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New safeguards for proposed debt recovery powers

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Following consultation, the government has revised its proposals for recovery of tax debts direct from taxpayers’ bank accounts, offering safeguards which include a guaranteed face to face visit for every debtor being considered for such action and the right of appeal to the county court. Draft legislation will follow for consultation, although the measure will be included in the Finance Bill in the next Parliament.

The move has been widely welcomed by the tax profession, with Chas Roy-Chowdhary, head of taxation at the ACCA, saying it was ‘a good day for taxpayer confidentiality’. He said: ‘There will now need to be face-to-face engagement between HMRC and the tax payer before anything can happen. Vulnerable taxpayers will be identified and taken out of the process entirely and put in touch with a dedicated helpline … The new powers will be restricted to only asking the bank or building society for the balance in the account rather than 12 months’ information. From a preferential creditor’s point of we were concerned that HMRC would jump the queue with this power.’

The CIOT also hailed the decision to revise the ‘controversial’ measures, with president Anne Fairpo saying: ‘Throughout the consultation process, we have maintained that the rule of law should not be undermined. It is for this reason that we are especially pleased to see changes allowing appeals to the county court. If an objection to DRD is made by the taxpayer, it will be internally reviewed by HMRC and the time limit to request a review has increased from 14 to 30 days. If the review is denied, the taxpayer will be given a further 30 days to appeal to the county court; this is the kind of external oversight we have been seeking. If the proposed changes are reflected in legislation, they will go a significant way to allay our concerns.’

While ATT president Natalie Miller also praised the ‘clear tangible improvements’ and LITRG president Anthony Thomas offered a ‘guarded welcome’ to the proposals, ICAEW chief executive Michael Izza expressed his ‘lingering fear’ that other government departments and agencies might try to introduce similar approaches to collecting debt.

BDO partner Dawn Register expressed concerns over HMRC’s commitment to speak directly to the taxpayer to inform them of the intention to recover unpaid tax debts prior to doing so. ‘[This] poses an issue around who the campaign is targeting,’ she said. ‘It is likely that the more hardened debtor will keep their money offshore or outside the banking system, so that HMRC cannot get hold of it [and] HMRC can only seize money from UK bank accounts. These powers are also complex, particularly in terms of how they interact with existing insolvency and debt recovery legislation, so it will be interesting to see how this plays out in practice.’

Writing in this week’s Tax Journal, Paul Aplin (ICAEW Tax Faculty) noted that the revised proposals address almost all of the concerns that were expressed, and he said that: ‘In terms of reacting to concerns, it has proved to be one of the most constructive consultations I can recall.’ However, he added: ‘We do of course need to see the draft legislation, particularly to see which safeguards are in statute and which are in guidance. In my view, all key safeguards must be statutory’.

HMRC has since issued an issue briefing on the application of its proposed new powers.