The Direct Recovery of Debts consultation: HMRC is now consulting on possibly the most terrifying new power ever proposed. It wants to be allowed to recover tax and tax credit debts directly from debtors’ bank accounts. Unsurprisingly, there is a lot of opposition to this proposal, not least because HMRC is considering that debtors once targeted should have no right of appeal.

Under the proposal, which was announced by the chancellor at Budget 2014:

MPs from the Treasury Select Committee have in their report on the 2004 Budget expressed "considerable concern" at HMRC's proposals which could, they note "develop into a return to Crown preference by stealth." The Committee considers a lengthy and full consultation essential with extensive examination of the consultation as well as further evidence. Adding that "giving HMRC this power without some form of prior independent oversight — for example by a new ombudsman or tribunal, or through the courts — would be wholly unacceptable."

The Committee also made the following points:

The Chartered Institute of Taxation (CIOT), representing also the Association of Taxation Technicians (ATT) and the Low Incomes Reform Group (LITRG) in giving evidence on the budget to MPs said:

"This power is unprecedented in the UK and the announcement contained no details of any judicial or other safeguards that would protect taxpayers on low incomes struggling with debt problems – apart from a stipulation that a minimum of £5,000 would be left in debtors’ accounts....To let HMRC raid their bank accounts without safeguards or re course to the courts – or with inadequate safeguards – would be to flout the rule of law in a manner unworthy of a public service body. It is not the same as seizing physical goods, it is depriving the debtor of the very means to live."

The Institute of Chartered Accountants in England & Wales (ICAEW) has reviewed the consultation and expressed its concerns that this tough new power carries many risks and as proposed carries inadequate safeguards. 

" Our concerns include whether HMRC can be relied upon to have accurate information and exercise its judgement properly, the adequacy of appeal rights (which are not clearly explained), and the fact that HMRC is in effect becoming a preferential creditor."  

The ICAEW says that it accepts "that HMRC has a duty to collect tax which is legitimately due, and that it should take firm action against those who can pay but won’t. However – we do not support the introduction of this new power and do not think the safeguards are adequate. We think it is wrong in principle and infringes fundamental civil liberties that no-one should access someone else’s bank account without their permission or under the supervision of a judge." ​


HMRC: consultation on the Direct Recovery of Debts

Consultation runs from 6 May to 29 July 2014