In our June 2014 update we reported on HMRC’s consultation, published on 6 May 2014, on a new power, announced in the 2014 Budget, to enable the Direct Recovery of Debts (DRD).

This power will allow HMRC to recover tax and tax credit debts directly from debtors’ bank and building society accounts, including Individual Savings Accounts.

On 21 November 2014, HMRC published a summary of responses to their consultation. In response to the comments received, new safeguards are included in the proposals, including:

  • guaranteed visits to debtors from an HMRC officer to meet them face-to-face
  • establishing a new, specialist unit to deal with cases involving vulnerable members of society, and a dedicated DRD team and helpline
  • ensuring judicial oversight of the process is enshrined in legislation, with an avenue for
  • appeal to the County Court; and
  • giving debtors 30 days to contact HMRC and arrange payment of the debt or object to the use of DRD, before any money is taken

A number of respondents had raised concerns regarding the potential interaction of DRD with insolvency proceedings, and that the power could be tantamount to “Crown Preference by stealth”. HMRC has committed in the response document to ensure that it does not receive any advantage during insolvencies through its use of DRD.

Draft legislation will be published in due course for consultation. In the meantime, HMRC should be applauded for acknowledging the “strong concerns” regarding the operation of this power and the proposed new safeguards which are intended to address such concerns.

To read HMRC’s news story on the new safeguards click here.

To access the summary of responses and other consultation documents click here.