HM Revenue & Customs has denied it will write off £1.5 billion in unpaid tax, in spite of staff telling the BBC the department had given up attempting to recoup the money.
The reports come only a fortnight after it was revealed that six million people had been incorrectly taxed since 2008, with 1.4 million people facing an unexpected tax bill. This was in spite of a more advanced IT system for tax and National Insurance, called the NPS system, being introduced last year.
HMRC has been battling its tax case backlog for a number of years, hindered by problems with its databases and continued reductions in staff numbers. At one point there were 30 million open cases.
Today the BBC said unnamed HMRC staff had insisted that up to £1.5 billion would be written off, because many of the cases were over two years old and could face legal challenges from individuals.
Only cases that could be considered fraudulent will be pursued, according to staff who spoke to Radio 4’s The Report programme.
"For each underpayment there are thousands of pounds owed. Underpayments are very frustrating,” one employee said. "If we had the chance to sort it out three years ago we could have recovered the money. It is now likely to be written off if it's over two years - we're not looking at underpayments beyond two years."
Another said: "Our directors are telling people that [those who owe tax] will appeal and fight it and this will generate more work."
Additionally, HMRC owes £3 billion in overpaid tax, money that dates back two to three years but will be reimbursed over time. Many of these cases are reportedly not on the new IT system and therefore will be processed manually.
An HMRC spokesperson told Computerworld UK that “no tax is being written off”. In terms of overpaid tax that needed to be returned to individuals, he said it would be repaid, adding: “We are simply prioritising repayments to vulnerable groups."