HMRC 'taking back money direct from bank accounts' sounds 'alarming' says BBC expert

A BBC expert has explained that the HMRC will be taking money direct from people's bank accounts under certain circumstances. Last month HM Revenue and Customs warned people that it has already started recovering money owed directly from debtors' bank accounts.

BBC Radio 4 Money Box Journalist, Dan Whitworth explained how this was possible on BBC Morning Live and admitted it sounds 'alarming'. He asked if HMRC are allowed to do this he said: "Yes, but only under very specific circumstances. The power comes from something called Direct Recovery of Debts (DRD). The idea is to help HMRC recover tax debts from people who owe at least £1,000, have ignored repeated attempts to make contact, and have no valid appeals outstanding.

"While it sounds alarming, the scale of use in the past shows how rarely it happens. When the DRD scheme was first introduced in 2016, HMRC estimated it might be used around 11,000 times a year, but in the two years it was active, up to 2018, it was used only 19 times."

Strict safeguards are built into the process:

• HMRC can only consider DRD for debts over £1,000, and only after all other recovery routes have failed.
• Before any action, HMRC must make a face-to-face visit to confirm they are dealing with the right person, assess for vulnerabilities, and discuss other payment options.
• If a DRD is approved, HMRC must leave at least £5,000 untouched across all the debtor's accounts. For example, if you had £7,500 in savings, the most that could be removed would be £2,500.
• A formal 30-day notice must be issued before any money is taken, giving time to appeal, correct any errors, or set up a payment plan.s who need help with their payments."

A spokesperson for HMRC told BBC Morning Live: "Most people pay tax on time and in full - but it's right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to.

"These powers are subject to robust safeguards and we'll continue to support customers who need help with their payments."

The HMRC said the recovery policy was paused during the Covid-19 pandemic, and has now been restarted in a "test and learn" phase, HMRC.

Direct recovery of debts (DRD) is used when a person or business can afford to pay what they owe but are choosing not to, the revenue body said. The Government said in the spring statement that HMRC would restart DRD for those who choose not to pay.

This allows HMRC to recover money owed by requiring banks and building societies to pay directly from a debtor's account, and/or funds held in cash Isas.

It may be used wheredebtors owe £1,000 or more, subject to certain safeguards to ensure that debtors do not suffer undue hardship and that adequate protection is in place for vulnerable customers.

Safeguards include only taking action against those who have established debts, have passed the timetable for appeals, and have repeatedly ignored HMRC's attempts to make contact.

Anyone who disputes the amount owed has the automatic right to appeal, the revenue body said. The safeguards also include leaving a minimum of £5,000 in the debtor's accounts so the revenue body does not put a hold on money needed to pay wages, mortgages or essential business or household expenses.

HMRC said on its website: "The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so."

Dawn Register, a tax dispute resolution partner at BDO, said: "Given the pressure on public finances, it's clear that HMRC is determined to get tougher on those who can pay but don't pay.

"For those who are struggling financially we would always recommend that they explore 'time to pay' options to allow them to pay in instalments. "HMRC needs to strike the right balance between supporting businesses and individuals in genuine financial difficulty, while being assertive with those who can afford to pay but choose not to."

An HMRC spokesperson said: "Most people pay tax on time and in full - but it's right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to.

"These powers are subject to robust safeguards and we'll continue to support customer