The TaxPayers' Alliance (TPA) today reveals that Her Majesty’s Revenue and Customs (HMRC) has given up on £27.4 billion of tax revenue in the last five years. The findings are contained in a new TPA report for the 2020 Tax Commission (a joint project by the TPA and Institute of Directors).
If the Government simplified the tax code, errors on this scale could be avoided in the future and the deficit could be reduced more quickly.
Every year the taxman (HMRC) gives up trying to collect billions in unpaid tax. This research looks at remissions and write-offs.
Remissions are debts capable of recovery but HMRC has decided not to pursue the liability, for example, on the grounds of value for money or official error.
Write-offs are debts that are considered to be irrecoverable because there is no practical means for pursuing the liability, for example, if a firm has gone out of business.
The key findings of this research are:
- In the last five financial years HMRC has missed out on £27.4 billion of tax revenue through remissions or write-offs
- That is over £1,000 per household over the last five years, or more than £200 a year
- The taxman missed out on £5.9 billion in 2010-11. If this money had been collected, it would have been possible to cut more than 1 per cent off the standard rate of VAT
- In the last five financial years £4.4 billion of Income Tax has not been collected. The amount of Income Tax uncollected in 2010-11 was 52 per cent higher than in 2006-07
“It's ludicrous that our complex and unwieldy tax system means the taxman gives up on billions every year. Taxes are a challenge to administer and a burden on families and we need systematic reform to produce a simpler tax code. Some of this uncollected tax will be down to the recession but there is clearly a long term problem as well. Tax shouldn’t be so taxing that even HMRC can’t keep on top of it.”