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:

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 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

2. Bounce Back Loans Scheme follow-up

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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