3 Tax disputes, Tax Credits, and debt
management
Tax Disputes
20. The Department's Litigation and Settlement Strategy
states that, where its legal advice is strong, it should not accept
settlements for less than 100% of the tax and interest due.[55]
The Department maintains that it does set out to prove the tax
liability, serve its assessment and then collect what is due.
[56] The Department told
us that the final decision on how to resolve each tax dispute
has to be taken by two Commissioners and must involve legal advice.[57]
21. The Department did not answer some of our specific
questions on tax disputes on the grounds that it has a legal duty
not to disclose taxpayer details, except in certain limited circumstances.[58]
This applies to all taxpayers, whether they are an individual
or a publicly quoted company. This inevitably makes it difficult
to obtain assurance that the Department resolves tax disputes
appropriately.
Debt Management
22. The Department collected £67.9 billion of
tax debt in 2009-10, £5.6 billion more than in 2008-09.[59]
During 2009-10 it introduced a campaigns-based approach to the
collection of debt across the major taxes. Its initial analysis
shows that the campaigns approach has been cost effective, and
it now applies this approach to collecting 90% of its debt.[60]
To support the campaigns approach, it is enhancing its analytical
capability by recruiting specialist staff and developing its IT
capability. These measures have been delayed but should be in
place by October 2011.[61]
23. The Department has been less successful in dealing
with Tax Credits debt. The debts are often small, making them
resource intensive to pursue, although where the Department can
recover debts from ongoing awards, this is more successful.[62]
The Department told us that it is on track to achieve its target
of reducing the Tax Credits debt balance by £200 million
to £4.3 billion by March 2011, although this will be partly
achieved by writing off £461 million of uncollectible debt.[63]
Tax Credits Error and Fraud
24. The Department has a target to reduce Tax Credits
error and fraud to no more than 5% of the value of finalised awards
by March 2011. There is a time lag in measuring error and fraud
in finalised awards, so the Department will have to wait until
summer 2012 to know whether it has achieved its target.[64]
25. The Department's strategy for reducing tax credit
error and fraud is increasing its focus on preventing error and
fraud entering the system and it has changed its approach from
'pay now, check later' to 'check now, pay later'. It estimates
that, whereas it used to prevent about £200 million of error
and fraud per year, in the year to July 2010, it prevented £750
million and it plans to prevent £1.4 billion in the year
to July 2011.[65] The
Department believes it can reduce error and fraud losses by £2
billion in each year of the Comprehensive Spending Review.[66]
55 Q 260 Back
56
Q 265, 266 Back
57
Qq 264, 276; There are currently six Commissioners of HM Revenue
and Customs who have responsibility for handling individual taxpayers'
affairs impartially. Back
58
Q 247 Back
59
C&AG's Report, para 3.4 Back
60
Q 223 Back
61
Qq 223, 224, 284, 285 Back
62
Q 286 Back
63
Qq 295-297,301 Back
64
Q292, C&AG's Report, para 20 Back
65
Qq 293, 294; C&AG's Report, para 4.17 Back
66
Q 292 Back
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