John Healey is set to give HMRC bank account access powers in next week's Budget, allowing unpaid tax to be taken directly from current and savings accounts. The change would let HMRC move on debts without court approval, with the first withdrawals expected to hit people and businesses who owe money but have not paid.
HMRC and £4 billion
The proposed crackdown is designed to recoup about £4 billion in outstanding debts. It would also reach accumulated fines and interest, not just the original bill, broadening what HMRC can recover from each account.
At present, HMRC can only pursue money from accounts where the debt exceeds £1,000, and it must leave the taxpayer with at least £5,000 once the amount has been recovered. Under the new plans, the minimum debt threshold would fall to as little as a few pounds.
Millions of HMRC debtors
The policy would affect millions of individuals and businesses. An estimated 4.8 million people and companies each owe less than £10,000, and their combined liabilities amount to roughly £4 billion. For individual taxpayers, the typical outstanding bill is £950.
HMRC is also exploring partnerships with credit reference agencies to work out how much each debtor can realistically afford to repay. Those organisations would supply data on income and outgoings, and earlier proposals indicated that deductions might be capped at no more than half of a person's disposable income.
Dan Neidle on safeguards
Dan Neidle, founder of Tax Policy Associates, said: "I do have concerns that an automated system is going to struggle to distinguish deliberate non-payment from illness or missed correspondence." He added: "It would be good to understand the safeguards that will be put in place."
That leaves the practical test on taxpayers themselves. If the Budget passes as expected, people who believe a deduction is wrong will have to challenge it after HMRC starts the recovery process, so the immediate issue is whether the safeguards match the speed of an automated system.
