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LITRG concerns remain after the publication of HMRC’s consultation document on Direct Recovery of Debt directly from the bank accounts of certain debtors, first announced on Budget day.

HMRC propose to strengthen their powers to recover tax and tax credit debts from those who refuse to pay what they owe by enabling direct access to their bank, building society or ISA accounts without reference to the courts. On Budget day, LITRG said that the new power risked flouting the rule of law if there were insufficient safeguards to prevent it from being used inappropriately against debtors on low incomes who simply got into difficulties.

 

The Low Incomes Tax Reform Group (LITRG) suggests that while the published document reveals some safeguards that may be generally effective in preventing HMRC from using their new power inappropriately, it is far less clear just what remedies there will be for those occasions when the safeguards are indeed breached, for whatever reason.

 

The power is intended for use only against those debtors who have been asked ‘repeatedly’ to pay what they owe, and have sufficient funds in their bank accounts. If strictly observed, the safeguards and conditions as set out should be broadly effective, but if they are disregarded in any particular situation, vulnerable taxpayers will suffer – and that poses an unacceptable risk.

 

Should that happen, one would expect to see robust remedies to reverse the impact of any misuse of the power and provide for compensation. In fact, all the consultation document proposes is the right for an aggrieved debtor to object to HMRC within a timescale is so short that few will be able to comply with it, combined with a vague and unspecified assurance of a ‘judicial appeal’. It is not clear what kind of ‘judicial appeal’ is being proposed, but unless it is guaranteed by a statutory right of appeal, lies to a tribunal that is accessible to the unrepresented debtor and can operate swiftly in a costs-free environment, LITRG fears it will be insufficient to rectify any mistakes and repair any damage.

 

The group strongly urges HMRC to think again about this aspect of their proposals as the application of the rule of law in the United Kingdom is fundamental to citizens being treated properly in a civilised society. The right of access to the courts should never be denied, particularly not in the name of administrative efficiency.

 

HMRC's consultation document, Direct recovery of debts