Government to take direct action to recover tax and tax credit debts

07 May 2014

The government is consulting on proposals to recover tax and tax credit debts from businesses and individuals that are able but are actively refusing to pay what they owe.

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.

DRD will help to level the playing field, ensuring the honest, hardworking majority are not disadvantaged by the minority that dodge their responsibilities.

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:

  • HMRC only taking action on those who have established debts and have passed the timetable for appeals.
  • 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.
  • Only targeting those with tax and tax credit debts over £1,000.
  • Always leaving a minimum of £5,000 in the debtor’s accounts.
  • 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.

Read the full press release

CIPP comment

The Policy and Research team will be reviewing this consultation in detail and will comment at a later date on any specific implications for payroll.