Up to 17,000 people a year will be affected by tax raids on personal bank accounts under new rules by HMRC.
The plans for new powers to recover tax debts from anyone who owes more than £1,000 were announced by Chancellor, George Osborne in the Budget last month.
Now HMRC has explained how the system will work and who will be affected.
The government estimates that the “Direct Recovery of Debt” system will recover £65m between 2015-2016, with that figure increasing over a five-year period.
Previously, concerns were raised by the profession who questioned HMRC’s ability to prevent innocent parties from being wrongly taxed.
After the budget, ACCA accountancy body described the plans as “seriously draconian” but now refer to them as “less fearsome than first thought.”
Chas Roy-Chowdhury, head of taxation at the ACCA, said:
“On paper, the safeguards look relatively robust, and the reality is it is unlikely that anyone will be left penniless. The fact that there will be plenty of opportunity for those owing taxes to respond to HMRC and appeal before any funds are taken.
“There remain some concerns over how efficient HMRC can be in maintaining those safeguards, as well as whether this initiative is in fact a toothless one that will make no difference at all to collecting taxes owed. However, it is important now to have constructive engagement with HMRC to ensure the proposals are reasonable and proportionate.”
David Gauke, exchequer secretary to the Treasury, said the measures would bring the UK in line with its peers and would become a valued part of “HMRC’s toolkit.”
The rules include:
- HMRC only targeting those who have long-term debts and have received at least four demands for payment
- Ensuring that at least £5,000 is left in total across all debtor’s accounts, including savings accounts, after the unpaid tax is seized
- Freezing the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized
The tax authority said that the average debt of those likely to be targeted was £5,800. It added that in around half of cases, debtors had more than £20,000 in their accounts.
Photo by HMRC