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Public Accounts Committee reads HMRC provision as tax written off

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MPs who claimed that HM Treasury had a ‘poor’ understanding of some aspects of the Whole of Government Accounts appear to have misinterpreted a key figure.

The audited accounts for the year to 31 March 2010 were published last November. The Commons Public Accounts Committee’s report published last week began with a note that the accounts showed that the government ‘wrote off £10.9bn in unpaid taxes’. On the following page the PAC said the Treasury ‘showed surprise’ at the estimated ‘£10.9bn in outstanding tax’.

However, the figure reported in the accounts published on the Treasury website represented neither tax written off nor total outstanding tax. It was a provision for irrecoverable debt, made ‘to reflect the risk of non-payment’.

HMRC reported ‘revenue losses’ of £6.6bn for 2009/10 and £5.9bn for 2010/11. Revenues accrued in 2010/11 amounted to a record £469bn.


In a letter published in the Metro newspaper, Chloe Smith, the Economic Secretary to the Treasury, said it was wrong to say that the Treasury was ‘surprised’ by the £10.9bn figure, which was not an amount of tax written off but was an estimate of tax that HMRC ‘may not be able to collect’.

Metro had reported on 6 February: ‘Almost £11bn in unpaid tax was written off in a year without anyone realising as chaos reigned among those supposedly in control of the nation’s finances, MPs say’.

‘Treasury unaware of tax write off’ was the Accountancy Age headline on 7 February, and in The Independent (9 February) Andreas Whittam Smith wrote that ‘the amount of unpaid tax written off in 2009/10 was a monstrous £10.9bn’.  Accountancy Age reported on 13 February that ‘Government wrote off £10.9bn in unpaid tax in 2010’.

The £10.9bn represented neither tax written off nor total outstanding tax. It was a provision for irrecoverable debt.



The Whole of Government Accounts were the first audited financial statements produced for the UK’s public sector. At a PAC hearing in December Margaret Hodge, the PAC Chairman, told Sir Nicholas Macpherson, Permanent Secretary to the Treasury, that it was ‘gobsmacking’ that the Treasury had ‘written off nearly £11bn’.

That was ‘a lot of money’, he agreed, adding that ‘we need to work on it’. But the question related to a provision, not a write-off.

The National Audit Office made no specific mention of tax liabilities in its press release, dated 29 November, on the Whole of Government Accounts. Its full report merely noted that the provision had been made.

Tailored debt campaigns

HMRC’s accounts for 2010/11 showed a provision for doubtful debt of £10bn at 31 March 2011, compared to £11bn at 31 March 2010.

‘HMRC has not "given up" any tax that is legally owed’

HMRC spokesman

‘Revenue losses’ were £5.9bn in 2010/11, including write-offs of £4.7bn and remissions (debts capable of recovery which HMRC decided not to pursue ‘on the grounds of value for money’) of £1.1bn.

The NAO had reported on HMRC’s 2010/11 accounts in July 2011. It said: ‘Receivables represent all taxpayer liabilities which have been established for which payments have not been received at the year end; this has increased by £1.4bn (5%) to £29.5bn, after taking account of changes to accounting policies. A provision for doubtful debts has been estimated as £10bn, based on the Department’s expectation of the value that is likely to be collected.

‘In our 2009/10 report on the accounts, we reported on the Department’s efforts to improve debt collection through new approaches such as the use of debt collection agencies and the introduction of tailored debt campaigns that targeted debt by its characteristics.’

The NAO added: ‘In 2010/11, £11.7bn of debt was assigned to campaigns, leading to the collection of approximately £7bn. The Department is developing and refining its approach to campaigns, including their evaluation, and it is too early to conclude on the effectiveness of this approach.’


A Treasury spokesman told Tax Journal: ‘The government welcomes the Public Accounts Committee’s recognition that the publication of the Whole of Government Accounts represents a “major step forward in improving transparency and accountability”.

‘This is the most ambitious public sector account prepared anywhere in the world. No other country has sought to fully consolidate all public sector bodies, including the local government sector, in one statement of accounts. We will build on this first publication and are working hard to remove any qualifications.’

He added that HMRC ‘collects almost all tax debt and write offs are relatively low’. Around 90% of tax written off was due to insolvency, ‘where further debt pursuit is barred by law’.

An HMRC spokesman said: ‘HMRC has not "given up" any tax that is legally owed and collects 99% of debt that is due. Ninety per cent of money owed to HMRC that is written off is caused by company liquidations and HMRC is legally barred from collecting that debt. However, the amount of remissions and write offs have fallen by nearly £2bn over the last year. Tax write-offs have nothing to do with errors in the tax system – they are mainly due to insolvency and other situations where it is not possible to pursue the debt.’

The PAC report on the Whole of Government Accounts is available on the Parliament website.