HMRC to Collect Taxes From Your Bank Account

The Direct Recovery of Debt (DRD) initiative has been given the go ahead. Therefore, HMRC will be able to collect tax debts from individuals and businesses who owe more than £1,000. It is predicted that the DRD will affect 17,000 individuals and businesses a year, with the average tax debt being around £5,800. However, it has been found that half of those in debt have around £20,000 in total across their accounts – more than enough to cover the debt. Despite this, it does not stop people questioning how ethical DRD is, and HMRC’s guarantee that safeguards are in place to prevent them accessing the wrong bank accounts, are not filling people with confidence. To collect tax debts, DRD will essentially allow the tax man to access the bank accounts of debtors directly. Their only rule is that they must leave a minimum of £5,000 in the accounts they access. They will, however, only be able to do this once HMRC have contacted the individual or business in question, about the outstanding amount, a minimum of four times.

Many small businesses are concerned that they will be the most affected by this new initiative. It is thought that larger corporations have more complex tax arrangements in place and are therefore more protected; whereas, smaller businesses are more vulnerable. Furthermore, smaller businesses are more susceptible to unexpected costs; therefore, the prospect of only having £5,000 available to them has made many small businesses wonder how they will survive. The DRD initiative will be the first time that HMRC are given direct access to individuals and businesses bank accounts. The initiative is due to come into effect in 2015. Up until 29 July 2014 public consultants have taken place, the results of which will shortly be processed. It will be interesting to see what changes, if any, will result from the consultations.

If you are a small business and are concerned about the DRD initiative, we are able to review your accounts and advise on any areas where you may be at risk. You must though remember that the DRD is purely a last resort and you will be contacted by HMRC beforehand, warning you of the consequences of unpaid tax and giving you time to prepare for money that will be collected.

Source: www.gov.uk – Direct Recovery of Debts