15 October 2015
Individuals and businesses who owe more than £1,000 to HM Revenue and Customs may have their bank accounts raided for the money owed.
At present, HMRC can only take debts directly from bank accounts if it has been granted court permission to do so. It also has the ability to seize physical assets belonging to debtors to sell at auction if a debt is not paid, and this power will remain.
New rules are set to come into force under the Summer Finance Bill 2015, which is expected to take effect this Autumn. This has certainly caused controversy since the proposal was first announced in 2014, and following a successful consultation with various groups, additional safeguards are being brought in to ensure that the rules are not incorrectly applied.
There are 3 conditions that must be satisfied in order for HMRC to seek recovery of the debt in this way;
Condition A – the sum is at least £1,000.
Condition B – the sum is either an “established debt” or one due under an accelerated payment notice.
Condition C – HMRC is satisfied that the debtor is aware that they owe the debt to HMRC.
As part of the consultation, the government has committed to ensure direct debt recovery will only be considered for debtors who have received a face-to-face visit, have not been identified as vulnerable, have sufficient money in their accounts, and have still refused to settle their debts.
If selected for this course of action, debtors will have 30 days to object before any money is transferred to HMRC, although the bank funds will be frozen during this appeal time. This is an increase from the 14 days originally planned. A minimum balance of £5,000 must always remain across a debtor’s accounts, and available for use.
If HMRC disagrees with the debtor’s objection and takes the cash anyway, the debtor will also then have a right to appeal its decision at the County Court.
If a business is targeted and their bank accounts are left with just £5,000 available, this is likely to prove insufficient for most businesses to function in their day to day activities, resulting in an inability to pay its debts and becoming insolvent.
If you are a director or an accountant/adviser of a company that is experiencing debt problems with HMRC, or have concerns over the new powers, we are able to offer a wealth of experience of assisting companies navigate through their problems.
If you require any further information about the details covered in this blog, please do not hesitate to contact me or your usual UHY partner.