HMRC Outsourcing Tax Debts
There’s a report out this week about HMRC Outsourcing tax debts more and more to aggressive private sector debt collectors.
There’s been a huge uplift in HMRC doing this with an increase of 630% in just 4 years.
This has been at a time when the Government has been laying off thousands of HMRC workers.
In 2014 they paid out £6.2 to private sector debt collection agencies.
In 2017 it is £39.1m.
HMRC Outsourcing Tax Debts to Private Sector Debt Collectors
As a result, aggressive private sector debt collectors are turning up at businesses’ and contractors’ doors saying the won’t leave till they get the money.
Many contractors haven’t paid, not because they don’t want to – but because they can’t.
It usually happens when they have had a spell out of work, perhaps in a downturn that they have tax problems.
Although they should put money aside for their taxes and ring fence it, they often don’t.
They often have families to feed, and mortgages and car loans to pay.
So, when their contracting money runs out, they dip into, ‘temporarily’, the money they have put aside for tax.
They reckon that once they get a contract they can pay off the taxman then.
Contracting in a Deep Recession
However, in a deep recession, they may not only spend all their contracting profits but the money they have set aside for tax.
And then they get the visit from the aggressive ‘freelance’ tax debt collector.
HMRC say that doing this is good value for money.
However, they offer no evidence for this.
£39m of taxpayers money is a lot to spend on something that they offer no evidence to justify.
HMRC Chasing Non-Existent Tax Debts
Indeed, HMRC spend a lot of time chasing tax debts that are non-existent.
They admitted at the end of last year that 78% of what they thought was outstanding debt wasn’t so at all.
They could probably save more than £39m by getting their information right in the first place.
This could mean that 70% of the cases of people that they outsourced to private debt collectors haven’t tax debts at all.
That means that many thousands of contractor and others were harassed unnecessarily.
Surely the main problem is the waste of much of the time of debt collectors and their own time.
These tax debt collectors threaten to remove equipment and furniture to the tune of the tax debts.
Contractors Harassed by Debt Collectors
This must be worrying for those who don’t have any tax debts – especially if the contractor is at work and the door is answered by a spouse or family member.
It must be even more worrying for those contractors who actually have spent their tax money on keeping their families.
This outsourcing of tax debts come about because of the pressure that the Government are putting HMRC under.
The Government say that they want to help the self employed as much as possible.
However, whatever Government is in power, freelancers never see much sign of this.
Indeed, with IR35 etc. they see very much the opposite.
With HMRC outsourcing tax debts to aggressive collectors that’s just one more worry for the self employed.
For more good articles on tax and the self employed click on Tax.
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