NAO Report Finds £14 Billion Shortfall In UK Tax Collections

by Jason Gorringe, Tax-News.com, London

26 March 2004

A report released on Wednesday by the UK government’s spending watchdog found that while the Inland Revenue has improved the way it recovers debts, it needs to put in place further measures to reduce debts owed by taxpayers.

According to the report by the National Audit Office, the Inland Revenue collected £219 billion in tax and National Insurance Contributions in 2002-03, although at the end of March 2003, debts totalled £14 billion, a significant proportion of which was owed by insolvent businesses and by taxpayers who could not be traced.

However, in the Revenue’s defence, the NAO conceded that this total tends to fluctuate throughout the year because of various statutory deadlines for paying different taxes.

The report also revealed that in the year to October 2002, the Department wrote off tax and other miscellaneous duties of over £500 million, and in the year to March 2003, £275 million was written off in respect of National Insurance contributions which were no longer recoverable. Over £575 million of this was written off as a result of business failure or insolvency.

Some £3 billion of tax debt was found to be outstanding for one year or more, and the report identified a tendency for tax debt to be harder to collect the longer it was overdue.

"Much tax is collected quickly but at any one time there are billions of pounds outstanding, some of it long overdue," commented the head of the NAO, Sir John Bourn.

He concluded: "Faster recovery and preventing the build up of debt could bring in money which could be used to improve public services.”

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