HM Revenue & Customs (HMRC) will have a new power to take tax debts directly from personal and business bank accounts that is expected to raise £100 million for Treasury coffers each year.
Direct Recovery of Debts (DRD) plans have been green-lighted by the government following a public consultation, but extra safeguards have been built into the scheme.
DRD is intended to let HMRC withdraw cash from ISAs, bank and building society accounts of taxpayers who owe £1,000 or more.
Safeguards for vulnerable
However, the government has warned HMRC that the money can only been taken after following other steps to recover the debt. These include:
- Sending out HMRC debt collectors for face-to-face meetings with debtors. So anyone owing money has a chance to make a full payment to clear their account or agree a payment plan
DRD will then apply to debtors who break any agreement.
- The DRD visit is also aimed at identifying vulnerable debtors who may qualify for special terms.
HMRC will set up a specialist unit to deal with these cases and to offer a help line
- Debtors will have the right to appeal any DRD decision at a county court under a new law
- DRD will let HMRC freeze bank accounts for 30 days while debtors can sort out paying the money they owe before any money is taken
HMRC will not be able to empty out a bank account or ISA – a minimum of £5,000 must be left untouched across all accounts and a hold can only be put on cash up to the value of the tax debt.
HMRC estimates DRD will hit around 17,000 taxpayers a year who have an average debt of £5,800. In half these cases, debtors have more than £20,000 in the bank.
Financial Secretary to the Treasury David Gauke said: “Most people pay their tax on time, but some try to pay as late as possible and many of these are persistent offenders. In most cases, they can pay what they owe but choose not to.
“These new power are designed to target those people. The government is determined to set safeguards for the vulnerable.
“Many other countries already have similar tax laws, and the systems seem to work well there.”