2011.

But the question remains how HMRC is going to achieve these targets as its morale-sapped workforce is pared down even further?

Advisers have been concerned the taxman does not have the manpower to do its job, even before looming staff cuts are enforced.

20,000 jobs have gone since 2006, according to the Public and Commercial Services Union. HMRC has a target of cutting 25,000 jobs and closing more than 200 offices by 2011. But HMRC has said the department will be able to cope.
“I am confident we will rise to these challenges as we continue to focus on closing the tax gap. Although we still need to reduce the size of our workforce, I want our people to feel that HMRC is an exciting place to work,” said HMRC chief executive Leslie Strathie.

The outlook appears gloomy, but its increased powers give it scope to chase cash. In particular the department has the ability to carry out checks on current records of all businesses, and visit business premises without giving advance notice in some cases – a move which advisers were concerned gave the taxman excessive strength.

However HMRC emphasised in its plan that its powers would be balanced with its mandate to help out taxpayers, as the UK looks to fully recover from the financial crisis.

“With the continuing difficult economic climate it remains important that HMRC helps and supports customers fulfil these obligations while relentlessly pursuing those who bend or break the rules,” HMRC said.