The Treasury says anyone subject to new HMRC powers to directly recover tax debts from bank accounts will have the right to a face-to-face meeting with officials and an appeals process before action is taken in a significant watering down of the rules.
The powers, unveiled in this year’s Budget, will allow HMRC to directly dip into bank accounts, building society accounts or Isas to recover tax owed if it is more than £1,000.
HMRC estimates direct debt recovery 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.
The Treasury select committee, banks and platforms had criticised whether there were enough protections in place to stop HMRC abusing the new powers.
In response, the Treasury has watered down the reforms so anyone who has action taken against them will receive a face-to-face meeting with the Revenue first.
The Treasury says this gives everyone a chance to “challenge and settle” their bill, whether through a settlement plan or paying in full.
It says the visit will also allow HMRC to identify vulnerable members of society to provide them with appropriate support.
HMRC will also put a hold on debtors’ accounts and give them 30 days – more than twice as long as previously planned – to contact the taxman and arrange payment of the debt or object to the use of direct action before any money is taken.
In addition, there will be a new, specialist unit to deal with cases involving vulnerable members of society, as well as providing a dedicated team and helpline.
Judicial oversight of the process is enshrined in legislation, by allowing for appeal to the County Court.
There are other safeguards too around transparency, governance and a phased implementation of the new powers.
TSC chair Andrew Tyrie says: “There’s a lot for Parliament to scrutinise here. The Committee made it abundantly clear earlier this year that prior independent oversight is essential.
“On the basis of the Government’s consultation paper, published today, it appears that the proposed new right of appeal will take place before withdrawal of any money by HMRC. It also appears, however, that the money would be frozen, prior to any appeal. The Committee will take a further look at these proposals. Safeguards for taxpayers are crucial.”