HM Revenue & Customs has softened plans to recover unpaid tax and tax credit debts directly from the bank accounts of people and businesses.
A consultation on the direct recovery powers saw widespread concerns raised over the power to dip into individuals’ bank, building society and Isa accounts of those who owe £1,000 or more.
The plans were designed to prevent tax avoiders from gaining a cash flow benefit on owed funds.
The plans, published in May, included some limited guarantees, such as only applying the powers to established debts and only targeting debtors who repeatedly ignored attempts to make contact.
Following “constructive comments from key stakeholders”, such as professional and representative bodies, the government has now watered down the proposals further by introducing provisions including:
• ensuring that judicial oversight of the process is enshrined in legislation by allowing for appeal to the county court;
• guaranteed visits from an HMRC officer to meet those affected face-to-face and ensure they have had a chance to challenge decisions;
• establishing a specialist unit to deal with cases involving vulnerable members of society, as well as providing a dedicated team and helpline; and
• 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 to raise objections.
David Gauke, financial secretary to HM Treasury, said: “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.
“We’re strengthening the guarantees we can offer taxpayers that the powers will only be used when debtors have consistently refused to talk to HMRC and settle their debts, and their use will be subject to the toughest scrutiny and oversight possible.
HMRC promised continued proactive work with professional groups and those representing vulnerable customers.
It estimates the rules will apply to around 17,000 cases a year, with the average debt of those affected £5,800.
Around half of these cases will involve debtors with more than £20,000 in their bank and building society accounts.