HMRC fails to collect £27.4 billion tax over 5 years

According to a report from the Institute of Directors and the Taxpayers’ Alliance, HMRC missed out on collecting £5.9 billion of tax in the financial year 2010-11 and a total of £27.4 billion over the last five years. The research collated data about debts not deemed worthy of pursuit, write-offs and errors.

The chief executive of the Taxpayers’ Alliance, Matthew Elliott, said it is challenging to administer taxes and onerous for families. Tax accountants will no doubt agree with his statement that the UK needs systematic reform of its taxation system to produce a tax code that is simpler to understand and implement.

He went on to explain that some of the uncollected tax can be blamed on the economic crisis but there also appears to be an underlying problem.

A spokesman from HMRC said that the Revenue collects 99% of the debt that is owed to it. 90% of money written off is caused by companies going into liquidation and the Revenue is legally forbidden from pursuing that debt.

Earlier this year, HMRC announced that it will pursue around 1.2 million people who underpaid PAYE by as little as £50 last year.

The Revenue had been writing off debts of less than £300 due to problems with the implementation of the new National Insurance & PAYE system but a Revenue spokesman said this was only ever designed to be a temporary measure and it was now time to revert to the normal threshold.

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