HMRC establishes safeguards to new debt recovery powers

The treasury has relented to pressure from campaign groups to impose safeguards on its new debt recovery powers. 

This week, HMRC released a briefing to explain how the powers would be used with the safeguards in place, to ensure that debtors do not face unnecessary hardship.

The controversial debt collection powers were announced earlier this year, stipulating that HMRC would have the ability to recover debts from debtor’s bank accounts and ISAs if they owed £1,000 or more.  Many have spoken out in concern over the use of the powers, and the potential hazardous effects they could have on vulnerable debtors.

Under the revised plans, safeguards will mean that HMRC has to meet all debtors face-to-face before taking action and provide extensions to the time allowed for appeals, from 14 days up to 30 days.  Additionally, an untouched £5,000 will have to be left across the debtor’s accounts.

According to the briefing, HMRC expects to use the new powers on only a minority of cases, around 17,000, where firmer action is deemed necessary to ensure debts are recovered.  It also noted that around half of their preliminary targets have more than £20,000 at their disposal.

The HMRC has suggested the safeguards will help them tackle only those guilty of avoidance, rather than simply endorsing punitive powers against those unable to pay off their debt.

David Gauke, financial secretary to the Treasury said:  “We already set out robust safeguards to protect vulnerable debtors in our original DRD proposals, but feedback from the consultation process told us we could do more to make sure this only catches those who are playing the system.

“We’re strengthening the guarantees we can offer taxpayers that the powers will only be used when debtors have consistently refused to talk to HMRC and settle their debts, and their use will be subject to the toughest scrutiny and oversight possible.”

HMRC also said it will be setting up a specialist unit to deal with cases involving vulnerable members of society.

However, Anthony Thomas, president of the Low Incomes Tax Reform Group, has said he will remain cautious about the new powers until safeguards are secured within legislation.

He said: “Our primary concern is that the vulnerable taxpayer or tax credit claimant on a lower income who gets in a muddle should not be caught up in a process designed to target those who have the funds to pay their tax on time but who resolutely refuse to do so.

“But importantly, these improved safeguards must be adequately set out in primary legislation.”

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