HMRC has confirmed it will raid bank accounts and seize cash under the £5,000 rule, raising an extra £13 million from taxpayers after threatening to use so-called "direct recovery" powers. These powers, granted by the Labour Party government, allow HMRC to seize cash from people who owe under £1,000.
Background of the Powers
The powers were confirmed by Labour Party Chancellor Rachel Reeves last year. Since the rules were reintroduced for tax department officials, HMRC has used them 12 times to claim a total of £225,000, which works out at £18,750 per debtor. After HMRC issued a public warning over the powers, it managed to raise £13 million between September last year and the beginning of May.
How the Rule Works
Under HMRC rules, tax officials can enter bank accounts to seize cash but must ensure £5,000 is left behind for people. This would allow those affected to still pay any essential bills and leave them with a pot which they can use to stay afloat amid the cost of living.
Expert Concerns
Mike Warburton, The Telegraph’s tax expert, told the newspaper on Thursday (June 4): “This is a blunt sword. I am very concerned that they may be using this in circumstances where the tax may not be due and they are effectively bullying people [into paying].”
Nimesh Shah, the chief executive of accountancy firm Blick Rothenberg, said: “I remain unconvinced that this is a sensible tool for HMRC to use, especially at a time when businesses and individuals are struggling with an increased tax burden – as a direct result of government tax changes, so it seems a double blow.”
HMRC Response
A HMRC spokesman said: “Most people pay tax on time and in full – but it’s right that we seek to recover tax from the tiny minority who can afford to pay but refuse to. More than £13m of tax has already been paid or brought into payment plans for public services due to the deterrent effect of this measure.”
