Sometimes I get very cross…
‘Consultation about a new power which will allow HMRC to recover debts from the accounts of debtors who are able to pay what they owe but have chosen not to do so…’
(HMRC consultation document on Direct Recovery of Debts issued on 6 May 2014)
The 2014 Budget announced proposals to allow HMRC to recover tax and tax credit debts directly from taxpayers’ bank and building society accounts, including ISAs and joint accounts, without the need to go to court like everyone else. This power is scheduled to be enacted in the 2015 Finance Act.
David Gauke, Exchequer Secretary to the Treasury in his introduction to the May consultation document says:
‘The Government recognises that there are concerns about the impact of this change on vulnerable members of society. We must ensure that there are strong safeguards in place so that this is only targeted at the truly non-compliant. That is why we are proposing to only use this power against a small core of taxpayers who owe significant debts of over £1,000 and have sufficient funds in their accounts to pay. Furthermore, we are proposing to leave a minimum of £5,000 after the debt has been recovered, ensuring that this does not create unnecessary financial trouble for those affected. We are also proposing additional checks and procedures.’
The consultation which ended on 29 July was limited to implementation of the policy which appeared to have already been given the green light.
Obviously, the correct exercise of a power to recover debts of tax and overpaid tax credits directly from the bank accounts of tax payers is dependent on the ability of HMRC to accurately determine who owes what. Incorrect collections are likely to have serious consequences and there are bound to be lengthy delays before any issues are resolved. We already know how HMRC will approach those against whom the power is used – they are the undeserving minority who are able to pay but choose not to do so.
The Adjudicator’s Office investigates complaints against HMRC. In 2013/14 the Office received 1,087 new complaints and resolved 2,311, upholding 90% either partially or substantially. The following are quotes from the Adjudicator’s 2014 Report published in July:
- The Adjudicator is critical that she still sees a number of complaints where HMRC staff failed to consider the circumstances of vulnerable customers and where communication was poor.
- The Adjudicator was critical of HMRC for not putting themselves in the customer’s shoes at an earlier stage and highlighted they needed to be more aware of the direct impact their actions can have on a customer.
- The Adjudicator reminded HMRC to ensure their staff follow their own guidance correctly.
- HMRC accepted that they had made errors by failing to use information provided…
- The Adjudicator found that HMRC did not follow their own training and guidance… She was concerned that HMRC had not given any consideration to what was reasonable and proportionate in the circumstances.
- The Adjudicator emphasised HMRC need to be mindful of the direct impact their actions can have on customers, particularly vulnerable ones.
If you think HMRC can’t be trusted to exercise this new power responsibly sign Taxation magazine’s e-petition against its introduction here.
Update – You done good: tax debt recovery powers watered down (November 2014)
The government will not now try to push through the necessary legislation before the general election. It intends to legislate in a Finance Bill in 2015, during the next Parliament. Draft legislation will be published for consultation.
New safeguards, set out in detail in an HMRC response to the consultation published on 21 November 2014, will include:
- guaranteed visits to debtors from an HMRC officer to meet them face-to-face, allowing HMRC to identify vulnerable members of society to provide them with appropriate support
- establishing a new, specialist unit to deal with cases involving vulnerable members of society, as well as providing a dedicated DRD team and helpline
- ensuring that judicial oversight of the process is enshrined in legislation, by allowing for appeal to the County Court
- putting a hold on debtors’ accounts and giving them 30 days – more than twice as long as previously planned – to contact HMRC and arrange payment of the debt or object to the use of DRD, before any money is taken
- further new safeguards relating to transparency, governance and a phased implementation of the DRD powers
HMRC will apply DRD to a smaller number of cases in 2015/16, the first year of operation, allowing the department to ‘gain experience and feedback’. A proposed requirement for banks to provide 12 months of data on a debtor’s account history will not be implemented, in response to concerns about debtors’ privacy.
Tax lawyer specialising in business tax, SDLT and VAT