Controversial plans, first announced in the 2014 Budget, that allow HMRC to raid bank accounts and take overdue tax, have been softened by the Treasury, after coming under sustained criticism from banks, accountants, MPs, debt charities and other pressure groups.
The Direct Recovery of Debts (DRD) powers originally allowed the tax man to take funds from anyone owing more than £1,000 in tax or tax credits, subject to certain safeguards and a restriction that they must leave no less than £5,000 in the account being raided. As well as the obvious issues relating to ability of the state to simply take money from its citizens, the campaigning bodies were concerned about vulnerable people being affected and errors by HMRC leading to unintended consequences.
The revisions to the powers include:
- HMRC now have to hold face-to-face meetings with tax payers before taking any money from their account. This gives them a chance to explain and defend their position, as well as potentially negotiate a payment arrangement, as well as meaning the money can’t just disappear without fair and clear warning.
- Tax payers will now have 30 days to appeal a decision to take bank account funds, or agree a payment plan, double the original 15-day period. They can initially appeal to HMRC but if unsuccessful, they can appeal to the County Court for an independent judicial review – an important measure that enshrines independent oversight of such radical procedures in the legislation.
- Establishment of a dedicated DRD helpline and team and a speacial unit to deal with cases involving vulnerable members of society
Around 17,000 people are estimated to fall into the category that would potentially be affected by the proposals, i.e. owe more than £1,000 in tax, with the average bill estimated at £5,800.
The proposals are not expected to become law until after the current parliament but it will be interested if they are referred to in the Chancellor’s Autumn statement next Wednesday (3 December).