You may have heard that HMRC are proposing new rules on the Direct Recovery of Debts (DRD). HMRC recognise that:
‘…there are concerns about the impact of this change on vulnerable members of society. We must ensure that there are strong safeguards in place so that this is only targeted at the truly non-compliant.’
HMRC estimate that:
• DRD will apply to around 17,000 cases a year
• the debtors affected have an average of £5,800 in tax and tax credit debts and
• around half of the debtors affected have more than £20,000 in their bank and building society accounts and ISAs.
The main safeguards before the DRD will apply are that:
• a taxpayer will have been contacted a minimum of four times about their tax debt (HMRC say nine times on average)
• the measures will only be applied where in excess of £1,000 of tax is due and unpaid
• the measures will never be utilised in such a way as to leave a taxpayer with less than £5,000 in their bank account. Regard will also be had to their regular pattern of expenditure over the previous 12 month period in considering whether taking the money would cause hardship.
The safeguards after implementation are that for 14 calendar days from the date of application of the measures, HMRC will not actually be given access to the monies. Instead, during that period, the monies will in effect, be blocked and the taxpayer will be able to make representations that:
• either a transfer of the money to HMRC would cause hardship or
• that the tax debt is not due.
If those representations are not accepted, the monies will be transferred to HMRC.
So it may not be as bad as you might have thought, but please do get in touch if you have any concerns.