|The Inland Revenue collects over £200 billion a year in tax and National Insurance contributions from 30 million taxpayers ranging from individuals to multi-national corporations. Most people and businesses pay their taxes on time. Debts arise when people do not pay taxes that are legally due by the required date. This might because people do not understand the requirement to pay, or have forgotten to do so. Some may face temporary or longstanding cash flow problems. Others may be unwilling to pay and seek to make it difficult for the Department to collect the debt in the hope that it will not be pursued further. Because the deadlines for paying different taxes vary the level of debt fluctuates throughout the year. The total amount of debt stood at £12 billion at the end of March 2004, of which £3 billion was more than a year old.
The longer a debt remains outstanding the more costly and difficult it becomes to collect. The Department may reach a point where it has to write off a debt because there is no longer any prospect of recovery. Around £0.7 billion is lost in write-offs each year. Preventing the accumulation of debt is therefore important in securing earlier receipt of taxes owed and keeping collection costs to a minimum.
On the basis of a Report and a memorandum by the Comptroller and Auditor General, we examined the Inland Revenue on speeding up the recovery of debt; preventing the build-up of debt; and applying good practice in debt management.