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Once the Finance (No 2) Act 2015 receives Royal Assent (likely to be in late September or early October), HM Revenue & Customs (HMRC) will gain powers to collect tax debts directly from taxpayers’ bank accounts.
The debts affected by this include any tax liability, penalties, interest, overpaid tax credits and amounts included in an Accelerated Payment Notice.
HMRC have said that these powers are aimed for those who won’t pay rather than those who can’t pay, and as such there are certain safeguards which have been put in place.
The legislation states the following:
Before HMRC can start the process, as stated above, they must be satisfied that they have the right person and that the person is aware that the sum is due. Their guidance states that the taxpayer will be contacted four times, one of which is face to face. This is designed to reduce errors, such as letters not arriving or the wrong debtor being chased for payment; however, this is not law, merely guidelines.
Once satisfied the above condition is met, HMRC will then contact the bank for information regarding the accounts held. The client or their agent do not need to be informed of this initial contact.
HMRC will then send the bank a hold notice which will freeze the amount due. The bank will confirm to HMRC that the sum specified is held. HMRC must send the taxpayer a copy of the hold notice and the bank is permitted to inform the client at this stage.
Either the taxpayer or a joint account holder can lodge an objection at this point. HMRC must respond to any objections within 30 days.
Once the period for objections has expired, HMRC can issue a deductions notice to the bank, requiring them to pay the amount specified by a certain date. This notice is copied to the taxpayer and anyone else with an interest in the accounts, such as a joint account holder.
This legislation is aimed at taxpayers with large liabilities who refuse to pay but have the means to. The liability must be very late for the process to apply, to ensure that the liability cannot be reduced (for example, by amending a tax return within the amendment window). In addition, in order to meet the regulations, HMRC will need to ensure they have contacted you a number of times regarding the debt. This legislation is therefore likely to only affect a small number of people.
Should you have any concerns with regard to late payment of liabilities (in some circumstances it is possible to arrange a payment plan with HMRC) contact your usual advisor in order to discuss the best way forward.
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