Treasury injects millions into HMRC’s debt management team in bid to recoup £5bn in unpaid taxes

The government is investing £163 million in HM Revenue & Customs’ debt management team in a bid to recoup £4.67 billion in unpaid taxes over the next six years.

According to Treasury estimates, the injection of cash will help HMRC’s debt management team recoup £515 million in taxes by 2024-25.

More than £1 billion in unpaid taxes will be recovered by 2025, the autumn statement published on Wednesday claims.

The Ministry of Finance wants to close the so-called ‘tax gap’ between what is owed to the treasury and what is collected.

It said: ‘The Government is investing in HMRC’s ability to support individuals and businesses unable to pay their tax debts by increasing HMRC’s debt management resources.

‘This will allow HMRC to better target their collection activities, pursuing those with tax debts who can afford it and providing support to those who are temporarily unable to pay.

‘The government is also taking action against those who continue to bend or break the rules, by reducing opportunities for tax fraud in the construction sector and taking strong action against tax avoidance advocates.’

Recent figures from HMRC show that the amount of tax owed but unpaid totaled £45.5 billion at the end of September.

This included £7.8bn of ‘managed debt’, while debt available for prosecution stood at £37.7bn, according to accounting group BDO.

Most of this tax debt was owed by small and medium-sized businesses, but the figures also included personal tax debts, it added.

Dawn Register, head of tax dispute resolution at BDO, said: ‘While this additional investment in HMRC’s debt management capacity is very welcome, it is long overdue and likely insufficient to meet the eye-wateringly high tax liabilities currently owed to the Treasury to grab.

‘What is clear is that HMRC is likely to come down much harder on those who can pay but are trying to manage their cash flow by dragging their feet.

‘For individuals who are struggling to pay tax bills, it is always worth contacting HMRC to discuss your situation. If you have debts of up to €30,000, you can apply for a Time to Pay scheme online.

‘Companies can also take out a Time To Pay arrangement online for certain taxes. For example, repayment arrangements can now be set up for certain VAT and wage obligations of employers.

‘However, these online facilities do not yet apply to a number of important taxes, such as corporate tax, so we would like to see these expanded in the long term.’

In the period 2022-2023, HMRC collected £788.8 billion in tax revenue for the Treasury, representing an increase of 10.2 percent on the previous year.

According to the Office for Budget Responsibility, taxes as a share of gross domestic product will reach a new post-war high of almost 38 percent in 2029, up from 33 percent before the pandemic.

In Wednesday’s Autumn Statement, Jeremy Hunt unveiled a raft of measures aimed at reviving the economy and boosting people’s finances.

However, income tax, annual Isa allowance and inheritance tax thresholds remained unchanged, prompting some to warn about the impact of ‘sleuth’ taxes and tax barriers.