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Additional safeguards announced for Direct Recovery of Debts

November 26, 2014


Following representations by concerned tax professionals, accountancy bodies and business representatives HMRC has added stronger safeguards to their controversial Direct Recovery of Debt plans.  The consultation on the proposed new powers, which would allow HMRC to take sums relating to unpaid tax directly from debtors’ bank accounts, caused great concern, with respondents calling for independent overview of the process and additional safeguards to prevent vulnerable taxpayers being left at a disadvantage.

In an issue briefing note HMRC sets out the improved safeguards for DRD:

  • Guaranteed visits to debtors from an HMRC officer to meet them face-to-face. This will ensure that everyone subject to DRD will have had a chance to challenge and settle their affairs – whether by paying in full or setting up a payment plan – and that DRD will only apply to those who have chosen not to do so. The visit will also allow HMRC to identify vulnerable members of society to provide them with appropriate support.
  • Establishing a new, specialist unit to deal with cases involving vulnerable members of society, as well as providing a dedicated DRD team and helpline.
  • Ensuring that judicial oversight of the process is enshrined in legislation, by allowing for appeal to the County Court.
  • Putting a hold on debtors’ accounts and giving them 30 days – more than twice as long as previously planned – to contact HMRC and arrange payment of the debt or object to the use of DRD, before any money is taken.
  • Further new safeguards relating to transparency, governance and a phased implementation of the DRD powers.

Commenting in Taxation magazine, editor Mike Truman, who ran a campaign to raise awareness of the proposals and get them removed from the Finance Bill 2015 pending a wider investigation into late payment, said that they had got “as much as was realistically ever going to be given” in terms of additional safeguards and changes to the measures.  Truman also wondered whether the measures would prove practical in reality, and whether simply seeking a County Court Judgement would prove more efficient in those cases where the taxpayer really is deliberately withholding payment of tax due.

Head of taxation at the ACCA Chas Roy-Chowdhury said that the announcement was “good news for taxpayers’ confidentiality” as the measures will no longer include having access to the taxpayer’s bank account records for the previous 12 months, but only the current balance.  Roy-Chowdhury also said that the ACCA would “make every endeavour to ensure the Government does not subsequently seek to strengthen these powers post implementation.”  He said that although the DRD measures will still be in legislation “a lot of its teeth [have] been knocked out.”

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