HMRC Have Published Their Tax Debt Strategy

  • Person icon Mark Morton
  • Calendar icon 23 November 2023 16:34
HM Revenue & Customs

HMRC’s tax debt strategy sets out how they will improve the management of tax debt from 2023/24 to minimise the volume and value of tax debt.

HMRC’s approach to customers in tax debt remains to:

  • make it as easy as possible for customers who can to pay to do so
  • support those who need help
  • take effective enforcement action against those who refuse to pay or cooperate.

By identifying and analysing the key challenges to meeting their goal, they have developed four strategy pillars:

  • preventing tax debt
  • tailoring interventions
  • effective and efficient resolution
  • being adaptable.


Preventing tax debt

The objective for this pillar is to minimise the volume of tax liabilities that become a debt. This will reduce the volume of debt arising so HMRC can focus resources on debts that are harder to resolve and/or on customers that need more support.

The three sub-pillars to preventing tax debt are:

  • payments
  • compliance debt
  • tax policy design.

HMRC intend to make payment as simple as possible for customers. This includes methods of payment and payment allocation. This will ensure payments are credited against the desired liability and help prevent debts arising.

Compliance debts are those that arise from interventions by Customer Compliance Group to tackle error, avoidance and evasion. HMRC intend to reduce the volume of liabilities arising from compliance interventions that become debts through offering better payment options and improved communications during compliance interventions, before customers are contacted by Debt Management teams.

HMRC intend to ensure that payment and debt prevention are at the heart of tax policy design, to reduce the volume of debts created in the future.


Tailoring interventions

The objective for this pillar is to apply the most appropriate intervention to a particular debt and customer at the right time. This will help meet our strategy goal by reducing the number of ineffective interventions and identifying customers who need our support.

The three sub-pillars to tailoring interventions are:

  • data sources and uses
  • operational deployment
  • optimised debt journeys.

HMRC intend to understand the best data sources to improve our segmentation, and to what extent they improve it, so that these can be added over time. This includes external data sources as well as internal data, such as other information HMRC learn about after engaging with the customer following the initial segmentation.

HMRC also intend to use data from our compliance interventions, such as information about the customer’s behaviour. This will enable HMRC to strengthen our treatment of deliberately non-compliant customers and provide a consistent approach to achieving behavioural change.

HMRC intend to deploy the tailoring approach throughout all appropriate interventions across HMRC and not just within Debt Management teams. HMRC will give colleagues this information to enable them to make the best decision when engaging with customers.

HMRC intend to create personalised and dynamic customer journeys that use a range of data and analytics to select the best intervention for each debt. This will use machine learning to optimise output against resource availability.


Effective and efficient resolution

Resolving a debt means one of the following outcomes:

  • payment – full, partial and/or delayed payment such as Time to Pay arrangements
  • remission – our decision to no longer pursue a debt on economic grounds (can be undone)
  • write-off – administrative action when no legal route to collect exists, such as insolvency
  • administrative actions – for example, customers amending their returns or re-allocating payments.

HMRC’s objective for this pillar is to make sure our process for resolving tax debts is as efficient and effective as possible. This will help meet the strategy goal by increasing our capacity and the effectiveness of interventions so HMRC can resolve more tax debts.

The three sub-pillars to effective and efficient resolution are:

  • channel shift
  • recovery powers
  • internal processes.

HMRC intend to resolve as many debts as possible through digital-only products and services, rather than via telephone and post. This will be done under the overall HMRC channel shift strategy.

HMRC use a variety of powers to resolve debts. Some of these are specific to HMRC, such as coding-out – where money owed is recovered through a customer’s Pay As You Earn (PAYE) tax code. Some are restricted to a limited number of creditors, such as Taking Control of Goods, and some are available to all creditors, such as insolvency proceedings. HMRC are committed to ensuring they use all these powers in a responsible way, but also maximising their successful use in appropriate cases.

HMRC intend to make our internal debt management processes as smooth and efficient as possible. Our colleagues need to be able to access customer data and record the outcome of interactions as quickly as possible to maximise their time on resolving debts.


Being adaptable

The objective for this pillar is to adapt to fluctuations in debt volume and changing priorities. This will help to meet the strategy goal by ensuring HMRC are flexible enough to respond to external volatility and changes to the tax system.

The three sub-pillars to being adaptable are:

  • forecasting and insight
  • governance
  • IT systems.

HMRC intend to understand what is driving customer debt behaviour using insight from external sources and to accurately forecast new tax debt and resolutions. Bringing these things together on a regular basis will ensure HMRC have a combined view of what HMRC expect to happen and why.

HMRC will implement a governance structure that allows them to monitor the overall strategy and to be able to make decisions on how to respond to local and national emergencies.

HMRC intend to make sure their IT systems have flexibility incorporated into them so that thresholds and eligibility criteria can be changed at short notice and with minimal cost.


Being a responsible creditor

The HMRC charter sets out standards of behaviour and values to which HMRC are committed when dealing with customers. It is our commitment to giving customers a service that is professional and based on respect and integrity. The HMRC charter applies to all customer interactions, including those related to debt.

In addition to this, HMRC are committed to being a responsible creditor. This means that HMRC clearly articulate the options and consequences to debtors, especially people who are in problem debt.

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