Advisers gravely concerned over HMRC debt collection plans

TAX PRACTITIONERS have raised serious concerns over plans for HM Revenue & Customs to be afforded powers allowing them to deduct tax directly from debtors’ bank accounts.

The powers, originally announced in March’s Budget, extend as far as to include building society accounts and ISAs, with the caveat that at least £5,000 must be left across all the accounts. Debtors must owe at least £1,000 to be pursued in this way and will have been contacted at least four times for the measure to be exercised.

Currently, HMRC estimates 17,000 taxpayers will be affected annually.

Prior to presentations at the ICAEW’s Wyman Symposium, 65% of attendees disagreed with the direct debt recovery powers.

In particular, many were worried about HMRC’s ability to conduct direct debt recovery without making errors.

“Most arguments against DRD boil down to HMRC’s lack of ability in administration to safely carry it out,” noted Devereux Chambers tax barrister Jolyon Maugham.
But the move is not without its supporters, of which Maugham was one.

“It only relates to tax that is due, hasn’t been paid and which the taxpayer isn’t disputing,” he said.

“We have to find a way of getting people to pay the tax they owe. Similar powers are used in Australia, Sweden and USA and there are few examples of misuse,” argued IoD head of taxation Stephen Herring.

But the removal of the courts from the process was a source of consternation for many, in particular given the fact HMRC already can collect debts from bank accounts if it goes through the courts.

“So why does it need new powers?” asked Pump Tax Chambers’ Jonathan Schwarz. “This measure will affect vulnerable people.”

Following the discussions, 53% of the Wyman attendees felt direct debt recovery was wholly unnecessary, while an additional 17% believed it requires significant alterations. In total, a cumulative 70% disagreed with the proposals.

“It’s clearly worrying if a roomful of tax advisers and accountants can’t support the proposals. HMRC should drop it,” said Keith Gordon of Atlas Tax Chambers.

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