The Government will employ professional debt collectors to recover unpaid tax.

The plans form part of moves to generate an additional £7 billion in tax by the 2014/15 financial year at an up-front cost of £900 million (see the 2010/11 Tax Breakdown guide).

As well as recouping cash using third parties from dishonest tax evaders and families struggling to pay, HM Revenue & Customs also plans to crack down on more organised tax dodgers via other means.

Debt collection

It says debt collectors used won't be 'heavies', insisting the firms will be better equipped than HMRC is at collecting money. They will attempt to help debtors repay money by spreading payments, for example.

In total, around £1 billion of unpaid tax will be passed to debt collectors to recover, with the remaining sums to stay under HMRC's remit.

Self assessment taxpayers, who declare their own income, of which there are nine million people, are more likely to be chased by a third party collector. Those who pay tax via the Pay As You Earn (PAYE) system have this deducted by their employer.

However, it is not always that simple. Some 1.4 million who fall under the PAYE system are set to be told they owe money due to a blunder by HMRC which collected too little tax during the 2008/09 and 2009/10 financial years (see the How to fight HMRC demands MSE News story).

Stopping criminals

Funding will be used to increase the number of criminal prosecutions against evaders fivefold. HMRC plans to stop evasion include:

  • Preventing taxpayers "hiding" money overseas in the hope they can avoid paying their UK dues.
  • Deploying experts to monitor businesses it suspects of failing to declare tax owed.
  • More checks to stop tax repayments when they are not due.
  • Investment to prevent alcohol and tobacco smuggling.

The Government says the plans are more about recovering cash from evaders rather than closing loopholes used by wealthy individuals. These tax avoidance schemes, it says, will be closed via separate legislation.

Deputy Prime Minister Nick Clegg, speaking at the Lib Dem party conference today, described those who pay accountants to lower their tax bill as behaving like "benefits cheats".

Further reading/Key links

Tax help: 2010/11 Tax Breakdown, Taxing Times
Check benefits: Benefits Check-Up