HMRC Ramps up Use of Debt Collectors

Government departments are increasingly using debt collection agencies to recover outstanding tax and VAT bills, as well as tackling benefit cheats.

Government use of credit agencies is on the rise, partly the result of attempts to reduce fraud, as highlighted in the recent report,Tackling Fraud and Error in Government. Fraud and error costs public services £31bn a year with HMRC alone reporting £6bn of losses a year due to tax errors.

The latest figures on the volume of consumer debt being chased by debt collection agencies hit £58bn in 2011, according to a report by the Credit Services Association (CSA), the representative body for the UK debt collection industry.

CSA president Sara de Tute said: ‘The economic environment has undoubtedly become more difficult so it is no surprise that debts are rising. But there are also other reasons, including ‘new’ creditors within the private sector and parts of national government who no longer see an issue with outsourcing debt for collection to professional and highly regulated agencies capable of recovering monies vital to the public purse.

‘The government has gone on record recently as reporting that overdue debts cost it between £7bn and £8bn – 95% of which resides with the Department of Work and Pensions (DWP) and HMRC – and part of this has now been passed to our members for collection.’

At the end of 2011, the total value of unpaid consumer debt held by CSA members for collection stood at £58bn, up 11% in the second half of the year.

HMRC has saved £50m by introducing an application screening process for tax credit claims and is developing a new system, Connect, to identify tax fraud and non-compliance. It has also expanded its tax investigation activities, ramping up the number of annual prosecutions to 1,000 a year.