HMRC to Take Owed Taxes Directly from Accounts

May 8, 2014 Taxation in UK

LONDON – As many as 17 000 taxpayers in the UK each year may see the HMRC take any owed taxes directly from their bank accounts.

On May 6th the government of the UK launched a consultation, lasting until July 29th, on new powers to be granted to the HM Revenue and Customs (HMRC), potentially allowing the tax authority to recover unpaid debts directly from the bank accounts of uncompliant taxpayer, as was proposed in the current government budget in March this year.

The aim of the consultation is to obtain feedback on the HMRC’s currently drawn plans of Direct Recovery of Debts, explaining how “…this measure will work and consults on how best to implement this policy, including which safeguards would be proportionate and balanced to ensure that debtors do not suffer undue hardship as a result of this policy.

According to the HMRC, the DRD will only be applied to situation when individuals owe at least GBP 1 000 in taxes repetedly refuse to meet their obligations, after having been contacted by tax authorities on least on four separate occasions.

The HMRC estimates that in any given year the DRD will be used to recover owed taxes from at least 17 000 people, with an average tax debt of approximately GBP 5 800, although nearly half of the cases will concern debts of more than GBP 20 000.

The original proposal in March to implement the DRD was met with immediate controversy and opposition, as many legal and accounting professionals derided the system, calling it “draconian”, however, in response to the accusations, the HMRC has promised that the DRD will have adequate safeguards, such as ensuring that the tax offender still has a minimum balance of at least GBP 5 000 on their account after the withdrawal, and providing taxpayers an adequate notice of 14 days before taking the funds.

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