HMRC: 'Eye watering' £42 billion owed in unpaid taxes

The committee also found that 5% of owed taxes remain uncollected amid calls for "serious action" from the Liberal Democrats.

Speaking of the issue, the party said there needs to be “serious action to close this tax gap black hole” as the country battles a cost of living crisis, labelling the amount owed: “absolutely staggering."

This comes amid strike action by nurses, civil servants, and railway workers over pay and conditions.

PA - Money owed to HMRC branded absolutely staggering

The committee report, which was published on Wednesday, criticised UK ministers for not doing more to collect money that could be used for public services.

Dame Meg Hillier, chair of the committee, said: “The eye-watering £42 billion now owed to HMRC in unpaid taxes would have filled a lot of this year’s infamous public spending black hole.

“But the public purse will continue missing out on billions of desperately needed revenues as HMRC will only employ more staff to tackle compliance over the next few years – not fast enough to dent the tax gap at a time of huge public sector spending pressures.”

According to PAC's 22-page document, HMRC collected £731.1 billion in taxes and duties in 2021-22, the highest on record for the UK as the country emerges from the pandemic.

However, despite this, the committee said that more must be done to collect unpaid taxes.

The report said: “In June 2022, £42 billion was owed to HMRC in tax debt, much more than before the pandemic.

“This debt is now set to fall more slowly than initially expected as taxpayers feel the effects of the cost-of-living crisis.

“In 2021–22 HMRC generated £30.8 billion from its compliance activities, though this also remains below pre-pandemic levels of performance.

“For every £1 that HMRC spends on compliance activities, it recovers £18 in additional tax revenue.

“The Government is missing the opportunity to recover billions in lost revenue by not resourcing compliance.”

MPs also added that it was a "moral duty" to continue tracking down unpaid money to the treasury.

The Committee also expressed its "disappointment" that the HMRC "only expects to recover around a quarter of the £4.5 billion" lost because of fraud and error during coronavirus support schemes.

PA - A task force has been given £100 million to investigate 40,000 cases (Image: PA)

Uncollected tax and duty money branded 'absolutely staggering'

Christine Jardine, the Liberal Democrat Cabinet Office spokeswoman, added: “This Government is losing absolutely staggering amounts of money through its incompetence and inability to collect the tax it’s owed.

“We need to see serious action to close this tax gap black hole.

“Ministers need to immediately get a grip on this situation, anything less would be a failure for millions of people who are struggling with the cost-of-living crisis.”

Labour’s shadow chief secretary to the Treasury, Pat McFadden, said: “The Government should be trying to recover every pound of this before hitting households with more tax.

“It’s not just the tax unpaid, but the sums lost to Covid fraud which show the extent of the problem.

“The Tory record is one of waste, fraud and more and more taxes to make up for their mistakes.”

However, a spokesman for HMRC said: “Since 2005 we have cut the UK’s tax gap by more than 30%, and we continue to prioritise collecting unpaid taxes, which is why we are adding a further 2,500 people to our compliance teams as well as rolling out our digital offer to ensure everyone pays what is due.

“We take a supportive approach to taxpayers in debt and balance that with recovering debt from those who can afford it.

“A blanket approach would put thousands of people and businesses to the wall."