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Tackling your debts

Changes to how HMRC can recover debts

Posted 05 November 2015 by Christine Walsh

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The way that HMRC can recover money owed to them has changed, if the person in debt is considered vulnerable. Read on to find out more.

You may have read in the news recently that there has been a change in the way Her Majesty’s Revenue and Customs (HMRC) is allowed to recover money you owe them. In short, when the budget was announced in 2015, it was announced that HMRC would be given the power to take any money owed straight out of people’s bank accounts and savings. However, after looking at it again, Ministers were concerned that this could have a negative effect on some people, so decided to put some restrictions on those new powers.

Now HMRC will not be able take money straight out of people’s bank accounts, if they can see that they are at a particular disadvantage in dealing with what they owe Revenue and Customs. This is a welcome change that will encourage HMRC to take an individual’s personal circumstances into account before they decide to just take the money.

So when can they use this power?

Let’s have a look at the important details surrounding this new power. Under the new rules, which were set out as part of the Finance Bill, HMRC cannot take money straight out of your account if they would be leaving it empty. They have to make sure that at least £5,000 is left in the account.

They would also have to contact you a number of times and hold at least one face to face meeting before taking any money.

If you owe money to HMRC, and they agree that you genuinely can’t pay the bill on time, you should also be given the chance to start something called a Time to Pay arrangement. These are given on a case by case basis, and if it went ahead, would allow you to pay in instalments until the debt has been settled. If you can’t pay your tax bill read more on how to deal with it here.

Debt experts have welcomed the fact that vulnerable people will be taken out of the equation altogether, but have pointed out that the new powers could still cause problems. While we all understand that taxes must be paid, HMRC have been known in the past to make mistakes. Critics are still worried that this new power means that money may be taken out of people’s accounts in error and have to be refunded.

Who is a vulnerable person?

There are many different reasons that could lead to you being particularly vulnerable, and therefore needing more help and/or time to settle your debts. Suffering from illness, whether mental or physical, or having suffered a bereavement, or being an unpaid carer are examples of situations that often lead to vulnerability. In these cases, it’s possible that you may not be able to sort out your finances as quickly as the lender or creditor would normally like.

At the moment, the Financial Conduct Authority (the regulator for the financial firms) has rules in place which require lenders to be sympathetic if someone is genuinely struggling. HMRC is a Government department, and not regulated by the FCA, however, it’s still possible to build up debt to them. This new rule should help to bring them more in line with the high standards of care and consideration expected from other creditors.

All in all, this is good news for vulnerable people in debt, who may not be able to manage their finances as easily as others.

 

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.