DSH warns over Direct Recovery of Debts consultation

DSH warns over Direct Recovery of Debts consultation

Proposals to allow HMRC to collect unpaid tax direct from bank accounts could have serious repercussions for those who have neglected to keep their affairs up to date, DSH Chartered Accountants & Business Advisors has warned.

HMRC has begun consultation on Direct Recovery of Debts, a policy which, if it comes into force, would give it powers to recover tax and tax credit debts directly from debtors’ bank accounts. You can also get the help of advisors from https://www.iva-advice.co/write-off-bounce-back-loans.html

Glen Thomas new“This is a controversial proposal and one which is already facing opposition, not least from the Treasury Select Committee which has said the process would be wholly unacceptable without prior independent oversight,” said Glen Thomas, Tax Partner of DSH in Maidstone.

“However, the fact that a consultation is taking place means those with tax debts need to be aware that the new powers could come into force at some point in the future.”

At the moment, HMRC cannot recover debts from bank accounts without first obtaining a court judgement.

It argues that direct access will be quicker, will help level the playing field between those who pay what they owe and those who do not, and help ensure compliant businesses do not face unfair competition from those who try to gain an advantage by not paying tax.

Glen explained that Direct Recovery of Debts (DRD) would be used where there were established debts of at least £1,000, which could be made up of a number of smaller debts, and would only be used where HMRC had already made a number of attempts to contact the debtor to arrange payment, at least four times and typically nine times.

He added: “DRD will apply to tax and national insurance liabilities and tax credit overpayments, including VAT and PAYE.

“Debtors may be individuals, businesses or partnerships and DRD will apply to their bank and building society accounts, including ISAs. The new powers would also apply to joint accounts, to the potential detriment of an innocent partner or spouse who may be unaware of the outstanding debt.”

The main arguments against the scheme centre on the accuracy of the information held by HMRC.

“Independent professional bodies such as the ICAEW report numerous cases of HMRC chasing debts which are not due,” said Glen. “We should also be wary about the reliability of the information HMRC holds about bank accounts.”

Other concerns include the fact that it would be up to HMRC to decide how much to leave in bank accounts to cover essential personal and business expenses.

“While there are fundamental questions to be answered about any proposed DRD scheme and even if it goes ahead it will be some time before HMRC begins taking money from accounts, those who have tax debts should be warned that the determination to recover them is real,” said Glen.

“The public discussion of future methods of doing that should serve as due warning to debtors to take action now to get their affairs in order.”

To talk to DSH Chartered Accountants & Business Advisors, visit www.dsh.co.uk or call 01622 690666.

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