UK tax billions go uncollected as staff tackle Covid fraud and Brexit

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Billions of pounds of tax are being left uncollected in the UK because almost 2,300 HM Revenue & Customs tax compliance staff have been transferred to work on Brexit and Covid-19 schemes.

Victoria Atkins, the Treasury minister, acknowledged in response to ministerial questions that 1,043 HMRC tax compliance staff had been assigned to work on Brexit cases in the 2021-22 tax year. She added that a further 1,250 staff, who would normally be working on recovering unpaid taxes, have been moved to working on Covid-19 loan schemes — which have been subject to fraud.

“Civil servants are being moved from one crisis to another in a constant game of whack-a-mole, leaving taxes uncollected and public services deprived of cash,” said the Liberal Democrat party, which put the questions to Atkins.

Sarah Olney, Lib Dem treasury spokesperson, said the transfer of around 10 per cent of HMRC tax compliance offers to Brexit and Covid duties came at a cost to public services.

Atkins revealed that £30.7bn had been recovered through compliance efforts in 2021-22 compared with £36.9bn in 2019-20, the year before the pandemic fully hit, a fall of more than £6bn.

“This Conservative government is in nonstop firefighting mode because of their gross incompetence, from the botched EU trade deal to the unforgivable mistakes made during the pandemic,” Olney said.

HMRC said: “We move resources where and when they are most needed and our performance is reflected in the fact that we collected a record sum for the UK’s public services last year.

“The National Audit Office has recognised that HMRC’s compliance work provides good value to the taxpayer.”

However John Cullinane, director of public policy at the Chartered Institute of Taxation, said Brexit had added “significantly” to the workload of the tax authorities.

“Brexit, Covid and the war in Ukraine have required HMRC to reallocate people from their existing work, leaving other areas badly stretched,” he said.

“These things came on top of long-running tendencies for governments to introduce tax policy changes tending to lengthen the tax code and complicate the system.

“We fear that proposed tax changes will bring more people into the scope of tax across a range of different taxes and put further pressure on HMRC’s limited resources.”

In his Autumn Statement Jeremy Hunt, the chancellor, announced that the capital gains tax-free allowance will fall from £12,300 to £6,000 in April before halving again next year, which the government estimated will draw around 260,000 more individuals and trusts into self-assessment tax returns.

Conservative officials said the Liberal Democrats were trying to have it “both ways” by insisting that the government cracked down on fraud in Covid-19 support schemes and then criticising it when officials were deployed to tackle the issue.

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