Self assessment records used to recover £818m in unpaid council tax

HMRC has released details of data sharing arrangements with local authorities where it is trialling self assessment and tax data exchange to clamp down on council tax debt

In 2017/18, local authorities in England had an £818m deficit for council tax arrears, representing a 3% shortfall in collection from the total annual £27.5bn council tax take.

This is the first release of information after 29 English councils agreed to share data with HMRC in a bid to increase the recovery levels for council tax debt. The one-year trial started in June 2019 and allows councils to obtain information from HMRC about employment records for a sample of residents who had not paid their council tax and had received a magistrates’ court liability order.

HMRC said: ‘The purpose of the pilot is to measure the potential yield the local authorities could have if they were to use HMRC data for an attachment of earnings order.’

During the trial, which runs for one year, non-paying customers who are employed or have an income will be contacted and told to start paying their debts, or their debt will be deducted directly from earnings through their employer.

Local authorities believe that accessing HMRC PAYE and self assessment data, including date of receipt of self assessment tax returns, tax year, details of total income, as well as partnership, trust and property income, could help them close in on recalcitrant non-payers and the orders would allow deductions of unpaid council tax at source through tax codes.

HMRC, as joint data controller to these agreements, has published the business cases and data protection impact assessments for these pilots.

A number of councils participated in the scheme, on average sharing around 4,000 data records, including Birmingham, Bradford, Brighton, Coventry, Ealing, Islington, Kensington and Chelsea, Manchester, Medway, Newham, Southwark and Tower Hamlets.

Birmingham City Council, for example, agreed to supply HMRC with customer names and addresses for a sample of up to 4,000 residents, who were subject to liability orders. HMRC will match against HMRC data and matching cases will be supplied to Birmingham council with PAYE and self-assessment data.

The data will be used to enable management and recovery council tax debt. Birmingham Council said that where financial vulnerability was identified, discussions around the use of debt support would take place, while there would be further discussion with individuals where self-assessment information had been provided by the tax authorities.

In London, Kensington and Chelsea faced uncollected council tax of £2.7m from around 10% of residents, and the council obtained 8,002 liability orders at the magistrates court, although only 0.03% resulted in attachment of earnings orders, with direct deductions made from salaries.

Manchester City Council shared around 4,000 records and reported a lower than average collection rate of 93.2% against the national average of 97.1%, with a shortfall of £12m in uncollected council tax.

The pilots are intended to test whether debts can be managed and recovered using HMRC data, and will end in May 2020, at which time a review will be undertaken to assess whether the data exchange is an effective way to increase debt collection rates.

Permission to use data in this way was included in the Digital Economy Act 2017, and has been published in line with the Code of Practice for transparency included in that legislation.

Sara White

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