More HMRC chaos - £1.5bn of unpaid tax is likely to be written off

Earlier this week (23rd September) the BBC revealed that insiders at HM Revenue and Customs said that up to £1.5bn of unpaid tax is likely to be written off.


Staff said the vast majority of cases would not be pursued because they were over two years old and open to legal challenge from taxpayers.


There is a backlog of 7.5 million cases of tax underpayment or overpayment - the latter estimated at £3bn which will be reimbursed - dating back to 2007-8.


An HMRC spokesman said no decision had been made on underpayment cases.


The details have emerged just days after the revelations that a further six million people had been wrongly taxed in the past two years, with 1.4 million people who underpaid set to receive an unexpected tax bill.


The latest issue is part of a huge backlog of open cases dating back to 2007/8 which are not on HMRC's new computer system and will have to be dealt with manually.


It would appear that only cases that verge on fraud will be pursued.  Cases where money is owed to taxpayers by the Exchequer will still be processed.


The delay in handling these open cases is due to a combination of a historic backlog, which once reached 30 million, the additional work created by problems with the new computer system and a shrinking number of staff.  HMRC has cut 20,000 jobs since 2006 and aims to shed a further 5,000 by next year.


An HMRC spokesman said: "We have said to staff if you find an overpayment to pay it back - we are prioritising vulnerable groups, old age pensioners, low-income groups - the priority is to repay these groups.


"But while we are reviewing the cases of underpayment, no decision has been made on these cases."


He added: "It's a provisional period, where staff have been asked to review underpayments. If they find someone who has underpaid then that is set aside for a future decision.


"Those who have underpaid, they will be part of the overall decision-making process - no decision yet on what to do with them. But they are being identified."


Seek professional advice

The message is clear.  If you receive a demand for underpayment then take professional advice.  After all, it might simply be another HMRC error. 

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