Under the government's proposals, HMRC will put in place an automated process to recover lower value tax debts (up to £5,000 for individuals and £10,000 for businesses) in monthly instalments directly from the taxpayer’s bank and building society accounts.

Before initiating the process, HMRC must have exhausted its standard collection powers, and given the taxpayer a final opportunity to pay or to contact HMRC. An earlier article provides more information and explains why the government believes the measure is necessary.  

ICAEW’s concerns 

In its response to the consultation (ICAEW Representation 61/26), ICAEW has expressed broad support for the measure as a way to reduce the tax gap by recovering persistent long-term debt. However, ICAEW is concerned that, with an estimated 4.8m taxpayers expected to meet the criteria for inclusion in the programme, HMRC may not have the resources it needs to manage the process effectively. 

Importance of safeguards

ICAEW believes that safeguards will be key in ensuring that:

• The debt being recovered is genuine. ICAEW believes that HMRC has underestimated the extent to which errors or delays in its own processing systems lead to debts appearing to be outstanding, but which have already been paid, extinguished or superseded.
• The amount being sought each month is affordable and does not cause undue financial hardship. ICAEW is particularly concerned that collection from joint accounts could leave families in a vulnerable position and recommends that deductions are not taken from joint accounts, or that they are given more extensive examination to ensure that the other account holder is not unduly impacted.
• Any taxpayer support needs and vulnerabilities are accommodated for. While it is proposed that the taxpayer would have access to a streamlined objections process, vulnerable taxpayers may not understand the process or be able to take advantage of it. Indeed, their vulnerability may be the reason why the debt remains outstanding.
• There are sufficient routes for the taxpayer to lodge objections. The routes should be clearly set out in legislation and guidance to ensure that taxpayers subject to this measure are aware of their rights and obligations. 

ICAEW also believes that the notice period for the taxpayer to respond to a pre-deduction notice should be at least 30 days and that at least a month’s notice should be given following the end of the objection period before payments are taken.