The government is to press ahead with plans to allow tax collectors to recover debts directly from bank accounts – but promises it will add extra safeguards.
The Treasury held a consultation earlier this year on direct recovery of debts, giving HM Revenue & Customs the power to recover tax and tax credit debts from accounts, including savings accounts.
The Law Society described the plans as ‘draconian’ and the Treasury admitted many of the 124 consultation respondents were not supportive. A number of these raised concerns about HMRC’s ability to use such a power effectively, fairly and in a targeted way.
The Treasury’s response, published today, said a small minority of individuals and businesses try to ‘play the system’ and hold off paying taxes until HMRC has pursued lengthy and expensive action.
It insisted that ‘robust new safeguards’ will address concerns raised in the consultation when the plans are written into legislation.
The government said it will guarantee every debtor will receive a face-to-face visit from an HMRC agent before their debts are considered for recovery.
Direct debt recovery will be applied to a small number of cases in the first year of its operation (2015/16) to allow for a softer launch of the system.
The window for debtors to object to HMRC will also be extended from the original proposal of 14 days to a period of 30 days.
Debtors will also be given an option to appeal against the decision to a county court on specified grounds, including hardship and third-party rights.
Only debts of £1,000 or more will be eligible for recovery and HMRC will always leave at least £5,000 across a debtor’s accounts.
The response added: ‘The government believes that these new safeguards will help to ensure that this policy is targeted specifically at those debtors who are refusing to pay what they owe, and that robust protection is in place for vulnerable customers and those who need additional support.’
The government plans to publish draft legislation in due course as part of the Finance Bill in 2015, which will be debated during the next parliament.
Law Society tax law committee chair Gary Richards said: ‘We are pleased that the government has listened to our concerns and announced safeguards that may go some way to protecting more vulnerable taxpayers.
‘We look forward to examining the detail when draft legislation is consulted on in the next parliament.’