HMRC May Take Small Tax Debts Straight From Bank Accounts

HMRC could soon take unpaid tax straight out of the bank accounts of people and businesses who owe small amounts, according to reports. The plans are due to be announced in Chancellor John Healey's Budget on Wednesday.

The crackdown targets an estimated 4.8 million individuals and businesses that each owe less than £10,000 in tax. Together that comes to around £4 billion. Reports put the average unpaid bill among individual taxpayers at £950. Not everyone in the group is dodging payment on purpose, and a lack of awareness explains some of the debts.

What would change

For now, HMRC can recover money directly only if a taxpayer owes more than £1,000 and is left with at least £5,000. The reports say that figure will be cut to a few pounds.

Officials would also be able to recover outstanding fines and interest. If the change is introduced, tax officials could deduct payments from current and savings accounts automatically, without first obtaining a court order.

HMRC is reportedly also considering the use of credit reference agencies to assess the finances of the people it targets, so it can work out how much each can afford to repay. Earlier proposals suggested that deductions could be capped at 50% of disposable income. Anyone affected would be responsible for challenging a decision, according to the reports.

Concerns about vulnerable people

Critics of the plans say vulnerable people could have money taken from their accounts because of administrative errors, illness or missed correspondence. Dan Neidle, founder of Tax Policy Associates, warned that automated systems could struggle to tell deliberate non-payment from genuine difficulties.

A senior government source said there would be "rigorous" protections for vulnerable groups.

Source: Metro