The amount of delinquent tax debt owed to HMRC has increased by 10% from £34.3bn to £37.8bn (year ending 30 June 2022) in the last three months alone, notes law firm Pinsent Masons.
This growing tax debt is subject to immediate debt collection procedures. It does not include a further £9.1bn owed to HMRC that is part of agreements such as ‘time to pay’ arrangements.
Andrew Robertson, partner at Pinsent Masons, says that the speed of the rise in unpaid tax will raise pressure on HMRC to increase its use of enforcement action to make up for the shortfall. The law firm notes that HMRC could seek to shut down more businesses to settle their tax debts. These ‘winding-up petitions’ are an area where HMRC stopped almost all activity during the pandemic, although it has in recent months begun to petition the courts to close more businesses.
‘The last three months have seen a very significant jump in delinquent tax debt – more businesses and individuals are struggling to pay their tax bills as other costs keep climbing,’ Robertson said.
‘HMRC is in a difficult position where it needs to bring in as much of this delinquent tax as possible without triggering a huge wave of business insolvencies. That’s an unenviably fine line to have to walk.’
‘We expect to see HMRC first focus on those businesses that have agreed ‘time to pay’ arrangements and later breached them, plus the companies with the biggest unpaid tax debts. That may buy some time for some of the other struggling businesses to recover,’ Robertson said.
‘Another issue that may save some businesses is capacity restrictions at HMRC,’ he added. ‘It isn’t clear whether it has enough capacity to handle a significant rise in the number of winding-up petitions required.’
Pinsent Masons noted that the tax authority is already increasing the number of tax investigations it is opening, with 72,000 civil compliance checks opened in the second quarter of 2022, an increase of 22% on the 59,000 checks opened in the first quarter of the year.
HMRC may also increase its use of debt collection agencies to recover the rapidly-growing amount of delinquent tax. It currently uses a roster of debt collection agencies to pursue taxpayers, although it sharply reduced this activity during the Covid pandemic.
The amount of delinquent tax debt owed to HMRC has increased by 10% from £34.3bn to £37.8bn (year ending 30 June 2022) in the last three months alone, notes law firm Pinsent Masons.
This growing tax debt is subject to immediate debt collection procedures. It does not include a further £9.1bn owed to HMRC that is part of agreements such as ‘time to pay’ arrangements.
Andrew Robertson, partner at Pinsent Masons, says that the speed of the rise in unpaid tax will raise pressure on HMRC to increase its use of enforcement action to make up for the shortfall. The law firm notes that HMRC could seek to shut down more businesses to settle their tax debts. These ‘winding-up petitions’ are an area where HMRC stopped almost all activity during the pandemic, although it has in recent months begun to petition the courts to close more businesses.
‘The last three months have seen a very significant jump in delinquent tax debt – more businesses and individuals are struggling to pay their tax bills as other costs keep climbing,’ Robertson said.
‘HMRC is in a difficult position where it needs to bring in as much of this delinquent tax as possible without triggering a huge wave of business insolvencies. That’s an unenviably fine line to have to walk.’
‘We expect to see HMRC first focus on those businesses that have agreed ‘time to pay’ arrangements and later breached them, plus the companies with the biggest unpaid tax debts. That may buy some time for some of the other struggling businesses to recover,’ Robertson said.
‘Another issue that may save some businesses is capacity restrictions at HMRC,’ he added. ‘It isn’t clear whether it has enough capacity to handle a significant rise in the number of winding-up petitions required.’
Pinsent Masons noted that the tax authority is already increasing the number of tax investigations it is opening, with 72,000 civil compliance checks opened in the second quarter of 2022, an increase of 22% on the 59,000 checks opened in the first quarter of the year.
HMRC may also increase its use of debt collection agencies to recover the rapidly-growing amount of delinquent tax. It currently uses a roster of debt collection agencies to pursue taxpayers, although it sharply reduced this activity during the Covid pandemic.
