HMRC will be given a 30% rise in specific funding to expand debt collection activities from the new tax year
The Chancellor said that the extra £163m, which will bring the annual costs to £515m for 2024-25, would be invested in HMRC’s ability to support individuals and businesses who are unable to pay their tax debts by increasing HMRC’s debt management resource.
This is expected to result in an additional £5bn in taxes collected over five years, Jeremy Hunt told MPs.
Funding will ramp up in future years with £1.05bn allocated from 2025-26 onwards, which is dependent on the outcome of the next general election.
The extra funding will allow HMRC to ‘better target their debt collection activity, pursuing those with tax debts that can afford to pay, and providing support to those that are temporarily unable to pay’.
The government is also planning a tougher crackdown on people who continue to bend or break the rules, by reducing opportunities for tax fraud in the construction industry and taking strong action against promoters of tax avoidance.
The Tackling the Tax Gap package of measures is the largest since 2016, raising £5bn of tax revenue over the next five years.
Fiona Fernie, partner at Blick Rothenberg said: ‘If the Chancellor really wants to cut the tax gap significantly, HMRC need the resources to mount investigations into those taxpayers where there is a suspicion of serious non-compliance and large underpayments.
‘They also need properly technically trained staff manning the helplines for the ordinary taxpayer to use to try and ensure they are compliant by getting appropriate advice.’
The government also confirmed that HMRC will rewrite the guidance around the tax deductibility of training costs for sole traders and the self-employed, to provide more clarity to business on what costs are deductible.
This will ensure that individuals can be confident that updating existing skills, or maintaining pace with technological advances or changes in industry practices, are allowable costs for tax purposes.