Plans for HMRC bank account raids revised
Taxpayers get more protection from the taxman.
The Treasury has altered the plans allowing HMRC to take money directly from debtors’ bank accounts.
Under the new proposals, there will be further protection for vulnerable taxpayers, and people will be informed and given the chance to appeal before HMRC utilises its Direct Recovery of Debt (DRD) powers.
More protection for taxpayers
HMRC’s use of DRD will be limited further under the revised plans. All debtors will receive a visit from an HMRC officer, guaranteeing a face-to-face meeting regarding their tax bill. This will give them a chance, says HMRC, to “challenge and settle their affairs,” either by paying up the full amount due, or by setting up a payment plan agreed to by HMRC.
Debtors will be allowed to appeal against DRD action being taken against them, firstly to HMRC, where the length of time they have to appeal has been increased from 14 to 30 days. If they are unhappy with that, they may appeal to the County Court for independent judicial review.
A new, specialist unit will be set up to deal with vulnerable people, and a dedicated DRD team and helpline will also be established.
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Only used when suitable
HMRC has pledged that it will only use DRD to recover money in cases where over £1,000 of tax or tax credits debt are owed, and that a minimum of £5,000 will be left across debtors’ accounts.
The Treasury continues to insist that DRD would only be considered as a suitable course of action when a debt to HMRC has been clearly established and HMRC says it will only be targeting debtors who repeatedly ignore its attempts to make contact.
The new proposals, says Financial Secretary to the Treasury David Gauke, are about “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”.
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Who owes what?
Currently, HMRC is estimating that DRD could be applied to roughly 17,000 cases a year, where debts average £5,800. It says that around half of the cases in question would involve debtors who have more than £20,000 in their bank and building society accounts.
The plans have come under much scrutiny, with John Thurso MP going so far as to say the powers would contravene the Magna Carta, as they didn’t include allow for “judicial process or review”.
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), said that while ACCA “would have preferred the powers were not being proposed at all, we consider where we are today is light years better than what was originally being proposed”.
He went on to say that the face-to-face involvement of HMRC with taxpayers was a crucial element of the re-thought plans, as vulnerable taxpayers could be identified and “taken out of the process entirely and put in touch with a dedicated helpline”.
The legislation, if approved in its current form, could be taken forward as part of the 2015 Finance Bill. £375 million is expected to be raised from the scheme between 2015 and 2019.
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