Following consultation into its controversial Direct Recovery of Debt (DRD) proposals, HMRC have announced that it is to improve its proposed safeguards.
Financial secretary to the Treasury, David Gauke said:
‘We’re strengthening the guarantees we can offer taxpayers that the powers will only be used when debtors have consistently refused to talk to HMRC and settle their debts and their use will be subject to the toughest scrutiny and oversight possible.’
The powers are expected to come into force in 2015 and will allow HMRC to recover funds directly from bank, building society and ISA accounts of debtors who owe £1,000 or more. HMRC have said that they will always leave a minimum of £5,000 in the debtor’s account, so that they ‘do not put a hold on money needed to pay wages mortgages or essential business or household expenses.’
HMRC have already proposed a number of safeguards including only taking action against those who have established debts and have passed the timetable for appeal, and only targeting debtors who have repeatedly ignored HMRC’s attempts to make contact with them.
So what is new?
HMRC have now stated that they will only use the intended new powers where they have first had a face-to-face meeting with the individual. The purpose of the meeting is identify the taxpayer and allows HMRC the opportunity to confirm the debt, explain what is owed and discuss ways to resolve the debt, including offering a Time to Pay arrangement.
Under the revised plans, HMRC are also introducing a clear appeal procedure available to taxpayers who have been advised that that their debt is to be recovered through the DRD. The debtor will have 30 days to appeal against the decision to initiate the DRD. Debtors will also be given the option to appeal against HMRC’s decision to a County Court.
HMRC have also taken on board the concerns raised about the potential impact on vulnerable taxpayers and are establishing a new vulnerable customers unit, which will work closely with the voluntary sector on HMRC’s communications with debtors affected by DRD to ensure that they are well tailored and provide helpful advice on how to seek further assistance.
Finally, HMRC will strengthen its own governance procedures for DRD with oversight by the commissioners of HMRC and will publish statistics on the use of the DRD via the Tax Assurance Commissioner’s Report.
The effect of the DRD measures is that HMRC expect it will bring in an extra £100m a year from approximately 17,000 cases.
If you have any questions about the impact of DRD and how this may affect your clients, please call TaxDesk on 0845 4900509 and ask for John Hood.