Select Committee on Public Accounts Forty-Ninth Report

3 Applying good practice in debt management

22. The Department has made significant improvements in recent years in the way that it collects and enforces debts. It has compared its practices with a number of other tax authorities, but does not benchmark its performance on a regular basis with other public sector or private sector organisations.[26]

The Department's targets and management information

23. The Department's main targets on debt management focus on the percentage of taxpayers who pay within 12 months of the due date (Figure 4). These targets do not provide a good measure of the effectiveness of the Department's debt collection as they do not focus on increasing the number of people who pay by the due date. Nor do they incorporate targets for collecting debt more quickly than 12 months after it is due.[27] Figure 4: The Department's main targets and outturn
Targets on tax collected 2002/03 Target


2002/03 Outturn


2003/04 Target


Percentage of employers who pay within 12 months of the due date (19 May)


Percentage of self assessed taxpayers who pay within 12 months of the due date (31 January)



Source: C&AG's Report, Figure 2, page 10

24. The Department produces management information on the total amount of debt collected each month on each tax stream, and the number of enforcement actions and the amount of debt involved. But it does not have other important information such as the number and value of cases settled at each stage of the debt recovery process for each tax stream, where backlogs occur in the system and how long these take to clear, and the costs of taking each type of recovery action. The lack of such information affects the Department's ability to manage the work as efficiently as possible and to assess the effectiveness of actions taken. The Department expects to make significant improvements in its management information by early in 2005.[28]

25. The Department uses an analysis package to segment the taxpayer population into different groups and examine the relationship between taxpayer characteristics and their tax compliance record. A number of private sector organisations including credit card and utility companies use a similar approach in managing debt. The Department has not analysed the debt record of taxpayers in this way.[29]

The Department's computer systems for managing debts

26. The Department uses an automated Integrated Debt Management System to manage the collection and enforcement of debts for PAYE and Corporation Tax. The purpose of the system is to improve efficiency, reduce costs and tax arrears and to increase tax flows. The Department uses separate systems for other tax streams such as self assessed Income Tax and Class 2 National Insurance contributions. It intends to move self assessed Income Tax on to the Integrated Debt Management System by 2005 but has not set a date for Class 2 National Insurance contributions.[30]

27. Using separate systems reduces staff productivity because it is more difficult to collate information on all debts relating to a taxpayer and pursue these as one case. Local recovery office staff can manually link related cases but they have to look across multiple screens to gauge the full extent of the debt. As a result taxpayers could sometimes be approached separately on each debt they owed.[31]

28. Using different systems also means that some processes have to be performed manually. For example Class 2 National Insurance debts are initially managed by the National Insurance Contributions Office. If the Office cannot recover the debt it is transferred for collection by the Receivables Management Service who have to input the details manually to the integrated system. If the process could be automated costs could be reduced by around half, saving around £1.6 million a year. The Department has feasibility work under way on fully automating those systems where records are maintained manually at present. The Department considers such changes would be cost effective but it does not currently have the capacity to implement them.[32]

26   C&AG's Report, Executive Summary paras 6-7, Figure 7  Back

27   ibid, Figure 2; Qq 147-149 Back

28   C&AG's Report, para 1.10; Qq 2-3 Back

29   C&AG's Report, para 4.19; Qq 93, 135-137; Ev 24 Back

30   C&AG's Report, para 1.9 Back

31   ibid, paras 2.9, 3.9; Qq 170-177, 180-181 Back

32   C&AG's Report, para 2.8; Qq 168, 180-181 Back

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