Government announces further HMRC direct recovery safeguards

Further safeguards have been announced by the UK Government as part of its plans to recover tax and tax credit debts directly from the bank accounts of people and businesses who refuse to pay.

Proposals for direct recovery of debts (DRD) were put out to consultation in May. They would give HM Revenue & Customs the ability to recover cash directly from the bank accounts, building society accounts and ISA accounts of debtors who owe £1,000 or more, provided they will still have at least £5,000 left across their accounts.

HMRC estimates DRD will apply to around 17,000 cases a year, with the average debt of those affected £5,800. Around half of these cases will involve debtors with more than £20,000 in their bank and building society accounts. The measure is expected to bring in around £100 million a year.

The power has attracted criticism as draconian, though ministers insist it will only be applied to established debts and only to debtors who have repeatedly ignored attempts to make contact.

The further safeguards now announced include a guaranteed visit to debtors from an HMRC officer to meet them face to face, to ensure that everyone subject to DRD will have had a chance to challenge and settle their affairs, by paying in full or setting up a payment plan. The visit will also allow HMRC to identify vulnerable people to provide them with appropriate support. A new, specialist unit will be established to deal with cases involving the vulnerable, along with a dedicated DRD team and helpline.

Debtors will now have 30 days to contact HMRC and arrange payment of the debt or object to the use of DRD, before any money is taken. Judicial oversight of the process will also be provided through a right of appeal.

David Gauke, Financial Secretary to the Treasury said: “This is about levelling the playing field. 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 owed to the Exchequer.

“We already set out robust safeguards to protect vulnerable debtors in our original DRD 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."

He added: "We’re far from the first country to take this step – many other tax authorities already use similar powers routinely and responsibly as a crucial lever for ensuring their government is paid what is owed.”

Draft legislation for DRD will be published for consultation in due course. In order to allow for an extended period of scrutiny, the government intends to legislate in a Finance Bill in 2015, during the next Parliament.