Last updated: 10 Dec 2024 11:00 Posted in:
The overall tax debt in the UK has risen to £44.8bn, up from £43.3bn in the last quarter, according to the latest quarterly performance update from HMRC. This includes £6.1bn in managed debt and £38.6bn of debt available for pursuit. Compared with the previous quarter, the number of taxpayers in Time to Pay Arrangements (TTPAs) fell by 1.5% to 845,884.
“While HMRC reported a decrease in new debt compared with the previous quarter, the reduction in the number of taxpayers with TTPAs and increase in debt available for pursuit underlines the scale of the challenge for HMRC’s Debt Management teams to collect debts due to fund public services,” said Dawn Register, Tax Dispute Resolution partner at BDO.
HMRC raised its expected cash from compliance activities from £1.8bn to £3.73bn. In light of this, the total compliance yield for the six months to 30 September 2024 is £17.38bn, up from £13bn for the six months to 30 September 2023.
“This was despite only a small increase in the number of civil compliance checks closed (168,000 compared with 162,000) so the yield per check must be increasing compared with last year,” she added.
Register said: “The debt owed to HMRC is now a whopping £44.8 billion, up by £1.5bn from the last quarter. This shows the level of challenge facing HMRC’s Debt Management team as it tries to recoup tax debts from late payers.
“At the Autumn Budget, the Chancellor announced that 1,800 debt staff would be ‘maintained and recruited’ over the next five years. Extra resource is urgently required – as is the modernisation of HMRC’s systems. It’s particularly worrying that we are seeing the number of Time to Pay arrangements going down while the debt available for pursuit is increasing.”
She added: “HMRC’s late payment interest rates are currently set at the base rate plus 2.5 percentage points, meaning the rate from 26 November 2024 will be 7.25%. This is due to increase by an additional 1.5 percentage points above the base rate from 6 April 2025. Taxpayers should therefore pay what they can as soon as possible to mitigate the interest charges. Agreeing time to pay arrangements before HMRC takes steps like involving bailiffs or taking money from wages or bank accounts would also be a sensible step for those struggling to pay.
“Interestingly, as fraud remains a significant and persistent threat to business – and particularly large businesses – the number of fraud hotline tip offs increased to 79,176 in the six months to the end of September, up from 68,507 in the same period last year.”
“The debt owed to HMRC is now a whopping £44.8 billion, up by £1.5bn from the last quarter. This shows the level of challenge facing HMRC’s Debt Management team as it tries to recoup tax debts from late payers."
Dawn Register, Tax Dispute Resolution Partner, BDO