Crackdown on tax losses ordered

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The aim is to reverse £1.2 million a year owed by insolvent companies or individuals, and follows the removal in 2002 if the Crown’s preference in insolvency debts under the Enterprise Act.

Some £300,000 of this was written off as irrecoverable in 2002.

A report from the spending watchdog said most of the money is deducted by employers from employees’ pay, and urged the creation of an obligation on businesses to inform the tax authority when they face difficulties.

MPs said the Revenue should, as a minimum, demand security from businesses with a poor payment record to provide cover for future tax bills – a power already exercised by some overseas tax authorities and Customs and Excise.

They also called on the Revenue to speed up the collection of overdue sums in a bid to reduce the total of £3 billion of debt over a year old, some £700,000 of which ends up being written off as irrecoverable.

Among steps urged are the use of other departments’ records to trace taxpayers; the integration of taxpayer debt and its collection initially by a telephone call centre (including debt owed to Customs as the amalgamation of the departments proceeds); recovery of debt from salary, bank accounts or third parties without the need to go to court; and the provision of a credit card payment facility, with charges passed on to those who use it.

Commons Public Accounts Committee Chairman Edward Leigh said action is needed to reduce large sums tied up or lost to the public purse when they could be used to finance public services.

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