Tax authorities criticised for outdated IT systems

Outdated HM Revenue and Customs IT systems has written of £11.2bn of £28bn in accumulated tax debt

Commons public accounts committee has criticised tax authorities

The Commons Public Accounts Committee has criticised the tax authorities for allowing outdated IT systems to hamper their ability to recover tax debt.

MPs delivered the complaint in a report which revealed that HM Revenue and Customs had written off a whopping £11.2bn of £28bn in tax debt for 2008-09.

The report said the Treasury should reconsider the way it evaluates the case for purchasing systems taking the benefit to public finances into account, as well as HMRC's need to make decisions within funding limits.

The comment related to the Treasury's recent deferment of the purchase of a debt management system enabling officials to profile an individual's total debts to assist recovery of unpaid taxes.

Chairman Edward Leigh complained: "Delays in introducing new systems have contributed towards backlogs in processing tax cases and have led to staff resources being diverted at critical times."

Some 17 million PAYE cases are awaiting processing. This will not begin until next April when the new Pay-As-You-Earn systems will become fully operational.

Work to test compliance with the Stamp Duty Land Tax has been disrupted by delays in introducing a new computer system.

And weaknesses in the Department’s debt management systems are preventing it from analysing debts by age and value and from calculating a taxpayer’s total debts across all taxes.

The Department has deferred its plan to invest in a new debt management system because of other spending priorities.

But with £11.2 bn at risk of non-recovery, the benefits of investment in a new system could easily outweigh its cost, according the committee report.

And systems that support those claiming tax credits are also inadequate. HMRC requires tax credits claimants to report changes in their circumstances as they occur, but IT systems are currently unable to quickly recalculate their new award amount.

"The Department should assess the costs and benefits of investing in an enhanced tax credits computer system that offers the flexibility to introduce service improvements promptly and to update claimant records in real time," the report says.