Starting this week, HM Revenue and Customs (HMRC) has reinstated a programme enabling it to recover outstanding debts directly from individuals’ bank accounts and ISAs. This action, which had been paused due to the pandemic, marks the beginning of a “test and learn” phase.
According to the Manchester Evening News, HMRC will now be able to directly seize funds from those who owe £1,000 or more, provided certain conditions are met. The decision is a part of broader efforts to address outstanding public finances, and while safeguards are in place, the programme is expected to impact both individuals and businesses.
Who Will Be Affected by HMRC’s New Scheme?
The new debt recovery policy will target individuals or businesses that owe £1,000 or more to HMRC and have failed to respond to previous attempts to settle their debt. HMRC will only take action if the debtor has passed the appeal deadline and ignored multiple attempts at contact.
In addition, at least £5,000 must remain in the account after the debt is recovered to ensure that essential living costs aren’t impacted. HMRC is clear that this method will not be used for people who cannot afford to pay but is reserved for those who have the means but refuse to do so.
An HMRC spokesperson said:
Most people pay tax on time and in full – but it’s right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to. These powers are subject to robust safeguards and we’ll continue to support customers who need help with their payments.
Safeguards Are in Place to Prevent Hardship
While the idea of HMRC taking money directly from bank accounts might sound daunting, several safeguards have been put in place to protect vulnerable customers. If a debtor can show they are in financial difficulty, HMRC provides options like the “time to pay” scheme, allowing them to pay their debt in manageable installments.
Importantly, HMRC also ensures that debt recovery actions won’t leave people without the funds needed for essential expenses, such as housing or business costs. The agency guarantees that at least £5,000 will remain in the debtor’s account after the payment is deducted. HMRC also ensures that debtors are not unfairly impacted, providing protections for vulnerable individuals.
HMRC stated on its website:
The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.
HMRC Aims to Target Deliberate Defaulters
HMRC’s primary goal is to recover taxes from those who deliberately avoid paying despite having the means to do so. According to HMRC’s website:
The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.
These measures were brought back in response to the financial pressure on public finances, and HMRC is committed to going after those who refuse to pay. As Dawn Register, a tax dispute resolution partner at BDO, pointed out:
Given the pressure on public finances, it’s clear that HMRC is determined to get tougher on those who can pay but don’t pay.
Dawn Register added:
For those who are struggling financially we would always recommend that they explore ‘time to pay’ options to allow them to pay in instalments.
This method will only be used for cases where the debtor has ignored HMRC’s attempts to make contact and has exceeded the timetable for appeals. HMRC will not immediately take action against anyone who disputes the debt. An automatic right to appeal is available for those who believe they do not owe the amount HMRC claims.
The Programme Was Suspended Due to the Pandemic
The Direct Recovery of Debts (DRD) policy was suspended at the onset of the pandemic, but HMRC has now decided to bring it back as part of a “test and learn” phase. This reintroduction follows the government’s commitment to crack down on tax defaulters, especially at a time when public finances are under significant pressure.
While the policy is still in its testing phase, HMRC is focused on ensuring that individuals are treated fairly, with a particular emphasis on balancing enforcement with providing support for those genuinely in need of help.
