It is inevitable: not every business that has taken a COVID-19 bounce back loan will manage to ‘bounce back’, some taxpayers who deferred payments of Income Tax & VAT will remain in default and, some people took fast and easy government loan finance with no plans to ever repay it. Coronavirus has left the UK, like many other nations, with a massive debt legacy. Parliament is currently pursuing the issues via the House of Commons Public Accounts Committee (PAC).

The National Audit office (NAO)’s November 2021 report, Managing Tax Debt through the pandemic reveals that HMRC had to make significant changes to its debt management process during COVID-19. It allowed taxpayers to defer debt, it changed the way it dealt with debtors and it moved to more telephone and online contact.

Tax debt is currently standing at some £42 billion and HMRC forecasts that total tax debt will fall to £33 billion by March 2022 but this assumes that the pandemic has not changed repayment behaviour. Key issues identified by the NAO are that HMRC:

  • Is unlikely to have sufficient capacity in the short term to manage increased levels of tax debt arising from the pandemic.
  • Lacks a sufficiently detailed understanding of its activity to identify the resources needed to optimise debt collection.

The Bounce Back Loan Scheme provided registered and unregistered businesses with loans of up to £50,000, or a maximum of 25% of annual turnover, to maintain their financial health during the first phase of the COVID-19 pandemic. The NAO, made an investigation into that Scheme in October 2020, noting that:

  • The government prioritised one aspect of value for money, payment speed, over almost all others and was thus prepared to tolerate a potentially very high level of losses as a result.
  • Losses can stem from businesses wanting to pay back loans but finding themselves unable to, through to organised criminals taking out loans with no intention of ever paying them back.

The PAC has been reviewing the issues. In June 2021, it published a report 'Fraud and Error', warning that government actions 'significantly increased' UK taxpayers' exposure to a loss of billions of pounds through fraud and error in administering Coronavirus support packages.

In November 2021, the PAC opened two new inquiries and is asking for evidence to be submitted in respect of:

1. HMRC's Management of Tax Debt

  • This inquiry is calling for evidence on HMRC's debt collection policy. The Committee will question senior officials at HMRC. If you have evidence on these issues, please submit it here by Monday 10 January 2022.

2. Bounce Back Loans Scheme follow-up

  • In this follow-up inquiry, the Committee will question senior officials at BEIS and the Treasury on what government is doing to protect public money in relation to the Scheme; how many loans were made by the time the Scheme closed; how many businesses have begun repaying loans; the counter-fraud activity taking place, and the levels of identified fraud; and the latest Scheme estimates of potential fraud and credit losses.

  •  Billed by the NAO as “government’s largest and most risky business loan support scheme”, official calculations and estimates of how much will be lost to fraud and default in the BBLS are ongoing.

  • If you have evidence on any of these issues, please submit it here by Monday 3rd January 2022

Useful guides on these topics

COVID-19 Zone
All about tax and financial support during the crisis

COVID-19: Grant Funding for Business
What cash grants are available to support businesses during the Cornonavirus crisis?

Taxation of COVID-19 Support Payments
Summarises the tax treatment of grants paid during the Coronavirus pandemic.

COVID-19: Loan Funding
A summary of the different types of loan funding made available by government.


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