Staggering £45 billion owed to the taxman – more than enough to head off tax rises

British businesses and individuals owe a staggering £45 billion to the taxman, which – if recovered – would be more than enough to head off tax rises.

Details have been revealed in the HMRC’s annual report raising concerns the government should concentrate on collecting what is owed rather than raising new taxes.

Some £7 billion of the outstanding taxes is described as ‘managed debt’ which is effectively being paid off in instalments.

However, that means there is still some £37.5 billion available to be pursued.

Tax experts BDO said the total amount owed is down 3 percent in the past year to a total of £44.6 billion.

However, Dawn Register, BDO’s Head of Tax Dispute Resolution, said: “While the decline in overall tax debt is welcome, £45bn is still a huge sum of money that is going unpaid.

“With the chancellor looking to fill a £22bn budget shortfall in the public finances, going after those who can but don’t pay seems like a no-brainer.”

She said there is a Time to Pay regime to help people whose debt to the taxman is less than £30,000 to pay off the money, but the number signed up has fallen.

Dawn Register said: “Clearly, some of the tax owed won’t be recoverable, but you might have hoped that recent investments in HMRC’s tax debt management capabilities would have had more of a significant impact. Instead the decline in overall tax debt over the last year has been modest at best.

“We know that the Government has committed to extra resources and staffing for HMRC, although we don’t yet know the extent of this future investment.

“What is clear is that with £45bn of tax owed but going unpaid, there’s a huge target for the chancellor to aim at if she’s looking to plug a hole in the public finances.”

To put the figure in context a much lower £9.7 billion of total benefit expenditure was overpaid due to fraud and error last year, according to the DWP.

It emerged this week that a husband and wife who ran an agency supplying NHS workers to the care sector have been banned from being company directors after they failed to pay £30 million in tax to HMRC.

Raja Usman and his wife Khair Un Nisa were directors of Umbrella Care Ltd, a Derby-based company which provided workers to the care sector

Usman was banned as a company director for 14-and-a-half years this month and Nisa signed an 11-year disqualification undertaking.

Umbrella Care was wound-up in 2020, with liquidators having recovered more than £12 million in assets from the pair since then. The couple used the money to buy 14 properties which have since been sold to recover some of the unpaid tax.

The pair knowingly submitted inaccurate VAT, PAYE and NIC returns between May 2017 and at least April 2020.

Lawrence Zussman, Deputy Head of Company Investigations at the Insolvency Service, said the pair “deliberately under-declared the amount of tax Umbrella Care was expected to pay by tens of millions of pounds.

“This was money that should have been used to provide vital public services and investment in areas such as schools, hospitals and roads.”