In a hearing on Thursday (26 January), HMRC chief Jim Harra told the Public Accounts Committee that the level of small business tax debt is growing.
This can be partly attributed to businesses struggling with poor economic conditions as inflation soars and the cost of living crisis worsens. There has also been a higher level of non-payment since the Covid-19 outbreak.
Harra denied that this was due to a change in taxpayers' attitude, instead saying that it was because of the economic impact of the pandemic.
The HMRC chief noted that there has not been a significant downturn in customers filing their return on time, but rather an increase in the number of people unable to pay in full.
When questioned about rising levels of outstanding tax debt, Harra told MPs that this was because of the worsening economic situation, saying that HMRC did not expect the debt balance to "change materially" in 2023.
Speaking on HMRC's approach to managing tax debt, Harra said:
"We want to tailor the approach depending on what we think the customer's ability to pay is.
"We only want to take enforcement action in cases where we believe they can pay but they will not, or they are not engaging with us, or it is actually a hopeless case."
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