Unpaid tax bills can now result in calls from debt collectors, under a new HM Revenue & Customs (HMRC) drive to raise an additional £140m.
Following a pilot scheme involving two debt collection agencies, HMRC has appointed four companies “to boost . . . debt collection capacity and help the pursuit of lower value debts”, mainly from individuals. Contracts have been signed with Commercial Collection Services, Credit Solutions, Fairfax Solicitors and iQor Recovery Services – firms currently used by banks, credit card issuers and utilities companies. They will be paid a percentage of the tax they recover.
Before a tax bill is referred to one of the debt collectors, HMRC must write to the taxpayer in question, providing a final opportunity to pay or reach agreement on settling the debt. If the letter is ignored, the debt collectors can begin pursuing the
“They will go about collection by making telephone calls,” an HMRC spokesman said. However, they will not be allowed to recover debts by seizing property, as only HMRC can take that action via the courts. “That is a statutory right that we have – we can ask county court bailiffs to come in,” the spokesman explained.
As a result, HMRC said the debt collectors will be focusing on individuals with debts of between £300 and £2,000, rather than businesses with big tax bills. In the pilot scheme, the average tax bill pursued by debt collectors was £1,000.
But tax advisers have criticised the focus on chasing smaller, personal tax bills, at a time when employees and pensioners are owed nearly £250m in refunds of overpaid tax.
According to figures from the National Audit Office obtained by accountancy group UHY Hacker Young, the amount of tax wrongly deducted through the Paye As You Earn (PAYE) system has increased 148 per cent in the past 12 months. In 2009/10, HMRC collected £96m too much tax due to PAYE errors but in 2009/10 this figure leapt to £238m.
Rob Durrant-Walker, tax manager at UHY Hacker Young, said: “We have seen a steady increase in PAYE errors over the past year. For the amount of tax collected in error through PAYE to jump 148 per cent in one year is simply unacceptable.”
Chartered accountants Blick Rothenberg pointed out that some taxpayers might be pursued for unpaid tax while being owed a refund. “I would have thought that the debt collection companies would have been better placed to go after the real delinquents on debt, from where it is difficult to collect the money,” said partner Angela Beech. “I would think that businesses are an easier target, as the tax take is down but debt from companies has increased.”