The Low Incomes Tax Reform Group (LITRG) welcomes the publication of a government amendment to the Finance Bill which will help protect vulnerable taxpayers who HMRC believe owe them money.
Background
The amendment to the Schedule of the current Finance Bill dealing with ‘Enforcement by deduction from accounts’ (also known as ‘Direct recovery of debt’) states that:
"Before deciding whether or not to exercise the power [to recover debt directly from a taxpayer’s bank account] HMRC must consider whether or not, to the best of HMRC’s knowledge, there are any matters as a result of which the person is, or may be, at a particular disadvantage in dealing with the person’s Revenue and Customs affairs." [extract only]
This will operate alongside a government commitment to ensure every debtor is granted a face-to-face meeting with an HMRC officer before their debt is considered for ‘direct recovery’. This meeting will allow HMRC to assess whether or not the debtor is vulnerable (or, in HMRC’s legal phraseology, ‘at a particular disadvantage’) in dealing with their tax affairs.
The amendment has been tabled following discussions between HMRC officials and LITRG, the Chartered Institute of Taxation and the Association of Taxation Technicians over recent weeks.
LITRG welcomes progress made
This amendment is a significant step forward in protecting vulnerable taxpayers.
Concern that HMRC’s new power might hit unintended targets
The LITRG’s primary concern is that the vulnerable taxpayer or tax credit claimant on a low income who gets in a muddle should not be caught up in a process designed to target those who have the funds to pay their tax on time but who resolutely refuse to do so.
Safeguards
It is important for safeguards to be set out in primary legislation as this makes them more secure than merely writing them into guidance, which is a second-best option, and which can so easily be changed without reference to Parliament. Alongside the right of appeal to a county court this means two of the three safeguards LITRG sought to these proposals will now be written into primary legislation, which is very welcome. The exception is the requirement for HMRC to meet face-to-face with a debtor before targeting them for ‘direct recovery’. It is hugely disappointing this will not be on the face of the Bill but LITRG acknowledge that the Government are making every effort to ensure that these meetings do happen.
Appreciation for HMRC and ministers listening
HMRC and ministers deserve praise for their willingness to engage with LITRG and the tax professional bodies on this sensitive subject and for being prepared to amend the legislation at this late stage to provide reassurance that vulnerable taxpayers will be excluded from the ‘direct recovery of debt’ process and will be dealt with instead by a specialist unit and helpline working alongside the voluntary sector.
LITRG flags concern that remains: is this new power needed at all?
For all that LITRG welcomes the safeguards, the group does remain sceptical as to whether this new power is needed at all. HMRC already have the power to recover money owed from a debtor’s bank account through the county court process. Enabling HMRC to take money directly out of bank accounts without specific court approval and without proper independent oversight is, in LITRG’s view, disproportionate.
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