Our comments on Finance Bill 2015 – direct recovery of debts draft clauses


HMRC is currently able to take funds from a taxpayer’s bank account, but only with the permission of the courts.  HMRC proposed originally to remove such funds without the added costs of seeking court permission.

Along with other stakeholders, we rejected such a move.  In response, HMRC[1] has now proposed a number of safeguards, some statutory.  In addition, there are changes to HMRC procedures, a key one being a guaranteed face-to-face meeting with the taxpayer.  We are disappointed not to see this reflected in the draft legislation.

An appeal mechanism has been introduced but we consider that it may be too restricted for a large number of taxpayers.

Taxpayer issues aside, our concerns on the operation and costs of the DRD process remain.

We are grateful for the opportunity to respond to this draft legislation and to HMRC officials who have willingly engaged with industry.

Hold notices

We consider five working days too short a time for building society/ bank to put in place a hold notice.  Assembling and checking the necessary information is time and people intensive, particularly for those deposit takers with different centres and IT systems.  In addition, there is continued evidence of HMRC letters are often received a week after the date of issue.  We note that under schedule 36 of the Finance Act 2008 deposit takers have 28 days with which to respond.  For regulatory returns under COREP 30 working days is the default.

We note the taxpayer will now be able to contest a hold notice and, if necessary, appeal to the courts.  But appeals may only made on a prescribed list of grounds.  Restricting the appeal rights is unhelpful; as others have pointed out, it should be left to the court to determine if HMRC is able to proceed.  According to the draft legislation, the taxpayer has to await the outcome of HMRC’s consideration of his/ her objection to the hold notice before being able to apply to the courts.  That is too late in the process; funds will already have been frozen which could limit the taxpayer’s ability to instigate court action.  It goes without saying that it will be front line staff at a building society/ bank that have to deal with taxpayers who are understandably upset to find out that they are unable to access their funds. 

Other stakeholders[2] have highlighted the perceived injustice in HMRC’s insistence of putting the taxpayer to the cost of a court action when, by its own insistence, HMRC has created the situation precisely because court action is inappropriate.

Face-to-face visits

The response document issued 21 November 20141 gave a commitment that every taxpayer will have a face-to-face visit from HMRC before any direct recovery from the taxpayer’s accounts.  Other stakeholders[3] have pointed out that it is hard to see how these visits can be “guaranteed” when the legislation does not require them.  HMRC is required only to be satisfied that the taxpayer is aware that the sum is due to HMRC, which could be satisfied in other ways.  Once again, it will be the building society/ bank that has to deal with taxpayers who are understandably upset to find out that funds have been taken from their account.  Even if the financial institution knew the reason for the removal, its staff would not be in a position to provide an explanation. 

Partial freezing of accounts

Few building societies can implement partial account freezing as outlined.   For larger societies, it is not just one system either – many operate several legacy systems.  Such systems development would cost huge sums – even if the society (or bank) has the resources to do so.  Long lead-in times are needed to schedule in any systems work, however minor they might look; HMRC is aware of the many, and often competing, demands, on building societies made by the various regulators. The new DRD powers hit smaller deposit takers even harder – they will most probably have to outsource the work to the detriment of more important customer-facing activities.  A proportionate solution for these smaller institutions would be most welcome.

Recent discussions with HMRC officials show a welcome willingness to make the necessary legislative changes to effect partial freezing but our concerns on the costs for building societies, particularly the smaller ones, remain.

About us

The Building Societies Association represents all 44 UK building societies. Building societies have total assets of over £330 billion and, together with their subsidiaries, hold residential mortgages of over £240 billion, 19% of the total outstanding in the UK. They hold over £240 billion of retail deposits, accounting for 19% of all such deposits in the UK. Building societies account for about 28% of all cash ISA balances. They employ approximately 39,000 full and part-time staff and operate through approximately 1,550 branches.


Andrea Jeffries


[1] See www.gov.uk/government/news/government-strengthens-safeguards-for-direct-action-to-recover-debts

[2] See, for example, ACCA’s submission

[3] See, for example, PM-Tax 14 January 2015