HMRC Could Take Money Directly From Bank Accounts to Recover £2 Billion in Tax Debts

Taxpayers who fail to pay their outstanding taxes could face direct recovery action on their bank accounts under enforcement measures being pursued by HM Revenue & Customs (HMRC). According to the tax authority, changes are being enforced for people who have the means of paying their taxes but deliberately avoid doing so.

The move stemmed from a broader strategy to recover billions of unpaid taxes and improve the overall compliance within the UK tax system. Although the prospect of HMRC accessing bank accounts may alarm some taxpayers, officials say that this is only limited to tightly controlled cases and safeguards would be in place to protect vulnerable taxpayers.

Financial Pressures That Come With Irregular Income

For a lot of self-employed individuals and those with variable income, most of their earnings arrive in predictable amounts. For instance, a late invoice or a quieter monthly income could cause pressure on cash flow.

That's why HMRC's confirmation that it will reinstate its Direct Recovery of Debts (DRD) powers caused concern for some. But what does it really mean in practice, and should people be worried?

At first, the policy can look alarming. Since 2015, HMRC has been holding these powers, and their use has been very limited. Between 2015 and 2018, only 19 direct recoveries were done. During the COVID-19 pandemic, the scheme was temporarily paused. However, it's been brought back for a 'test and learn' approach recently.

A series of safeguards has also been strictly enforced before any actions could be taken. For example, taxpayers should owe at least £1,000, have ignored repeated attempts to contact HMRC, and have been assessed as able to pay but are deliberately unwilling to do so. Additionally, an officer from the HMRC should visit the individual confirming the debt, discuss repayment options, and carry out a vulnerability assessment before any deductions are made.

How Taxpayers Can Respond to HMRC Debt Recovery Action

For those concerned with HMRC's enforcement powers, the key message is straightforward—stay in contact. Ignoring letters, emails, or calls from the HMRC is one of the common reasons some cases lead to more serious enforcement action.

If you struggle to pay on time, there's usually support available. Most taxpayers could arrange a 'Time to Pay' agreement so that they could pay tax debts in monthly instalments rather than a large lump sum. This will be based on the financial circumstances of the individual.

Also, before any direct recovery action is taken, HMRC must follow a formal process. Taxpayers are also given a notice in advance. This provides ample time for concerns to be raised and for the case to be reviewed before any money can be directly taken from one's bank account. That way, if one disagrees with HMRC, an internal review can be conducted, and even take the issue to a tribunal court, depending on the specific grounds for appeal.

Advocates backing the system argue that measures are intended to be fair, focusing on non-payers, not those experiencing genuine financial hardships or actively communicating with HMRC.