Completing your tax return? Don’t rush, HMRC is still missing £42bn

That cash ‘would have filled a lot of this year’s infamous public spending black hole’, says Labour MP

Going after your pennies, and not the pounds (Getty)

As the government scrabbles around to find extra money, there is £42bn going begging that it’s doing precious little to access.

It’s true, it’s rather like searching through drawers, inside cupboards, down the back of the sofa, the children’s piggy banks, anywhere for any spare change, and all the time there is a pile of notes sitting on the coffee table. Well not quite, but not far off.

The £42bn is the total amount of unpaid tax from businesses and individuals. The Commons Public Accounts Committee (PAC) found that HMRC collected £731.1bn in taxes and duties in 2021-22, a record, but that 5 per cent remained unpaid.

Perish the thought that within the Inland Revenue offices it’s high fives and warm prosecco all round as they hit the highest ever top number, and a collective shrug when the missing £42bn is mentioned, if it is at all.

As Dame Meg Hillier, the Labour chair of the PAC rightly points out, that cash “would have filled a lot of this year’s infamous public spending black hole”.

HMRC’s reaction is to continue, undeterred, on its sweet way. It is employing additional tax inspectors but over the next few years, not immediately. This, at a moment of huge pressure on public spending. The government needs every pound it can lay its hands on, but its tax arm is choosing not to move, or not to move quickly, to grab extra revenue that it knows is out there.

The next time we, and the striking public sector unions, are treated to a lecture by Rishi Sunak as to there not being any more funding available he should be told to look closer to home, to give his tax collection service a good shake. There is money going begging, but they are in no hurry to claim it.

The same prevailing attitude applies to recovery of £4.5bn that was handed out due to fraud and error in the various pandemic recovery schemes. HMRC only expects to clawback a quarter of that. A quarter! I’m tempted to write on my tax form that this year I will only be paying a quarter of what I owe because I understand that’s regarded as an acceptable hit rate.

If it was 75 per cent, that would be more like it – and I could live with the writing off of the remainder. But to only pursue 25 per cent, that seems incredibly lackadaisical, not least when we live in a period where every pound is vital.

A temporary taskforce has been allocated £100m to examine 40,000 pandemic handouts but HMRC forecasts the team will retrieve £1.1bn, leaving more than £3bn unaccounted for.

Meanwhile, an HMRC spokesperson points out they’ve cut the UK tax gap by more than 30 per cent since 2005. “We continue to prioritise collecting unpaid taxes, which is why we are adding a further 2,500 people to our compliance teams as well as rolling out our digital offer to ensure everyone pays what is due.”

This is one of those curious Whitehall statements, straight from Yes Minister. Ignoring all the evidence to the contrary, the mouthpiece blithely states: “We continue to prioritise.” Neither is any mention made of the timescale for the recruitment of the extra 2,500 staff – as I say, expect years not months. Nor is any detail afforded for what is meant by the “rolling out of our digital offer” but who cares, it doesn’t half sound good.

It’s the lack of ambition that is so galling. The many problems in the Covid support schemes such as furlough that acted as an open goal for fraudsters are well known, but HMRC appears to be compounding the gift by settling for trying to recover less than a quarter of the estimated losses. Says Hillier: “We recognise the problems HMRC faces – due to poor controls, the horse has bolted – but we believe there is a moral duty to pursue fraud. HMRC must ensure dishonesty is not seen to create advantage.”

She’s right of course. To not chase the dosh, to not follow the money, is negligent on two levels: the loss of revenue that could be recovered; and the signal it sends by making no attempt to go after it at all. At the very least, those who had no compunction in ripping off the state during the worst health crisis in living memory should be made to feel nervous. Who knows, rattle them a bit and they may offer settlements. But that option is not being explored either.

At the top of the commercial world, those who manage HMRC would not last two seconds. Their complacent approach, for that surely is what it is, would be blown apart. I recall congratulating Sir Terry Leahy on £1 in every £8 in Britain being spent at his Tesco stores. His face creased into a thin smile. He nodded and said it meant there was £7 still to chase.

Similarly, I was present when Guillaume Faury, head of Airbus, once asked an adviser how they were faring. “We’re trying our best,” said the consultant. Faury grinned and replied: “In which case, I will try to pay you.”

Rishi, please do not tell us there is no spare funding. There is, and it is right under your nose. Ask your tax department. And then order them to raise their game.