Tax practitioners raise concerns over HMRC debt collection plans

UK tax practitioners have questioned plans from HM Revenue and Customs (HMRC) to deduct tax directly from debtors’ bank accounts.
 
At the Institute of Chartered Accountants in England and Wales’ (ICAEW) Wyman Symposium, almost two-thirds (65 per cent) of attendees disagreed with the direct debt recovery powers.
 
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 accounts.
 
Debtors must owe HMRC a minimum of £1,000 in order to be pursued in this manner and will have been contacted at least four times for the measure to be exercised.
 
It is estimated that as many as 17,000 taxpayers could fall foul of these new debt collection plans each year.
 
Jolyon Maugham, tax barrister of Devereux Chambers, said: “Most arguments against DRD boil down to HMRC’s lack of ability in administration to safely carry it out.”
 
However, the move is not without its advocates, of which Mr Maugham was one.
 
“It only relates to tax that is due, hasn’t been paid and which the taxpayer isn’t disputing,” added Maugham.
 
Stephen Herring, head of taxation at IoD, added: “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.”
 
However, the removal of the courts from the debt collection process was a cause for concern for many practitioners, in particular given the fact HMRC already can collect debts from bank accounts if it goes through the courts.
 
As a result, more than half (53 per cent) of the Wyman Symposium attendees felt direct debt recovery was “wholly unnecessary”, while a further 17 per cent felt it requires significant alteration.

Last updated: 9th July 2014