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HMRC spends £84m on debt collection agencies in three years

Paloma Kubiak
Written By:
Paloma Kubiak

HMRC has spent more than £84m on private debt collection agencies in the three tax years to 2019/20.

For those who don’t pay their tax bills, HMRC can escalate the situation to external private debt collection agencies (DCAs).

It uses a number of these DCAs and when the matter is passed over to the agency, they will write to the debtor where they will need to pay the agency directly.

In 2017/18, HMRC spent £32m on DCAs, with £1.71m being spent on final opportunity letters.

In 2018/19, HMRC spent £26m on DCAs, with £1.3m being spent on final opportunity letters.

In 2019/20, HMRC spent £26.1m on DCAs, with £1.24m being spent on final opportunity letters.

Over the three tax years, this adds up to more than £84m.

Jesse Norman, financial secretary to the treasury, revealed the figures and said: “As part of their overall collections strategy, debt collection agencies (DCAs) provide HMRC with additional capacity.

“The department keeps under review the cost effectiveness and value for money that using DCAs provides to the exchequer and UK citizens. There are no current plans to move away from using agencies to send final opportunity letters.”

An HMRC spokesperson added: “By engaging directly with customers on HMRC’s behalf, DCAs have helped and supported thousands into affordable payment plans. Regulated by the FCA, all DCAs follow strict code of conduct and HMRC approved guidelines for dealing with our customers.

“They don’t make any visits or take enforcement action on behalf of the department. All contact is by letter, SMS or phone. And over the last few years DCAs have contributed directly to HMRC’s improving performance towards reducing the tax gap – the difference between what tax is owed and how much of it is paid.”

‘Coronavirus likely to see more people struggle to pay debt’

Jane Tully, director of external affairs and partnerships at the Money Advice Trust, the charity that runs National Debtline, said: “More and more people were struggling to pay debts owed to government even before Covid-19. As the financial impact of the outbreak continues to hit households hard, this number is likely to increase further.

“The government’s own debt collection practices often lag behind that of the private sector. Now more than ever, it is crucial that the government does not risk pushing people further into difficulty by using outdated collection practices that can be harmful to peoples’ financial, mental and physical health.

“We are calling on the government to level up its collection practices to those of the private sector by introducing a number of measures, including a new Government Debt Management Bill and much needed regulation of the bailiff industry.

“I encourage anyone worried about their finances to contact a free debt advice service such as National Debtline as soon as possible.”