HMRC spend on private sector debt collection doubles in a single year

Publications that covered this story include City A.M. on 27 March.
  • Spend has jumped by 92% - currently stands at £24 million
  • Controversial practice of outsourcing debt collection expands

HMRC spend on private sector debt collection agencies to chase people who have fallen behind on their tax bills has jumped by 92% in just one year to £24 million.

This is compared to a spend of £12.5 million on private sector debt collection agencies in 2015, and only £6 million in 2014.

This rise signals HMRC’s willingness to clampdown on taxpayers who are behind on tax payment.

Bringing in professional debt collection agencies to follow up on debts is seen as cost-effective by HMRC. However, employing private sector agencies is seen by many commentators as a heavy handed and an aggressive approach.

There have been frequent reports of these agencies putting pressure on debtors over the phone or visiting the individual in person. Whilst this is legal there have been incidences where the private sector debt collection agency has got it wrong contacting the debtor’s relatives or visiting the wrong property by accident.

With the private sector agencies naturally looking to make a profit from their HMRC work, there are obvious risks of more debtors suffering due to corner cutting by debt collection agencies. There are also risks that strong arm tactics will get even more aggressive as the debt collection agencies seek to prove their worth by bringing in more debts.

Often debtors are not paying because they simply cannot afford to at the time, rather than wilfully ignoring debts - meaning that aggressive tactics may not be the fairest approach.

Having outsourced the work to private sector debt collection agencies there can also be big delays when trying to resolve mistakes and potential problems caused by miscommunication between the different parties involved.

Mark Giddens, head of private client tax in our London office says; “HMRC have struggled to chase down debts on their own, hence their increasing reliance on controversial independent agencies.”

“HMRC are under pressure to constantly drive up tax take and collect as much as possible, but it does need to be careful to ensure that the taxpayer does not suffer as a result of efforts to do this.”

“Too many debt collection cases relate to HMRC errors or concern vulnerable individuals. The use of third party agencies makes it that much more difficult to resolve issues and protect those who are simply unable to manage their tax affairs.”

HMRC spend on private sector debt collectors to pursue taxpayers is growing

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