Daniel Pidgley
Litigation Executive
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Date Published:10 Mar 2016 Last Updated:26 Jul 2021

HMRC Proposal for Debt Recovery of Tax Liabilities

Dispute Resolution

On 6 May 2014 HMRC launched a consultation on direct recovery of tax debts(DRD).

The proposal will allow HMRC to recover tax and tax credit debts of £1,000 or more directly from an individual’s savings account, stocks and shares, ISA and joint account.

If the debtor has a joint account, all account holders will be notified and will have the opportunity to object to the DRD notice. Therefore this could potentially impact third parties holding joint accounts with defaulting taxpayers.

Although safeguards will be in place, the power to gain access to these accounts could have significant implications and unsurprisingly there is a lot of opposition about this development.

The proposal is likely to affect 17,000 taxpayers each year. HMRC proposes that at least £5,000 will be available to the debtor across all their accounts after the debt has been recovered and that they will only be able to remove the money after four ignored requests for payment.

HMRC states that it will review each case before authorising any action by ensuring that they have up-to-date information about the debtor’s account. HMRC will need to consider what should be left in the account to enable the debtor to pay their monthly expenses and ensure that they do not inadvertently cause hardship.

The chancellor believes that the measure can be justified because the DWP currently have similar powers to collect directly from people’s bank accounts to pay child maintenance. However, the HMRC would be acting in pursuit of its own objective of bringing in revenue for the exchequer.

A telephone line will be available for debtors to contact the DRD team and arrange alternative payment or object to the action. HMRC states that debtors will be fully recompensed for any losses incurred as the direct result of an error made by HMRC.

The HMRC has a duty to collect tax which is legitimately due. Nevertheless being able to access an individual’s bank account without permission or independent oversight is worrying.

Any legislation is expected to be included in the Finance Bill 2015.