Tax debt recovery safeguards strengthened

The government says it has improved safeguards to protect vulnerable taxpayers in its plans to recover tax and tax credit debts directly from taxpayers’ bank accounts.

Direct Recovery of Debts (DRD) will give HM Revenue & Customs (HMRC) the ability to recover cash directly from the bank, building society and ISA accounts of personal and business taxpayers who owe £1,000 or more.

HMRC estimates DRD will apply to around 17,000 cases a year and involve an average debt of £5,800. It says around half of these cases will involve debtors with more than £20,000 in their accounts.

When the government launched a consultation on the plans in May, they included safeguards such as only applying the powers to established debts and only targeting debtors who had repeatedly ignored attempts to make contact.

HMRC also said it would always leave a minimum of £5,000 across debtors’ accounts and only put a hold on the funds in an affected account up to the value of the debt due.

In response to feedback gathered during the consultation, the government announced on 21 November that it had further strengthened the safeguards to include:

  • a face-to-face meeting with an HMRC officer to ensure that anyone subject to DRD will have had a chance “to challenge and settle their affairs” – whether by paying in full or setting up a payment plan – and that DRD will only apply to those who have chosen not to do so. The visit will also allow HMRC to provide appropriate support to vulnerable taxpayers
  • setting up a new unit to deal with cases involving vulnerable taxpayers, as well as providing a dedicated DRD team and helpline
  • giving taxpayers the right to appeal to the County Court
  • giving taxpayers 30 days – more than twice as long as previously planned – to contact HMRC and arrange payment of a debt or object to the use of DRD, before any money is taken.

Financial Secretary to the Treasury David Gauke said: “The vast majority of people pay the tax that is due, on time, but there is still a very small minority who try to gain an unfair advantage by persistently refusing to pay what they owe, despite being able to. These are the people who will be targeted by the powers for the direct recovery of debts.

“We already set out robust safeguards to protect vulnerable debtors in our original Direct Recovery of Debts proposals, but feedback from the consultation process told us we could do more to make sure this only catches those who are playing the system.

“We’re strengthening the guarantees we can offer taxpayers that the powers will only be used when debtors have consistently refused to talk to HMRC and settle their debts, and their use will be subject to the toughest scrutiny and oversight possible.”

Link: HMRC briefing on DRD