HM Revenue and Customs will get a cash injection of nearly £180m to help close the tax gap, it has been announced.
Today’s Spring Statement included £100m in new funding to recruit a further 500 compliance officers, plus £79m to spend on third-party debt collectors over the next five years.
The measures will enable the tax authority to chip away at unpaid tax liabilities that stood at more than £44bn at the end of December. Some £20bn of these outstanding tax debts are over 12 months old and harder for HMRC to collect, according to documents published alongside the Spring Statement.
Recruitment for the extra compliance officers, who are expected to raise £241m in unpaid tax over the next five years, will start next month.
The 500 additional staff will “equate to around 300 fully productive compliance staff in 2029-30”, according to the costing documents. This is because it takes four years for new staff to reach “full productivity”, as well as the delay between working compliance cases and yield received and expected baseline productivity improvements.
The new hires are expected to net the Treasury £95m in 2029-30, accounting for the costs of hiring and training new recruits.
The department will also get £79m in new money to spend on its existing partnerships with third-party debt collectors over the next five years. The Treasury will top up HMRC’s spending on debt collection agencies by £9m to £44m each year up until 2029-30, when it will get a further cash injection of £43m.
This is expected to bring in £1.3bn in tax that would otherwise be lost through write-off or remission to the Treasury’s coffers – amounting to around £16 for every £1 spent, according to costings documents.
HMRC will also use £4m of its existing funding to pilot a new “test-and-learn” programme with the private sector to improve its approach to recouping older unpaid tax debt. The programme will look at how to collect older debts and move towards more automated debt recovery.
“Ministers will decide whether to proceed with a larger exercise later this year based on the results of this test,” the documents say.
The department will also hire an additional 600 civil servants over the next three years to expand its capacity to collect tax debts at a later stage of the debt management process.
It will hire the first tranche of 200 debt management staff in the upcoming year, with a further 200 to be recruited over the following two years.
The staff will “work with the private sector to make collecting tax debt more efficient including through automating admin processes”, according to Spring Statement documents.
The new hires will come on top of the 1,800 additional debt management staff announced in the Autumn Budget.
HMRC will spend £114m on the debt management staff but does not appear to be receiving any extra funding from the Treasury for the move. However, it expects to recover more than £13 of debt for every £1 spent on these officials.
The announcements come two months after Treasury minister James Murray told MPs that HMRC could get more staff if there was evidence that it would improve tax-collection rates.
"There was definitely extra capacity there to bring in additional tax revenue, and we can do that through these extra staff," said the minister, who chairs the HMRC board.
"You obviously have diminishing returns to investment in terms of extra staff at some point. But one of the questions which I'm very keen to understand is where that point kicks in," he added.