The income tax fiasco currently embroiling Her Majesty’s Revenue and Customs shows no signs of abating. This week, HMRC has been forced to deny that it plans to ‘write off’ more than £1.5 billion of unpaid tax because the underpayments were over two years old and potentially subject to costly appeals.
The Daily Mail reports that a number of HMRC staff had told the BBC that they had been instructed not to pursue a large number of underpayments, as it is believed that many would be subject to a legal challenge from taxpayers.
However, HMRC have issued a statement denying that any tax is to be written off.
Huge backlog of outstanding tax rebate cases
HMRC is currently working through a backlog of a staggering seven and a half million outstanding cases from 2007/08. Estimates suggest that taxpayers have collectively paid £3 billion too much in tax, whilst simultaneously underpaying to the tune of £1.5 billion. It is believed that some taxpayers both owe tax to HMRC and are owed a tax rebate.
Staff at HMRC have told the BBC that they had been told to prioritise cases where taxpayers were owed money, particularly if they were from vulnerable sections of the population such as pensioners. Staff had also been told to pursue cases that seemed to be fraudulent.
Tax underpayments ‘likely to be written off’
Underpayment cases over two years old are, apparently, to be ‘written off’ thanks to the possibility of long and costly legal appeals from taxpayers.
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 HMRC staff member said: “Our directors are telling people that (those who owe tax) will appeal and fight it and this will generate more work.”
In a statement, HMRC acknowledged that its priority was to give refunds to people who had overpaid tax. However, it denied that it was planning to write off any unpaid tax. A spokesman said: “No tax is being written off. We are simply prioritising repayments to vulnerable groups.”