Tax debt recovery powers watered down

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Tax professionals have welcomed the government’s decision to modify proposals for the direct recovery of tax debts from bank accounts. Chas Roy-Chowdhury, head of taxation at ACCA, said the revised proposals were “light years better than what was originally proposed”.

The government will not 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”, financial secretary David Gauke said. Draft legislation will be published for consultation.

HMRC estimates that direct recovery of debts (DRD) will apply to around 17,000 cases a year. Around half will involve debtors with more than £20,000 in their bank and building society accounts, and the average debt of those affected will be £5,800.

“This is about levelling the playing field,” Gauke said. “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.

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

HMRC said the new safeguards, set out in detail in a response document published this morning, would 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.

Chas Roy-Chowdhury said: “There will now be a totally different ethos behind the way the power will be designed and implemented. It will no longer be played out as a remote controlled video game where HMRC remotely takes money out of the taxpayers account. There will now need to be face to face engagement between HMRC and the taxpayer before anything can happen. Vulnerable taxpayers will be identified and taken out of the process entirely and put in touch with a dedicated helpline.”

ICAEW chief executive Michael Izza said Gauke deserved “real credit “ for listening and taking on board concerns expressed in response to the consultation launched in May.

Paul Aplin, chairman of the ICAEW Tax Faculty Technical Committee, said: “We still need to see the detail in the draft legislation but the changes announced today do seem to address the main concerns. The lack of any independent oversight was a show-stopper and including the right of appeal to a county court addresses that issue.”

Aplin said face to face contact, an increased time limit for appeal and a triage process to identify vulnerable taxpayers represent “very significant” changes which showed that ministers and HMRC had “listened, understood and acted”.

“We are now in a very different place,” he added.

Chartered Institute of Taxation president Anne Fairpo said the CIOT had maintained during the consultation that “the rule of law should not be undermined”.

She added: “It is for this reason that we are especially pleased to see changes allowing appeals to the county court. If an objection to DRD is made by the taxpayer, it will be internally reviewed by HMRC and the time limit to request a review has increased from 14 to 30 days. If the review is denied, the taxpayer will be given a further 30 days to appeal to the county court; this is the kind of external oversight we have been seeking.”

Fairpo said the revisions announced today were “proof that the government has listed to, and taken on board, the concerns of interested stakeholders” and showed “the merit of sustained engagement”.

A petition created by Taxation editor Mike Truman, calling on the government to withdraw the proposals and carry out a wide-ranging consultation on the problem of deliberate non-payment, has attracted more than 4,500 signatures.

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21st Nov 2014 09:43


As the ICAEW say, we await the details (and I'm still never going to be happy about the state using powers that would never be available to a private creditor) but this looks promising.

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21st Nov 2014 10:37

Postponed to after the Genral Election

The response paper says the legislation will be included in A Finance Bill in 2015, to be published in the next parliament, - that means after the General Election. Voters will have an opportunity to express thier views on this at the ballot box.

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16th Dec 2014 11:36

Political Manifestos

You wont find the proposed legalisation in any of the main parties manifestos, nor the minor parties manifestos (assuming they have manifestos).

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24th Nov 2014 11:41

A message to

Anne Fairpo. What part of being allowed to be a preferential creditor by taking money out of tax payers bank account does not undermine the rule of law. Oh yes you change the law to suite yourself. What will be really interesting is when the bank have a charge over the assets of a company and HMRC want to take money, especially if the company is going through a dodgy time.

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24th Nov 2014 13:24

Still unacceptable
You would still have to incur professional fees in connection with the appeal and suffer a lot of sleepless nights. Far easier to get your money out of UK banks and drip feed it back as needed.

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By nickf4u
24th Nov 2014 13:44

Direct collection of tax
The HMRC state that they want to level the playing field ; what a joke ; they are a creditor, that's all , what other creditor on this playing field has the right to raid Debtors bank accounts?
The rule of law as it stands has a due process , they just need to get on with it. The HMRC make too many mistakes to let them loose on this, and any version , watered down or not is unacceptable.

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24th Nov 2014 15:28

Not good enough

HMRC have never answered the point that there is no reason to grant them any special powers of debt recovery. They should first go to the county court just as anyone else has to. It is not difficult!

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By hiu612
25th Nov 2014 09:06

Insolvency proceedings

There have been a couple of news stories in the last month or so about HMRC initiating insolvency proceedings in respect of disputed tax debts. I agree with others that allowing HMRC to dip taxpayer's bank accounts does not sit comfortably, whatever the safeguards and promises that accompany the legislation.

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28th Nov 2014 05:57

In our economy today, a person debt becomes unmanageable and bankruptcy seems inevitable, one last option is debt forgiveness. Lenders can forgive debt in some situations, if a borrower reaches the right agreement. Debt forgiveness is a good thing for many people, as it means less than the whole of a debt has been paid though the debt has been satisfied. However, it's regarded as taxable income and the mistake of a debt forgiveness tax break for foreclosures or short sales of homes is set to bite some taxpayers.

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03rd Dec 2014 19:54

Not still very attractive as should be.

HMRC still make lot of mistakes in determing the correct amount of tax. It is hoped the review system is different from the inspectors to make it an independent review. Hope the county court have the power to intervene not just to defer the collection.

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16th Dec 2014 11:40

Were skint, thats it.

As as nation were skint and any measure to increase government coffers will be rolled out.  Mind you HMRC are the last people to implement such rules.



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