Does DRD Give HMRC The Right To Access Your Bank Account?
Ever since George Osborne announced in the 2014 budget that HMRC would be given the power to take money directly from individuals bank accounts there has been a lot of media coverage, which is understandable.
HMRC’s track record doesn’t fill us with confidence that they will be able to manage this correctly.
Let’s face it, they aren’t exactly known for their administrative skills!
The Facts
The proposal is that HMRC can use the Direct Recovery of Debts (DRD) on people and businesses who have ‘established debts’ of at least £1,000 in either tax or tax credits. This includes PAYE & VAT.
It is thought that the people and businesses affected will have already been contacted by HMRC by either letter or phone call at least 4 times and typically 9 times.
HMRC will leave a minimum of £5,000 in the account. So if there isn’t at least £5,000 in the account, they won’t take a penny. The accounts they are able to access include ISA’s and savings accounts, not just current accounts.
If it is a joint account then HMRC will take a pro rata proportion.
HMRC will speak to the bank/building society and have the funds put on hold, they will then contact you to make the payment within 14 or provide evidence that it isn’t due or will cause hardship if the money is taken.
If payment is not made and no objection is received then the bank will be told to transfer the funds to HMRC.
The Issues
As I’ve already said, HMRC are not known for their administrative organisational skills, in fact, it’s quite the opposite. So there have to be extremely strong safeguards in place to avoid mistakes.
I understand that HMRC have a responsibility to collect tax and that they need to be strict with those people who won’t pay. However, I’m not sure that I can agree that any other person should have any kind of control over your bank account.
There will be a right to appeal the DRD but HMRC are the adjudicators, this is not right!
HMRC will effectively become a preferential creditor
Will this cause people to start moving money to accounts abroad or even stuffing their mattresses with it instead?
I am concerned that a company may have a ‘client account’ holding funds in it’s name but on behalf of others. How will the beneficial owner be established? Assuming that a joint account is held 50/50 is a pretty big assumption, again the beneficial ownership may be different.
In Summary
There are a lot of details to be clarified and a lot more safeguards to be put in place before I can feel remotely comfortable with this. I’m not sure that I will ever agree that HMRC should have the power to take money form accounts directly.
There is now the consultation process to go through, this closes on 29 July and HMRC aim to have a response by autumn.
Draft legislation will then need to be published for further consultation in the Autumn statement. The Finance Bill 2015 will contain the legislation.
This will then need to receive Royal Assent and it is presumed that HMRC cannot start using DRD until this has happened.
I will keep you updated and in the meantime I’d love to hear what you think of HMRC and DRD.
Vikki
Did You Know?
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