HMRC Proposes to take Payments Directly from Bank Accounts

Following the 2014 Budget HMRC released a proposal named the Direct Recovery of Debts (DRD) which was aimed at taking outstanding tax arrears directly from taxpayers’ bank accounts.

The DRD proposes that where taxpayers have outstanding tax liabilities of over £1000, and hold over £5000 in a bank/building society account or ISA, HMRC would have the power to directly recover the arrears. Also in the proposal, HMRC will also be able to withdraw arrears from joint accounts, which may potentially impact on one party who does not have an outstanding tax liability.

HMRC would write to the taxpayer to inform them of the intent to withdraw the funds, and allow them 14 days to contact HMRC. In addition the bank or building society would prevent the taxpayer from withdrawing the funds by placing them on hold.

The aim of the proposal is to streamline the processes of recovering outstanding tax liabilities, through which, HMRC estimates that taxpayers are contacted on between 4 and 9 occasions.

It is estimated that the proposal will have implications for 17,000 annually with an average tax liability of £5,800.

HMRC proposes that a minimum of £5000 will be left in taxpayers accounts. However, the Commons Treasury has criticised the proposal.

If you suspect that the DRD proposal may affect you, please contact one of our tax investigations professionals either through the Enquiry Form or by calling 0113 387 5670.