HMRC writes off £11.2bn in debt

Edward Leigh

HMRC is writing off £11.2bn of a total of £28bn in tax debt for 2008-09 — £3.3bn more than last year — hampered by outdated IT systems, according to the latest Public Accounts Committee report.

Chairman Edward Leigh said the recession "is placing the tax system under great strain" and complained available systems do not provide essential information such as a profile of debt across taxes.

Leigh also complained: "Delays in introducing new systems have contributed towards backlogs in processing tax cases and have led to staff resources being diverted at critical times."

Some 17 million PAYE cases are awaiting processing which cannot start until new systems are fully operational next April.

Leigh said: "This and other backlogs must be cleared as swiftly as possible so that taxpayers know where they stand and what their liabilities are."

He was commenting on PAC findings based on an NAO report on what HMRC is doing to improve the processing of tax and tax credits after a year in which total revenues due fell £22bn to £436bn, including bad debts.

The report said: "Delays in introducing new computer systems and the loss of expertise following office closures led the department to divert staff away from work to test compliance with Stamp Duty Land Tax, increasing the risk of lost revenue from non-compliance.

"The absence of information on tax losses through non-compliance and avoidance makes it harder for the Department to analyse risk and to judge how to deploy its resources where they will have most beneficial impact."

It blamed shortage of funding.

In 2007–08 claimant error and fraud resulted in incorrect tax credits payments of between £1.58 billion and £1.84 billion, leading to the qualification of the Comptroller and Auditor General Amyas Morse’s opinion on the regularity of tax credits expenditure.