£5bn of unpaid tax bills may be written off

Her Majesty's Revenue and Customs may have to write off up to £5bn of unpaid income tax because of administrative chaos in the department, a tax specialist claimed last night.

As ministers cut budgets across Government, HMRC has admitted confusion from "legacy cases" means it will be unable to chase hundreds of millions of pounds that could have been spent on public services.

Up to £1.6bn may never be paid from outstanding debts dating back up to six years, the chief executive of HMRC, Dame Lesley Straithie, admitted at a Commons hearing last week. Officials were unaware the money was owed and when they discovered it was owed after the introduction of a new computer system, it was impractical to claw back much of the money, she told MPs.

Based on her admissions, Ian Liddell-Grainger, a Conservative backbench MP and PAYE specialist, estimated the total amount that may have to be written off from the past six tax years could reach £4bn or £5bn.

"What we don't know is the updated figures because the system isn't fit to tell us," he said. "There is quite likely £4bn or £5bn collectable. Can it be collected? It's dubious."

The scale of unrecovered debts emerged in evidence Dame Lesley gave to the Commons Public Accounts Committee looking into her department's surprise announcement two months ago that a new computer had identified mistakes in the tax affairs of 5.7 million people. For the years 2008/9 and 2009/10 HMRC said it would repay £1.8bn to 4.3 million people and chase £2bn from 1.45 million people. It then emerged hundreds of HMRC officials were ploughing through 17.9 million more "open cases" prior to 2008.

In exchanges with the PAC, Dame Lesley estimated HMRC was unable to collect large sums from those years because it had left them too long. For the years 2004/5, 2005/6 and 2006/7, she estimated her department might fail to recover £650m. For 2007/8, she disclosed it was owed £1bn.

Based on the recovery of debts from earlier years, the PAC's chairwoman Margaret Hodge suggested the amount that would be paid back from 2007/8 would be only £50m. Dame Lesley replied: "It's absolutely possible."

She said revenue officials had to weigh up the difficulties of contacting people who may have moved employer or address, and the challenges those taxpayers could make to HMRC given that HMRC had all the information it needed but had not acted.

Instead, she suggested, officials were concentrating on arranging refunds to those who had overpaid and chasing debts from more recent years.

Mr Liddell-Grainger, MP for Bridgwater, has been calling for a PAYE system where employers automatically update employees' pay in "real time" rather than at the end of the year.

Sport
sportGareth Bale, Carl Froch and Kelly Gallagher also in the mix for award
News
Japan's Suntory Beverage & Food has bought GlaxoSmithKline's Lucozade and Ribena
news
News
A tongue-eating louse (not the one Mr Poli found)
newsParasitic louse appeared inside unfilleted sea bass
Life and Style
The reindeer pen at the attraction
lifeLaurence Llewelyn-Bowen's 'Magical Journey' and other winter blunderlands
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksNow available in paperback
News
Tana Ramsay gave evidence in a legal action in which her husband, Gordon, is accusing her father, Christopher Hutcheson, of using a ghost writer machine to “forge” his signature
peopleTana Ramsay said alleged discovery was 'extremely distressing'
Arts and Entertainment
Robin Windsor and Aljaz Skorjanec rehearse their same-sex dance together on Strictly Come Dancing
TV
Money
Anyone over the age of 40 seeking a loan with a standard term of 25 years will be borrowing beyond a normal retirement age of 65, and is liable to find their options restricted
propertyAnd it's even worse if you're 40
Arts and Entertainment
Perhaps longest awaited is the adaptation of Jack Kerouac’s On the Road with Brazil’s Walter Salles directing and Sam Riley, Kristen Stewart and Viggo Mortensen as the Beat-era outsiders
books
Arts and Entertainment
theatreSinger to join cast of his Broadway show after The Last Ship flounders at the box office
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Austen Lloyd: Employment Solicitor

£30000 - £60000 per annum + Excellent: Austen Lloyd: Employment Solicitor - Ke...

Argyll Scott International: Risk Assurance Manager

Negotiable: Argyll Scott International: Hi All, I'm currently recruiting for t...

Austen Lloyd: Clinical Negligence Solicitor

Highly Competitive Salary: Austen Lloyd: HAMPSHIRE MARKET TOWN - A highly attr...

Ashdown Group: IT Systems Analyst / Application Support Engineer (ERP / SSRS)

£23000 - £30000 per annum + pension, 25days holiday: Ashdown Group: An industr...

Day In a Page

How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital
In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'