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The amount of debt owed to HMRC from UK businesses and taxpayers has trebled to £65.5bn from £19.3bn in 2019, according to law firm Pinsent Masons.
The firm said the increase is a result of businesses and taxpayers “falling behind on payments during lockdown”. An estimated £26.6bn of that debt is sufficiently in arrears to “enable it to be subject to immediate debt collection procedures”.
Furthermore, £35bn of the total outstanding debt is in relation to emergency coronavirus support policies such as deferred VAT payments and £3.9bn of the debt has been deferred through “Time to Pay” arrangements made with HMRC.
HMRC is currently prevented from certain enforcement action to recover debt, such as presenting winding-up petitions or making statutory demands, due to the moratorium on insolvency action that has been in place since March 2020.
Pinsent Masons said that once the moratorium and lockdown ends, HMRC will “come under increased pressure to help improve public finances in order to help pay for coronavirus support schemes, such as the furlough scheme”.
Steven Cottee, partner at Pinsent Masons said that HMRC will have a “difficult balance to strike in order to protect taxpayers’ interests whilst also looking to minimise the number of insolvencies”.
He said: “If HMRC moves quickly it may recover more money in the short-term for the UK taxpayer, however it could result in more insolvent businesses which the government will be keen to avoid.
“HMRC will need to have enough personnel with the necessary skills and qualifications to deal with these immense challenges and also be open to engaging with restructuring professionals to ensure that the interests of taxpayers and the UK economy are equally protected. The scale of the challenge for HMRC is unprecedented in recent times.”
