IT systems 'hindering tax debt recovery'

HMRC's efforts to protect tax revenues and recover debt are being undermined by an obsolete IT set-up, according to MPs.

A new report from the parliamentary Committee of Public Accounts shows that the Revenue’s total taxes and duties collected and receivable in the most recent completed tax year were £436 billion, £22 billion lower than in 2007-08.

The department has made a provision for bad and doubtful debts of £11.2 billion, 40% of the total £28 billion in tax debts and £3.3 billion more than in the previous year.

The committee acknowledges that HMRC are working to improve their debt recovery, but it stresses that the efforts are constrained by outdated systems that have seen plans for their improved deferred due to lack of funding.

‘The money needed to upgrade systems would be well spent if it were outweighed by the amount of additional tax recovered,’ remarked committee chairman Edward Leigh MP.

‘Delays in introducing new systems have contributed towards backlogs in processing tax cases and have led to staff resources being diverted at critical times.

‘The backlog of 17 million PAYE cases awaiting processing will not start to be cleared until the Department's new systems are fully operational in April 2010. This and other backlogs must be cleared as swiftly as possible so that taxpayers know where they stand and what their liabilities are,’ said Mr Leigh.

The department needs to improve its performance in recovering tax debt as a matter of urgency, concludes the MPs’ document, and it should establish targets for the amount of debt it collects, including the recovery rate expects to be achieved, while also setting out the actions it will take to reduce the levels of debt assessed as doubtful to below those of 2006.

The Revenue is also advised to re-evaluate the costs and benefits of investing in an IT system that would enable the department to profile debt effectively.

'There... appears to be a very strong case for investment,' notes the report.

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