HMRC have lost £27bn in tax over the past five years due to economic decline and complicated tax codes…

HM Revenue and Customs, formerly the Inland Revenue and HM Customs and Excise, have been unable to collect billions of pounds in taxes over the past five years.

Uncollected corporation tax, VAT, national insurance (NI), income tax, tax credits, capital gains tax and losses on tobacco and alcohol duties have all contributed to the taxman’s loss.

Following last months report by the Commons Treasury Committee – The Administration and Effectiveness of HM Revenue and Customs – which brought to light ‘poor performance’ and ‘endemic delays’ in HMRC’s response, or lack of, to UK taxpayer enquiries. (Click here for more information)

A report by the TaxPayers’ Alliance (TPA) and the Institute of Directors (IoD) has highlighted that the total amount of tax uncollected by the Revenue is equal to £200 per UK household, each year.

The TPA and IoD have branded HMRC’s tax system as ‘too complicated’, adding that the ‘tax code has grown massively’.

The TPA and IoD report said:

“The handbooks of tax legislation have sharply increased in length, indicating more and more complexity. Tolley’s Corporation Tax guide is 1,897 pages long.

“The tax code is so long that it would take Steve Woodmore, the world’s fastest speaker, over five days straight to get through it.”

Matthew Elliot, of the TPA, added: “Tax shouldn’t be so taxing that even HMRC can’t keep on top of it”.

Although HMRC has vowed to fight the issue of tax underpayment, the amount of tax uncollected by HMRC totalled £5.9b last year alone; with future figures looking set to increase.

In 2010/2011 HMRC lost £1.35b in UK income tax. The figure totals over 50% higher than the amount lost four years ago in the 2006/2007 tax year.

A spokesman for HMRC, said:

“HMRC has not given up any tax that is legally owned and collects 99% of debt that is due. 90% of money owed to HMRC that is written off is caused by company liquidations and HMRC is legally barred from collecting that debt.”

The area where HM Revenue and Customs lost the most money in 2010/2011 is value-added-tax (VAT).

HMRC have had to unwillingly write-off the large VAT loss of £2bn, along with many other outstanding sums.

Kevin Kinsella Jnr, of KinsellaTax, said:

“There is no doubt that economic downturn and recent financial crisis in the UK has contributed to the HMRC’s loss in taxes. However, for tax loss figures to have more than doubled over the last four years, indicates a serious problem for the Revenue.

“HMRC need to re-address current UK tax legislation and simplify the tax code in order to collect unpaid tax and avoid such errors increasing.

“The problem seems to be growing year by year. One wonders why HMRC are even contemplating cutting back staff when they are obviously understaffed now to deal with the whole tax process.”

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