Tax bodies encouraged by debt recovery safeguards but clearer protection needed for vulnerable

Legislation published today delivers on a promise made to professional bodies by the Government that debtors who dispute claims that they owe HMRC money will be able to appeal to the County Court before HMRC has the right to take the money directly from their bank accounts.

However there is concern that other promised safeguards do not appear on the face of the Finance Bill published today, making it harder to be confident that they will be enforced. Specifically this refers to the Government’s commitment that HMRC will only seek to recover debts in this way after a face-to-face meeting with the debtor, at which HMRC officers will satisfy themselves that they have identified the right debtor and calculated the debt correctly and explored with the debtor various options for settlement of the debt including time to pay; and that the new debt recovery power will not be applied to vulnerable debtors.

Chris Jones, President of the Chartered Institute of Taxation, said:

“HMRC need the power to collect taxes owed, but this has to be subject to the rule of law. That’s why it is right that today’s legislation provides for someone who disputes a debt, or who believes that a deduction from their bank account would cause ‘exceptional hardship’, to be able to appeal to the county court. This is the kind of external oversight we have been arguing for throughout the consultation process on this proposal.”

Ralph Pettengell, Deputy President of the Association of Taxation Technicians, said:

“Explanatory notes to the Bill repeat the Government’s commitment that the power will only be applied to debtors who have had a face-to-face meeting with one of HMRC’s officers, during which they have not been identified as vulnerable. Face-to-face meetings will mean that the debtor has a direct channel of communication with a Revenue official before money may be withdrawn from their account. This addresses our concern about someone having their bank accounts raided by the Revenue before they are given the chance to clarify their position and explain their case or point out any errors in HMRC’s understanding of their situation.  It should avoid the scenario where HMRC letters have been going to a wrong or out of date address for the debtor or where the individual has simply not understood their liability.”

However there is concern that, by not putting key safeguards into primary legislation, these safeguards will not be enforceable1. Anthony Thomas, Chairman of the Low Incomes Tax Reform Group, explained:

“The Government has given an undertaking not to apply this debt recovery power before a face-to-face meeting with the taxpayer, and not to apply it at all where the taxpayer is adjudged vulnerable. This is welcome. However these commitments do not appear in today’s Bill and unless they are legislated for they will be unenforceable in any court and entirely dependent on HMRC’s discretion, which is an unsatisfactory state of affairs. We urge the Government to look again at legislating for these commitments, and understand that the Government are considering how that might be done. Particularly important will be the definition of ‘vulnerable’ that is applied.

“Our primary concern is that the vulnerable taxpayer or tax credit claimant on a low income who gets in a muddle should not be caught up in a process designed to target those who have the funds to pay their tax on time but who resolutely refuse to do so. ‘Can’t pays’ must be distinguished from ‘won’t pays’.”

The Government has stated that the debt recovery powers “will be kept under review through regular communications with affected taxpayer groups” and “the Government has committed to an HMRC-led review of the measure after two years of operation, to be laid before Parliament”. CIOT, ATT and LITRG believe that any such review should include tax practitioners and should ensure that the safeguards are at least maintained if not increased.


Notes for editors

1.       Representatives of professional bodies raised the need for the safeguards to be enshrined in primary legislation at meetings with HMRC last year.

2.       The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries.  The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Association of Taxation Technicians

The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible. Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.

The Association has over 7,500 members and Fellows together with over 5,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.

The Low Incomes Tax Reform Group (LITRG)

LITRG is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes

George Crozier
Head of External Relations

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