HMRC direct debt recovery - Additional safeguards announced

Following consultation, HMRC has announced additional safeguards as part of the controversial direct debt recovery proposals.

HMRC estimates that direct recovery of debts (DRD) will apply to around 17,000 cases a year.

Around half will involve debtors with more than £20,000 in their bank and building society accounts, and the average debt of those affected will be £5,800.

The original proposals included certain safeguards, such as:

  • only taking action against those who have established debts and have passed the timetable for appeals
  • only targeting debtors who have repeatedly ignored HMRC's attempts to make contact (typically they will have been contacted around nine times)
  • only considering the use of DRD on those with tax and tax credits debts of more than £1,000
  • always leaving a minimum of £5,000 in the debtor’s accounts

Following consultation, further safeguards have been added to guarantee that every debtor will receive a face-to-face visit from HMRC agents before their debts are considered for recovery through DRD.

This meeting will provide a further opportunity for HMRC to:

  • personally identify the taxpayer and confirm it is their debt
  • explain to debtors what they owe, why they are being pursued for payment and discuss payment of the debt
  • discuss options to resolve the debt, including offering a Time to Pay arrangement to the debtor, where appropriate
  • identify debtors who are in a vulnerable position and offer them the support they need to settle their debts. (Only debtors who have received this face-to-face visit, have not been identified as vulnerable, have sufficient money in the bank and have still refused to settle their debts will be considered for debt recovery through DRD)

Additional measures being provided by HMRC:

  • establishing a new vulnerable customers unit, which will work closely with the voluntary sector and whose prime focus will be dealing with DRD cases in the early stages of its operation;
  • committing to work with voluntary organisations and professional bodies on HMRC’s communications with debtors affected by DRD, to ensure they are well tailored and provide helpful advice on how to seek further assistance
  • applying DRD to a smaller number of cases during the first year of its operation in 2015 to 2016, allowing HMRC to start the process on a small, targeted basis and gain experience and feedback;
  • extending the window for debtors to object to HMRC from 14 days to 30 days, once debt recovery through DRD has been initiated. Money will be held in the account, but no funds will be transferred until this period has passed
  • introducing an option for debtors to appeal against a decision to a county court on specified grounds, including hardship and third-party rights
  • strengthening governance procedures for DRD, including oversight by the commissioners of HMRC
  • committing to enhanced transparency on this power and publishing, in the Tax Assurance Commissioner’s Report, statistics on the number of times this power is used and appeals that are raised
  • reviewing DRD fully after the policy has been operational for two years, and laying this report before Parliament
  • Anyone who disputes the amount owed has the automatic right to appeal