New direct tax debt collection powers will not put taxpayers into financial difficulty, says HMRC

Out-Law News | 08 May 2014 | 3:02 pm | 2 min. read

Proposed new powers allowing HM Revenue and Customs (HMRC) to collect unpaid tax directly from the bank accounts of debtors would include safeguards so that taxpayers would not face financial difficulty, the UK government has said.

According to a consultation setting out the details of the proposed new power, around half of the expected 17,000 affected cases a year would involve debtors with more than £20,000 in their bank or building society accounts; while the average debt that would be collected was £5,800. The proposals are intended to allow the recovery of tax and tax credit debts from businesses and individuals that are able but that have actively refused to pay what they owe, the government said.

Exchequer Secretary to the Treasury David Gauke said that HMRC's new direct recovery of debts (DRD) ability would help to "level the playing field" between "honest" taxpayers and "the minority that dodge their responsibilities".

"The government's long-term economic plan is to reduce the deficit so that we deal with our debts," he said. "It is therefore important that people pay the tax they owe, on time. Although the vast majority do this, there is still a minority that chooses not to pay, despite being able."

"Providing HMRC with the powers to directly recover tax debts will reduce the debt owed to HMRC in the most effective way so that the government can continue to fund vital public services. Making this change will align the UK with other countries whose tax authorities use similar powers," he said.

As part of March's Budget, the Chancellor of the Exchequer announced that HMRC would be given the power to take money directly from the personal bank accounts of tax debtors who owe more than £1,000 in tax or tax credits. According to the consultation paper, HMRC would be able to use this power to recover money from bank accounts, building society accounts and ISA accounts. It would be used to recover unpaid tax debts, overpaid tax credits, unpaid National Insurance contributions and unpaid fines.

Only those debtors owing more than £1,000 and who have repeatedly ignored a minimum of four attempts by HMRC to make contact would be targeted using the new power, according to the consultation. The department would proceed by placing a hold on debtors' accounts and giving them 14 days to contact HMRC and arrange payment before any money was taken. Only those with "established" debts and who are now time-barred from appealing against HMRC's decision would be targeted by the new procedure, according to the consultation.

HMRC said that it would continue to provide a "flexible range of support for those who would like to pay on time, but find it hard to do so" once the new power became available, which is expected to happen in time for tax year 2015/16. It currently allows taxpayers to request a 'time to pay' arrangement, which could include paying any tax owed in instalments.

The consultation will be open until 29 July 2014.