HMRC powers to raid bank accounts watered down

George Osborne has watered down plans to dip into taxpayers' bank accounts to seize unpaid tax debts in the wake of a backlash from MPs, banks and charities.

Taxpayers will be given the right to appeal through the courts before outstanding debts are removed from their accounts, as part of a number of safeguards aimed at defusing criticism of the reform.

The Treasury said the new safeguards, agreed after a consultation, would ensure that the measure "only catches those who are playing the system". It has made the concessions after its original proposals, announced in the Budget, sparked fears that they could be used inappropriately and cause hardship.

In a response to the consultation due to be published on Friday, David Gauke, financial secretary to the Treasury, said: "The vast majority of people pay the tax that is due, on time, but there is still a very small minority who try to gain an unfair advantage by persistently refusing to pay what they owe, despite being able to. These are the people who will be targeted by the powers for the direct recovery of debts owed to the Exchequer.

"We already set out robust safeguards to protect vulnerable debtors in our original Direct Recovery of Debts proposals, but feedback from the consultation process told us we could do more to make sure this only catches those who are playing the system."

Mr Gauke added: "We're strengthening the guarantees we can offer taxpayers that the powers will only be used when debtors have consistently refused to talk to HMRC and settle their debts, and their use will be subject to the toughest scrutiny and oversight possible."

The decision to give taxpayers the right to appeal, first to HMRC and then, if not successful, to a court addresses the main concern voiced by many critics of the policy. HMRC will also be required to hold face-to-face meetings with debtors before ordering banks to pay outstanding debts from taxpayers' bank accounts. They will also set up a specialist unit to deal with cases involving vulnerable members of society and will set up a helpline.

The plans laid out in the Budget to give the taxman the powers to recover unpaid bills are expected to target 17,000 people with an average tax debt of £5,800 and raise £375m over four years.

The Treasury select committee was highly critical of the measure and demanded "some form of prior independent oversight" before money was removed from a bank account. But HMRC earlier resisted the call saying that the cost of going to court was likely to seriously diminish the tax collected.

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