Concerns Raised Over Proposed Expansion of HMRC Debt Recovery Powers

HM Revenue and Customs (HMRC) is seeking new powers to directly access bank accounts and seize cash to recover unpaid tax debts under proposed legislation. The recent consultation under the Labour Party government, now closed, suggested extending an existing HMRC enforcement power to recover lower value tax debts from taxpayers who have persistently failed to engage with HMRC.

Although the specific debt thresholds have yet to be confirmed, estimates suggest the new measures could apply to debts up to £5,000 for individuals and £10,000 for businesses. Currently, HMRC holds powers to recover higher value tax debts directly from bank accounts, and this proposal would broaden those powers to cover lower value debts.

The consultation’s closure means the next steps rest with the new Prime Minister, Andy Burnham, who will decide whether to implement these changes.

These enforcement rules were initially introduced by the Conservative government in 2014 amid concerns from parliamentary committees. At the time, the Treasury Select Committee raised significant apprehension regarding the measures.

Senior Conservative MP Sir Iain Duncan Smith criticised the plans, stating, “Anything that allows government bodies to seize individuals’ property without recourse is an attack on freedom.” He warned that these proposals could lead to a “tyranny of the state.”

Further criticism came from a Public Accounts Committee report published earlier this year, which stated, “HMRC’s treatment of taxpayers has damaged trust in the tax system.”

HMRC defended the proposals, emphasising the importance of tax compliance. A spokesperson said: “Individuals and businesses need to pay the tax that is due; otherwise, it is unfair on the honest majority. The funds we collect are vital for supporting public services.”

They noted that while most taxpayers pay their dues in full and on time-approximately 90% of the £858.9 billion collected in the 2024 to 2025 tax year-some require reminders or prompts. The spokesperson added, “Direct Recovery of Debts (DRD) is used when an individual or business can afford to pay what they owe but chooses not to. These powers serve as an effective incentive and were used only 19 times over two years before being paused during the COVID-19 pandemic.”