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The Direct Recovery of Debts (DRD) scheme will bring the UK in line with other countries that already recover tax and tax credit debts from those who are refusing to pay what they owe.DRD will allow HMRC to recover tax and tax credit debts directly from debtors’ bank and building society accounts, including Individual Savings Accounts (ISAs), without the need to apply to a court. The legislation is expected to be taken forward as part of the 2015 Finance Bill.
HMRC estimates that DRD will apply to around 17,000 cases a year; the debtors affected by this policy have an average of £5,800 in tax debts; and around half of the debtors affected by this policy have more than £20,000 in their bank and building society accounts and ISAs.
Debts will only be suitable for DRD where there is a tax or tax credit debt of £1,000 or more due to HMRC. This £1,000 debt could be owed against just one tax or could be made up from smaller debts owed across a range of taxes. It will also include National Insurance Contributions that are due to HMRC.
Christina Nawrocki of Wellers explains how the new legislation could be enforced: “Before a debt is due, HMRC will contact a taxpayer several times to arrange payment of what is owed. Only when a debt is established will DRD action be used.
“Banks and building societies are already required to share information with HMRC about interest paid or credited to accounts they hold for their customers and so the first step will be for HMRC to match the debt against the bank."
“HMRC will not use DRD if a debtor has credit less than £5,000 across their accounts and will not create or increase overdrafts. The Revenue will also ensure that a minimum credit balance of £5,000 is available to the debtor across all accounts after the debt has been recovered."
“In the case of business accounts the payment of regular costs such as employee wages will be taken into consideration. In most cases, HMRC will look to prioritise recovering debt from accounts that appear to be used primarily for savings over those that appear to be used for day-to-day expenses."
“In response to the consultation that took place in 2014, HMRC has assured that all identified debtors will receive a personal visit from one of their officers to identify vulnerable members of society and provide them with the appropriate support."
“Debtors will also have 30 days in which the funds will be held in the debtor’s accounts before being transferred. This will give the opportunity to contact HMRC and arrange payment of the debt or object to the use of DRD, before any money is taken. If the objection is denied, the taxpayer will be given a further 30 days to appeal to the county court."
“This is a step to coming in line with many other EU countries who already carry out DRD and in some cases are much less lenient, not leaving a minimum balance in a debtors account for example.”
Find out how else HMRC have increased their powers in the war on tax avoidance by reading this blog post http://www.wellersaccountants.co.uk/blog/HMRC-power-tax-return.aspx.
Wellers is one of the most successful medium size firm of accountants and business advisors in the South East. Established 70 years ago, Wellers has four offices covering London and the Thames Valley with around 80 loyal and experienced employees. The firm provides a comprehensive range of professional services whilst retaining a partner-led approach. Partners work integrally with organisations to help them achieve their business objectives and fulfil their aspirations. Clients then benefit from tangible savings and sustainable business growth, branded by Wellers as ‘Business Oxygen’.
Contact Info:
Name: Jo Love
Email: Send Email
Organization: Wellers Accountants
Address: 1 Vincent Square London SW1P 2PN
Phone: 07887 775271
Website: http://www.wellersaccountants.co.uk/
Release ID: 73333
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