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November 26, 2014

The Treasury Revises Controversial Powers to Raid Bank Accounts

Controversial plans to give HM Revenue & Custom the power to raid bank accounts to recover unpaid tax directly have been revised by the Treasury, granting the taxpayer with a longer appeal time and increased safeguards.

The ‘Direct Recovery of Debts’ (DRD) powers were announced by George Osborne in the Budget earlier this year and will allow HMRC to seize assets from anyone owing more than £1,000 in tax or tax credits.

Under the new proposals, there will be more robust protection for vulnerable taxpayers and those in financial difficulties, and individuals threatened with action will be informed and given the opportunity to appeal before HMRC utilises its DRD powers.

HMRC, who is under increasing pressure from the UK government to reduce losses on tax revenues, estimate that these new powers to recover debts could return £375m to the Treasury over four years.

However, these proposals attracted criticism from banks, MPs and debt charities, who argued that these powers may be subject to HMRC error, could cause further problems for people in financial difficulty and raised concerns about the risk of fraud.

In relation to the revised powers, Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA) said: "It's a good day for taxpayer confidentiality. While ACCA would have preferred the power were not being proposed at all, we consider where we are today is light years better than what was originally being proposed."

The Treasury reiterated that these powers would only be used against debtors who had repeatedly ignored attempts by HMRC to make contact or pay their debts. Only debtors who have received a face-to-face visit, have sufficient money in the bank and have refused to settle their debts will be considered for debt recovery.

Under the old proposals, it was estimated that around 17,000 people will be affected, owing £5,800 each on average. Around half of these cases will involve debtors with more than £20,000 in their bank and building society accounts. However, given the new safeguards, ACCA’s Mr Roy-Chowdhury said that he would be “surprised” if more than 1,000 people were affected in the first year.

The revised changes

HMRC will be required to hold face-to-face visits with debtors before any money is taken from their accounts, enabling HMRC to identify individuals who consistently refuse to cooperate or vulnerable members of society.

  • A new specialist unit to deal with cases involving vulnerable individuals will be established, providing a dedicated DRD team and helpline
  • Judicial oversight of the DRD process will be enshrined in legislation by allowing for appeal to the County Court for independent judicial review
  • Debtors will be given 30 days – more than twice as long as previously planned – to contact HMRC and arrange payment or object to the use of DRD before any money is taken





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