HMRC is consulting on proposed new powers allowing it to recover a range of assessed tax debts directly from the bank accounts of businesses and individuals who have ignored repeated requests for payment. This action would only apply to debts over £1,000 and would include such safeguards as leaving a minimum of £5,000 in the debtor’s account. The proposal was announced at Budget 2014 and the consultation will run until 29 July 2014.


Announced at Budget 2014, Direct Recovery of Debts (DRD) will provide HM Revenue and Customs (HMRC) with the ability to recover cash directly from the bank accounts, building society accounts and ISA accounts of debtors who owe the taxpayer £1,000 or more.

HMRC estimates this 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.

To ensure HMRC only targets those refusing to pay, safeguards will be in place to provide certainty to taxpayers. These include:

  1. HMRC only taking action on those who have established debts and have passed the timetable for appeals.

  2. Only targeting debtors who have repeatedly ignored attempts to make contact. Typically they will have been contacted on up to nine separate occasions (a minimum of four) before HMRC takes action.

  3. Only targeting those with tax and tax credit debts over £1,000.

  4. Always leaving a minimum of £5,000 in the debtor’s accounts.

  5. Putting a hold on debtors’ accounts and giving them 14 days to contact HMRC and arrange payment of the debt, before any money is taken.

Exchequer Secretary to the Treasury, David Gauke, said:

“The government’s long term economic plan is to reduce the deficit so that we deal with our debts. It is therefore important that people pay the tax they owe, on time. Although the vast majority do this, there is still a minority that chooses not to pay, despite being able.

“Providing HMRC with the powers to directly recover tax debts will reduce the debt owed to HMRC in the most effective way so that the government can continue to fund vital public services.”

HMRC provides help to those who may find it difficult to comply, through Time to Pay arrangements. Having supported compliant taxpayers and provided help to those who find it difficult to comply, it is only fair to promptly pursue those who choose not to pay on time.

Making this change will align the UK with other countries whose tax authorities use similar powers.

The government is seeking views from all interested parties and HMRC will be actively engaging with stakeholders on safeguards and other operational aspects. The consultation will be open until 29 July 2014.

Source: LexisNexis update.