Summer Budget 2015: Direct recovery of debts

HMRC does not have the power to seize funds from bank or building society accounts of a taxpayer without first seeking a Court Order to do so but does have the ability to seize and sell ‘physical assets’ to make good the debt.

Following Royal Assent of the Summer Finance Bill 2015, HMRC will be able to remove and hold funds in respect of debts of over £1,000 from the bank and building society accounts of debtors. This will apply where debts are payable to the Commissioners by virtue of an enactment or under a contract settlement. HMRC are required to check that the taxpayer will be left with a minimum aggregate credit of £5,000.

Financial Institutions will be required to provide details of the accounts/balances held and transfer funds to HMRC, with a small administrative cost to be charged to the account holder.

The taxpayer has the right to object to the seizure of their funds and can appeal to the County Court.

The purposes of the new power are to reduce the time taken to recover debts and minimise the legal costs incurred by HMRC in seeking Court judgements.  The power is intended for situations where the taxpayer has been contacted by HMRC face to face, has been requested to pay the debt and despite having sufficient funds to do so, chooses not to.

The new power targets individuals rather than companies. There is a risk that the information obtained from the Financial Institutions could be used for purposes other than the recovery of a debt.