HMRC has reintroduced controversial powers allowing tax officials to take money directly from bank accounts of people who owe more than £1,000. Chancellor Rachel Reeves (Labour) approved the reinstatement of these "direct recovery powers" ahead of her Autumn Budget. The powers were first introduced in 2015 but paused during the Covid pandemic.
The tax authority announced on Monday it had restarted the strategy in a "test and learn" phase. HMRC staff can now claim money directly from accounts of debtors who owe more than £1,000 under the direct recovery system. The powers can be used against funds held in cash ISAs as well as standard bank accounts, according to the Liverpool Echo.
Expert warnings over accuracy
Tax expert Mike Warburton from The Telegraph expressed serious concerns about the development. "Clearly taxpayers should pay the tax that is properly due, but I do not have the confidence that HMRC will always get it right," he said. "I recognise that there are safeguards in place, but this really is the thin edge of a wedge leading towards a very dangerous development."
Dawn Register from accountancy firm BDO described the powers as "draconian". "The relaunch of this draconian power underlines how important it is not to stick your head in the sand and ignore HMRC demands," she said. Register warned that HMRC needs to strike the right balance between supporting those in genuine financial difficulty and being assertive with those who can afford to pay.
Government justification
The latest figures show £42.8 billion in tax owed to HMRC remains unpaid - significantly higher than pre-pandemic levels. The Government recently announced £630 million of investment in HMRC's debt recovery capability, including 2,400 new debt management staff. The policy was originally announced in the Spring Statement targeting those who choose not to pay despite having the means to do so.
Built-in protections
Safeguards include maintaining a minimum of £5,000 in debtor accounts for essential expenses. An HMRC spokesman defended the approach, saying most people pay tax on time and in full. "It's right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to," the spokesman said. "These powers are subject to robust safeguards and we'll continue to support customers who need help with their payments."
Sources used: "The Telegraph", "Liverpool Echo", "Birminghammail", "Mirror"
Note: This article has been edited with the help of Artificial Intelligence.
