£1.5bn of unpaid tax not being written off, says HMRC

HM Revenue & Customs today denied it planned to write off more than £1.5 billion of unpaid tax because the cases were more than two years old.

It is currently working through a backlog of around 7.5 million outstanding cases from 2007/08.

It is thought that within these cases, some people have collectively paid £3 billion too much tax, while others have underpaid by £1.5 billion.

Staff at HMRC told the BBC that they had been told not to pursue the majority of the underpayment cases because they were more than two years old, meaning they are open to legal challenge from taxpayers.

Instead, they had been told to prioritise cases where the Revenue owed people money, particularly if they belonged to vulnerable groups, such as pensioners, while they had also been told to pursue cases that appeared to be fraudulent.

One member of staff told BBC Radio 4's The Report: "For each underpayment there are thousands of pounds owed. Underpayments are very frustrating.

"If we had the chance to sort it out three years ago we could have recovered the money. It is now likely to be written off if it's over two years - we're not looking at underpayments beyond two years."

Another member of staff said: "Our directors are telling people that (those who owe tax) will appeal and fight it and this will generate more work."

But HMRC said that while it was prioritising giving refunds to people who had overpaid tax, it was not writing off any unpaid tax.

A spokesman said: "No tax is being written off. We are simply prioritising repayments to vulnerable groups."

He added that in many of the open cases, tax would not have been either over or underpaid.

The backlog of cases are not on HMRC's new computer system, meaning they will all have to be processed manually.

Earlier this month it emerged that more than six million people had paid the wrong amount of income tax due to errors in the Pay As You Earn system.

Among these, 1.4 million people are facing demands for repayments averaging £1,428 each, while a further 900,000 people who owed less than £300 have had their underpaid tax written off.