Staff Cuts Lead to £1.1Bn in Unpaid Tax

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Staff cuts has been listed as to why HMRC missed out on recovering £1.1bn in outstanding tax,  according to the Public Accounts Committee

Chair of the committee Margaret Hodge MP advised that there is at least £35bn in outstanding tax waiting to be collected by the HMRC. While she did issue praise to HMRC for the increasing the amount of tax collected by £4,32bn during the last five years of its Compliance and Enforcement programme she did make the point of advising that a further £1.1bn could have been recovered if 3,300 jobs that had been cut had been saved.

HMRC said that the Government had assigned an additional £917 million in funds that will be used to reinvest in the program and had already been used in part to increase the staff levels of the Enforcement and Compliance team. It was also advised that 10 debt collection agencies had been brought in to assist with the recovery of unpaid tax.

Margaret Hodge said:

“It is incredible that the Department could under any circumstances advise that this was acceptable behaviour for a public servant.”

“The Department must have a clear and consistent approach to providing advice on such matters. The Chief Secretary to the Treasury has announced a review of how managed service companies are used in the public sector and we expect to return to this issue once the review is concluded.”

HMRC has defended this allegation by arguing that the use of MSCs or Personal Service Companies (PSCs) can be a legitimate commercial arrangement, which meant it would need to consider all cases of suspected system abuse as individual.

HMRC said:

“We are very clear that the use of MSCs are only for the purposes of tax avoidance and are always unacceptable which is why Parliament brought in legislation to prevent this tax avoidance. Where PSCs are used purely as tax avoidance vehicles it is always unacceptable and when we have evidence it’s happening we stop it.”

It has also pledged to bring in an additional £7bn in uncollected tax in by 2014 through tackling such abuses.

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