More combative debt-collection forecast

HMRC’s attempts to recover overdue taxes could become increasingly combative as the Government seeks to reduce the public deficit, according to the accountancy group UHY Hacker Young.
 
The firm’s prediction follows its scrutiny of the most recent Revenue accounts, which show that the amount of money the department believes it will be unable to recover jumped by 40%, from £4,557 million to £6,367 million, in the year to March 2010.
 
‘The Treasury is very hungry for cash at the moment. Our concern is this is going to lead to much more aggressive debt-collection tactics in the future, against both individuals and businesses,’ said Roy Maugham, a partner at UHY Hacker Young.
 
He suggested that the Revenue – which earlier this year engaged four companies of bailiffs to pursue debts – might have built up unnecessary bad debts in the early days of its time to pay scheme.
 
‘In the panic following the collapse of [financial services giant] Lehman Brothers, very generous terms were offered, and that may have led to HMRC extending credit to businesses they should not have. Many of those firms will have lost that battle to keep trading, leaving the department out of pocket.’
 
Mr Maugham said that a major area concern for the taxman should be the huge jump in the amount of outstanding National Insurance (NI) payments that have been written off. In the department’s most recent set of accounts, the figure is shown to increased by 78%, from £516 million to £920million, over 12 months.
 
Some debts have gone bad as a result of them being too old to pursue. The Revenue claims £29 million of the NI contributions it is owed can no longer be collected because they are at least six years overdue and are therefore time-barred.
 
‘It is thought that when HMRC changed their internal systems they temporarily lost track of payments in the process and were then forced to abandon problematic payments that weren’t picked up in time. You are seeing the results now,’ said Mr Maugham.

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