Recommendation 20

HM Government Acknowledged

6: PAC conclusion: HMRC has further to go until it can differentiate between taxpayers who are genuinely struggling, and those who can afford to meet their liabilities but are choosing not to. 6a: PAC recommendation: HMRC should set out how it will strike the right balance between providing support to taxpayers who need it, whilst ensuring that those able to meet their liabilities are doing so. 6.1 The government agrees with the Committee’s recommendation. Recommendation implemented 6.2 In its approach to debt collection, the department recognises the importance of differentiating between taxpayers who are struggling to pay and those who can afford to meet their liabilities but choose not to do so. Its priority remains to support customers in short term financial difficulty to manage their way out of debt quickly and sustainably while taking enforcement action against those who can pay but choose not to. 6.3 The Committee has already noted the progress HMRC has made in testing external data sources, and the expansion of its debt management service, which will give the department greater insight into debtors’ circumstances and greater capacity to deal with them appropriately. 6.4 The government is investing a further £47.2 million to improve HMRC’s capability to manage tax debts. This will allow HMRC to better distinguish between taxpayers who can afford to settle their tax debts but choose not to, from those who are temporarily unable to pay, ensuring taxpayers are offered the right support. It will support taxpayers who are temporarily unable to pay by enhancing the online Self-Serve Time To Pay service, while also providing HMRC with additional capacity to ensure that those who can afford to settle their debts do so. 6.5 HMRC will apply the external data it has tested to its internal modelling by the end of 2023/24. This will provide greater insight into the debtor population and result in more appropriate treatment based on their circumstances. 6.6 HMRC wrote to the Committee on 24 January 2023 outlining its transition to six new debt journeys based on data-led insight that will ensure that debtors receive treatment which is more closely aligned to their circumstances. 6.7 Going forward, it is the department's ambition is to improve data analysis capability to enable the implementation of more dynamic debt recovery journeys. This will better ensure that debtors receive the most appropriate intervention at the right time based on their individual circumstances.