Posted by James Pearson on 23 Jul 2015
HMRC Free to Access Taxpayer Bank Accounts
Despite a massive outcry last year against suggestions that HMRC should gain powers to collect tax debts directly from taxpayers’ bank accounts under the Direct Recovery of Debts (DRD) rules, it has recently been announced that HMRC intends to push forward regardless.
The DRD rules will come into effect after Royal Assent is given to Finance (No 2) Act 2015, likely to be late September or early October 2015. Despite promises of safeguards following last year’s public discussion of these measures, those safeguards are not included in the legislation. We are in favour of all taxpayers paying the correct amount of tax and paying it on time, but HMRC’s recent record when it comes to calculating the correct tax, and even, at times, identifying the correct taxpayer has been less than perfect.
The absence of safeguards means that the first a taxpayer could know of such action against them, correct or not, could be the copy of a hold notice through the door, by which point the taxpayer’s funds are already frozen.
How the DRD rules will operate
A debt of at least £1,000 must be owed by the taxpayer to HMRC, and there can be no prospect of that amount being reduced on appeal. This debt can be tax of any sort, penalties, interest and amounts demanded by an Accelerated Payment Notice (APN), as well as overpaid Tax Credits.
HMRC have said they will contact the taxpayer a minimum of four times about the debt before commencing the DRD procedure, including a face to face meeting with the taxpayer to establish that they have found the right debtor and calculated the debt correctly. However, this promise of a face to face meeting is pointedly not included in the legislation. As the promise has no legal basis, it cannot be enforced by the courts.
HMRC will send the deposit taker (e.g. the bank) an information notice which requires the bank to provide details of the accounts held by the taxpayer within 10 working days. HMRC will then send the deposit taker a hold notice which requires them to freeze the taxpayer’s accounts in respect of the debt owed, but at least £5,000 must be left available to the taxpayer across all his accounts. Once confirmed, HMRC must send the taxpayer a copy of the hold notice and the deposit taker is also permitted to inform the taxpayer.
The taxpayer, or a joint account holder, can lodge an objection against the hold notice with HMRC, who must respond within 30 working days to dismiss the objection, or cancel or alter the hold notice. The taxpayer can appeal against the hold notice to a County Court after HMRC has dealt with the objection. HMRC will issue a deductions notice to the deposit taker, which replaces the hold notice, once the period for objections and appeal against the hold notice has expired.
This will require the deposit taker to pay the required sum by a date specified. The deductions notice must be provided to the taxpayer and joint account holders and it expires, returning complete control of the account to the account holder, either on cancellation or once the final payment is made to HMRC by the deposit taker. There are penalties for deposit takers who fail to comply with the notices issued by HMRC.
If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or email@example.com
- Tax Relief For Residential Mortgages
- Property Partnership Incorporation and SDLT
- Overseas Pension Changes 6 April 2017
- Non-Resident Landlords – UK Tax Update
- Top 10 Expat Tax Tips for Individuals Moving to the UK