HMRC tax debt recovery proposals face calls for stronger safeguards

Professional accounting bodies are calling for robust safeguards and longer notice periods regarding government proposals to automate the recovery of low-value tax debts directly from bank accounts.

HMRC aims to expand enforcement powers to collect debts from individuals and businesses that have persistently failed to engage with the department. HMRC estimates that approximately 1 in 10 taxpayers do not pay liabilities on time, with roughly £2 billion in low-value debts remaining uncollected. The department's analysis suggests there are approximately 11.5 million debts totaling around £4 billion, consisting of debts below £5,000 for individuals and £10,000 for businesses.

The Institute of Chartered Accountants of England and Wales (ICAEW) expressed broad support for reducing the tax gap but warned that safeguards must ensure recovered debts are genuine and not the result of HMRC processing errors. ICAEW also emphasized that monthly installment amounts must remain affordable and account for taxpayer vulnerabilities.

Similarly, the Institute of Chartered Accountants of Scotland (ICAS) cautioned that the measures could disadvantage those requiring extra assistance. ICAS argued that a ‘clear prompt’ within the Pre-Deduction Notice is an inadequate safeguard and recommended mandatory face-to-face visits for cases identified for manual review to protect individual debtors.