Money

HMRC quadruples spending on private debt collectors


The money spent by the UK tax authority on private debt collectors has quadrupled in the past five years, suggesting an increasingly “aggressive” approach to collecting unpaid tax, accountants have warned.

HM Revenue & Customs spent £26.3m on private debt collectors in 2018, up from just £6.2m in 2014. It is part of an increase in the amount handed to private sector debt agencies by HMRC, which has spent more than £140m on their services since 2011.

The figures were compiled by accountancy firm UHY Hacker Young using HMRC records of departmental spending exceeding £25,000.

Debt management issues have been under increasing scrutiny in the UK. Earlier this month the House of Commons justice committee called for independent regulation of the bailiff sector. Meanwhile, research by Citizens Advice has found the portion of people reporting debt problems relating to public sector organisations doubled from 21 to 40 per cent in the five years to 2017-18.

HMRC was given the power to use private debt collectors in 2009, but complete data of departmental spending on the area was not available for the first two years of the policy, said UHY Hacker Young.

Mark Giddens, head of private client services at the firm, said HMRC had come under pressure to maximise tax revenues in recent years, leading to an increasingly “aggressive approach” to collecting unpaid tax.

“HMRC needs to ensure that external debt collectors are used as a last resort only,” he said. “The majority of taxpayers who owe tax are in that situation because they simply can’t afford to pay — workable debt restructuring options are more effective than relentless pressure from debt collectors.”

He added that there had also been several instances of poor communication between HMRC and the debt collectors leading people to be chased for debts they had already paid.

Michelle Sloane, senior associate at law firm RPC, said HMRC had originally intended to use private debt collection for wealthier individuals but the pressure to boost revenue had seen it cast a wider net.

“They are now going after lower income individuals in relation to tax credit debts and things like that, and scaring the life out of them,” she said.

HMRC said it sometimes used debt collection agencies to support its capacity to reclaim debt. It added that it did not use private sector bailiffs. Its agencies have no face to face dealings with individuals and contact them using letters, phone calls and text messages.

It added: “HMRC is committed to providing extra support for vulnerable customers, including debtors. We have specialist teams dealing with vulnerable customers who need extra support because they have difficulty resolving their inquiries through the standard HMRC contact channels. This includes a specialist team dealing with those vulnerable customers in debt.”



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