Direct recovery of tax debts—HMRC opens consultation

Direct recovery of tax debts—HMRC opens consultation
 Tax analysis: What are the key features of HMRC’s consultation on its plans for direct recovery of tax debts (DRD)? With legislation not expected to be introduced until Finance Bill 2015, now is the time for interested parties such as lawyers, banks and other deposit-takers to help shape the design of DRD.

Original news

Government consults on recovery of tax debts direct from bank accounts, LNB News 06/05/2014 116

HMRC is consulting on proposed new powers allowing it to recover a range of assessed tax debts directly from the bank accounts of businesses and individuals who have ignored repeated requests for payment. This action would only apply to debts over £1,000 and would include such safeguards as leaving a minimum of £5,000 in the debtor's account. The proposal was announced at Budget 2014 and the consultation will run until 29 July 2014.

The full consultation can be viewed here.

What does the consultation document on direct recovery of tax debts say?

On 6 May 2014, HMRC and HM Treasury opened the consultation on DRD. DRD will enable HMRC to recover tax (including NICs) and tax credit debts (together referred to as tax debts) directly from debtors' bank and building society accounts, as well as ISA accounts, if the debtor owes at least £1,000 (which could be made up of smaller debts owed across a range of taxes) (see chapter 1 and para 3.2 of the consultation). DRD was first announced at Budget 2014. The intention is for legislation on DRD to be included as part of Finance Bill 2015.

The DRD consultation document outlines:

the policy aim of DRD (chapter 2 )

how DRD is envisaged to work in practice (chapters 2 and 3), and

the safeguards to protect tax debtors from unduly harsh treatment (chapter 4)

The consultation asks taxpayers, deposit takers and those representing the vulnerable for their

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.