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£3.3bn more than last year — hampered by outdated IT systems, according to the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.

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