Recommendation 2

HMRC is not being ambitious enough in bringing down debt levels and securing the resources this will require. The longer a debt is left, the harder it is to collect. The increase in tax debt and the number of taxpayers in debt also increases HMRC’s debt management workload. We are concerned that a lack of appropriately trained HMRC staff will lead to more debt going unpaid. HMRC’s debt management team had made staff reductions before the pandemic to improve efficiency. Its planned recruitment in 2021–22 will only close the current shortfall in staffing of 300 FTE. HMRC makes limited use of private sector debt collection agencies to increase its capacity to work with specific customer groups. HMRC has additional funding over the next three years (of £40m, £60m and £90m) for “spend to raise” work but has not decided whether any of this will be used for debt recovery, despite this work bringing in at least £18 for every £1 spent. HMRC has been successful in securing additional funds from HM Treasury for time-limited recruitment, but we are concerned that the long-term uncertainty associated with this approach may prevent HMRC from planning effectively and protecting value for money. The Committee has raised this issue before on HMRC’s compliance work, which also offers high rates of return. 6 HMRC’s management of tax debt Recommendation: There is a clear value for money case to increase debt management capacity. HMRC should set out how much more tax debt it can bring in with increased levels of capacity using private sector and public sector options and write to the Committee alongside its Treasury Minute response with its findings and the actions it is taking to maximise value for money.