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HMRC concedes £19bn in unpaid taxes unlikely to be recovered amidst soaring call centre failures

by August 12, 2024
August 12, 2024
HMRC concedes £19bn in unpaid taxes unlikely to be recovered amidst soaring call centre failures

HM Revenue & Customs (HMRC) has conceded that it is unlikely to recover more than £19 billion in unpaid taxes, as the department grapples with a significant rise in uncollected tax debt and a dramatic increase in customer service failures.

According to HMRC’s latest annual report, the total amount of unpaid taxes has surged to £43 billion—nearly three times the level seen before the pandemic. The proportion of these debts deemed unlikely to be recovered has jumped to 45 per cent, up from 32 per cent the previous year, due to the accumulation of older debts and prevailing economic conditions that have severely impacted businesses and individuals.

The report also revealed alarming shortcomings in HMRC’s customer service. Every service target set by the previous government has been missed, with taxpayers facing unprecedented delays and frustration. Nearly 56,000 customers were cut off after waiting for over an hour on hold—an almost sevenfold increase from the 6,900 affected the previous year. The average waiting time for phone calls rose to 23 minutes and 14 seconds, a 42 per cent increase compared to last year.

Sarah Olney, the Liberal Democrat Treasury spokeswoman, criticised the situation, attributing it to “years of Conservative Party economic vandalism” and urged the Labour government to “properly invest in the organisation” to break what she described as a “cycle of decline.”

In addition to the challenges with unpaid taxes, HMRC has also admitted to significant losses due to error and fraud in pandemic-related tax schemes, particularly those designed to encourage research and development (R&D) in businesses. The department has lost an estimated £4.1 billion through these schemes since 2020, with £1.2 billion lost on the scheme specifically for smaller businesses.

A previous investigation by The Times revealed that companies were exploiting these R&D tax breaks for dubious “innovations,” such as adding vegan options to pub menus or adjusting launderette washing temperatures. Tax advisers have criticised HMRC’s oversight, claiming that the department “almost never checks” claims under the scheme, effectively turning it into “free money” for companies.

The department has since revised its estimates for fraud within the R&D scheme, with the figure climbing from 5.5 per cent to 25.8 per cent over the past year. Gareth Davies, the independent auditor of government departments, noted that this level of fraud is “among the highest reported across all government spending programmes, including those administered in response to Covid-19.”

An HMRC spokesperson emphasised the importance of timely tax payments to fund public services and stated, “We do everything we can to help those who engage with us to get out of debt. With research and development claims, public money is at stake, which is why we have increased compliance activity.”

The department’s challenges with recovering unpaid taxes and addressing systemic issues in customer service and fraud prevention highlight the broader difficulties faced by HMRC in the post-pandemic economic landscape.

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HMRC concedes £19bn in unpaid taxes unlikely to be recovered amidst soaring call centre failures

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