Individuals who risked tax debts being directly recovered by from their bank accounts will now have the right to a face-to-face meeting with tax officials and an appeals process before action is taken in a significant watering down of the rules.
Earlier this year the Budget gave HM Revenue & Customs to directly dip into bank accounts, building society accounts and 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.
There will also 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 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, it appears 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 ommittee will take a further look at these proposals. Safeguards for taxpayers are crucial.”
Head of financial planning
These proposals sound sensible. This isn’t just about people who know they owe tax and are trying to avoid paying, it will also cover situations where people don’t realise they owe money. Giving people the chance to represent themselves before money is taken is a good move.
Jacksons Wealth Management
If you owed money to a credit card company then they would take it from your bank account. It sounds like these are good protections and the Treasury is being more reasonable about the process.