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HMRC urged to adopt new data tools to recover tax debts

17/11/21

Mark Say Managing Editor

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HM Revenue and Customs (HMRC) needs to invest in new digital and data tools as part of a strategy to recover rising tax debts, according to the National Audit Office.

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Central government’s auditor has made the recommendation within a new report on HMRC’s performance in managing tax debt through the Covid-19 pandemic.

It highlights the fact that when the lockdown began in March 2020 the department paused most of its debt collection activity and changed how debt is collected, but this has led to a large increase in the amount owed and it lacks the capacity to recover this in the short term.

Among the recommendations for developing the necessary tools and capability to make this possible is that, in planning for the new Spending Review period, HMRC should urgently consider the need for new investment in data analytics, the single customer account and customer facing systems. It cites a possible example of online tools for setting up payment arrangements for business customers.

It should also develop its understanding of the effectiveness of different tools and interventions that it already uses and how they interact.

The NAO says that process mapping and data mining techniques can help HMRC plan a long term strategy for reducing debt.

It also advocates the adoption of good practices from the private sector and adopting some of its own practices from the pandemic period for the long term.

Debt doubled

The report in whole says that tax debt is more than double pre-pandemic levels – at £42 billion in September of this year compared with £16 billion in January 2020 – and current staffing at HMRC is unlikely to be enough to manage the increased workflow.

The department has forecast the figure will fall to £33 billion by March 2022, but this assumes the Covid-19 pandemic has not changed behaviour around repayments. In addition, it is unlikely to have enough staff to manage the increase.

Commenting on the overall report, head of the NAO Gareth Davies said: "HMRC faces several years of managing a far greater level of tax debt than it has seen in recent times, as a result of the Covid-19 pandemic. Some debtors have already been able to repay their tax debt quickly, but an unknown number of taxpayers have been badly affected and will struggle to do so.

“HMRC needs to significantly increase its capacity if it is to meet the changed scale and nature of the challenge."

Image from iStock, violetkaipa

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