The BBC was recently told by HMRC whistleblowers that the Revenue has been instructed not to chase a lot of underpayment cases that are over two years old and which could be open to a legal challenge; a claim that has been strongly denied by an HMRC spokesman.
According to the whistleblowers, staff have been told to prioritise cases where HMRC owes money to taxpayers, especially pensioners or other vulnerable groups, and any cases that could be fraudulent.
The Revenue currently has a backlog of around 7.5 million cases of under or over payment of PAYE. £3bn of these cases are the result of overpayments whilst £1.5bn are underpayments.
Whilst the HMRC spokesperson confirmed that the department would be prioritising the processing of refunds, he also made it clear that no decision had yet been reached concerning underpayments. Staff are currently reviewing the underpayment situation and any instances that are found will be put aside to await a future decision.
Like other government departments, the Revenue is subject to government spending cuts and expect to shed 5,000 staff by 2011 in addition to the 20,000 they have lost in the past 4 years.
In related news, the LITRG has expressed concerns over HMRC’s proposal to claim fixed costs from defaulters when a case is successfully pursued through the courts. The Group has no objection to these costs if a debtor has refused to pay but in some cases the debtor is suffering genuine financial hardship and is unable to pay. The body is therefore calling on the taxman to exercise discretion when it comes to claiming these costs.
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