The HMRC has been given the power to take money directly from people’s bank accounts under certain circumstances, and a BBC expert has explained when this can happen
A BBC expert has shed light on the circumstances under which HMRC will be directly withdrawing money from people’s bank accounts. Last month, HM Revenue and Customs alerted individuals that it has already begun retrieving owed funds straight from debtors’ bank accounts.
Dan Whitworth, a journalist for BBC Radio 4’s Money Box, clarified this on BBC Morning Live, conceding that it sounds ‘alarming’. When questioned if HMRC are permitted to do this, he responded: “Yes, but only under very specific circumstances. The power comes from something called Direct Recovery of Debts (DRD). The idea is to help HMRC recover tax debts from people who owe at least £1,000, have ignored repeated attempts to make contact, and have no valid appeals outstanding.
“While it sounds alarming, the scale of use in the past shows how rarely it happens. When the DRD scheme was first introduced in 2016, HMRC estimated it might be used around 11,000 times a year, but in the two years it was active, up to 2018, it was used only 19 times.”
There are strict safeguards built into the process:
- HMRC can only consider DRD for debts over £1,000, and only after all other recovery routes have failed.
- Before any action, HMRC must make a face-to-face visit to confirm they are dealing with the right person, assess for vulnerabilities, and discuss other payment options.
- If a DRD is approved, HMRC must leave at least £5,000 untouched across all the debtor’s accounts. For example, if you had £7,500 in savings, the most that could be removed would be £2,500.
- A formal 30-day notice must be issued before any money is taken, giving time to appeal, correct any errors, or set up a payment plan.s who need help with their payments.”
An HMRC spokesperson told BBC Morning Live: “Most people pay tax on time and in full – but it’s right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to.”
“These powers are subject to robust safeguards and we’ll continue to support customers who need help with their payments.”
The HMRC has announced that its recovery policy, which was paused during the Covid-19 pandemic, has now been restarted in a “test and learn” phase.
Direct Recovery of Debts (DRD) is utilised when an individual or business can afford to pay what they owe but are choosing not to, according to the revenue body.
In the spring statement, the Government stated that HMRC would restart DRD for those who opt not to pay.
This permits HMRC to recover money owed by instructing banks and building societies to directly withdraw from a debtor’s account, and/or funds held in cash ISAs.
It may be employed where debtors owe £1,000 or more, with certain safeguards in place to ensure that debtors do not experience undue hardship and that adequate protection is provided for vulnerable customers.
These safeguards include only taking action against those who have established debts, have passed the timetable for appeals, and have repeatedly ignored HMRC’s attempts to make contact.
Anyone who disputes the amount owed has the automatic right to appeal, said the revenue body. The safeguards also involve leaving a minimum of £5,000 in the debtor’s accounts so the revenue body does not freeze money needed to pay wages, mortgages or essential business or household expenses.
On its website, HMRC stated: “The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.”
Dawn Register, a tax dispute resolution partner at BDO, commented: “Given the pressure on public finances, it’s clear that HMRC is determined to get tougher on those who can pay but don’t pay.
“For those who are struggling financially we would always recommend that they explore ‘time to pay’ options to allow them to pay in instalments. “HMRC needs to strike the right balance between supporting businesses and individuals in genuine financial difficulty, while being assertive with those who can afford to pay but choose not to. “”.
An HMRC spokesperson stated: “Most people pay tax on time and in full – but it’s right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to.”
“These powers are subject to robust safeguards and we’ll continue to support customer”.
