It’s not uncommon to feel a pang of disappointment when you look at your payslip.
The difference between your gross pay and your net pay, once your Income Tax, National Insurance and potentially student loan payments have been taken out, can cause your heart to sink, just a little.
But for some taxpayers, the shock is even greater, now it has been confirmed that HM Revenue & Customs is making use of the powers at its disposal to take further money straight out of a person’s salary, in order to cover the money they owe.
Greater powers for the taxman
A few years ago HMRC was provided with a new option when it comes to getting money that people owe, called ‘attachment of earning’ orders.
This covers things like unpaid maintenance payments, county court judgements, or benefit overpayments that you need to give back.
Both you and your employer will receive a document from the courts, detailing what you owe and how much your employer will need to deduct from your salary each month in order to repay that money.
The court will look at your financial situation to work out what you need to live on, which is called the protected earnings rate, and then deducts the owed money from what’s left.
Data obtained by national accountancy firm UHY Hacker Young reveals that 428 people had money ‘recovered’ directly from their earnings by the taxman in 2017/18.
Why the taxman likes these powers
The firm points out that there are a couple of big selling points to these powers from the point of view of the taxman.
For starters, it ensures that the taxman gets the money as expected, rather than getting less than it might have anticipated one month because they may have been short on cash.
This is also a much more convenient way for the taxman to get what it’s owed as well. There’s no issue with repossessing the debtor's goods and selling them through auctions, a process which can take ages and see those goods sold for far less than they are really worth.
Also, as UHY Hacker Young points out, attachment of earning orders aren’t confrontational - the taxman isn’t having to interact with the debtors themselves in order to get the money, they can simply take it.
Furthermore, the Government allowing organisations to take money straight from your salary isn't a new phenomenon. The Student Loan Company collects 9% of most graduates' earnings every month, providing their earnings stay above a certain threshold.
The taxman is getting more aggressive
It’s perhaps fair to say that the taxman is getting a little miffed about how difficult it is proving to get people to hand over the money they owe.
In 2016 it spent £24m on private sector debt collectors, but this rocketed up to £39m last year.
Simon Browning, partner at UHY Hacker Young, noted that an attachment of earnings order is “one of the most aggressive tools HMRC has at its disposal, adding: “HMRC’s use of attachment of earning orders could be seen as yet another example of its dash for cash against people who can’t pay their bills."
It’s not just attachment of earnings orders that HMRC is making use of either, with the number of accelerated payment notices (APN) also on the rise.
APNs are issued to people that the taxman believes owe money, demanding payment upfront without having to prove that the money really is due in the courts, and data from accountants Moore Stephens last summer showed that the number issued had more than quadrupled since January 2017.
Dominic Arnold, head of tax investigations and disputes at the firm, highlighted that the taxman “wasn’t afraid to make people bankrupt or wind companies up” in order to get hold of the disputed money.
He added that APNs had created a ‘tax now, ask questions later approach which was a big concern “as these taxpayers are expected to remortgage their houses or sell their assets to pay a tax bill that HMRC has not proved in court”.
Keeping the taxman on your side
It’s worth remembering that the number of people impacted by these measures is very, very small. Most of us will never be on the receiving end of one of these orders or notices.
However, their growing use is a clear reminder not just of the importance of keeping on top of your tax liabilities, but also that HMRC has a host of options open to it when it comes to recovering unpaid money.