The value of bad debts owed to HM Revenue and Customs (HMRC) has rocketed by 40 per cent to £6.4bn in the last year, according to accountancy firm UHY Hacker Young.
The multi-billion pound figure was a significant increase in the amount of debt currently owed to the taxman that it does not expect to recover. At the same time last year the figure stood at £4.5bn, analysis by UHY Hacker Young showed.
UHY Hacker Young warned that the problem had been caused by the recession forcing more businesses to keep hold of money they should pay in taxes in order to pay other bills and keep afloat. The firm also warned that this deficit could lead to more aggressive debt collection for both businesses and consumers.
Roy Maugham, a partner at the firm, said: “The Treasury is very hungry for cash at the moment – they have a huge hole in the government’s finances to fill.
“Our concern is this is all going to lead to much more aggressive debt collection tactics in the future against both individuals and businesses.”
However HMRC dismissed the claims, arguing that it collected £5bn more debt during 2009/10 despite the recession making debts more difficult to recover.
An HMRC spokesperson said: “We collect nearly all tax debt and write offs remain relatively low.
“The most recent accounts show that in 2009-2010 HMRC only wrote off around one per cent of total revenue, and around 90 per cent of this was due to insolvency where further debt pursuit is barred by statute.”
Despite this, Maughan argued that the Revenue had built up unnecessary bad debts in the early days of the time to pay scheme, and pointed out that National Insurance write-offs had rose by 78 per cent from £526m to £920m in the last year.
This, Maughan said, was a big cause for concern.
He added: “HMRC really needs to keep an eye on this area. A lot of HMRC’s bad debts have built up as they have become time-barred.
“It is thought that when HMRC changed their internal systems they temporarily lost track of payments in the process and then were forced to abandon problematic payments that weren’t picked up in time. You are seeing the results now.”
HMRC currently employs four debt collection agencies, Fairfax Solicitors, Credit Solutions, Commercial Collections Services and