HMRC Will Get Bank Account Raiding Powers

15th July 2015

New Powers for HMRC to Access Bank Accounts

The recent Budget announcement was accompanied by detail on new measures aimed at reducing unpaid taxes. HMRC will soon (if the plans proceed) be able to collect debts of more than £1000 directly from the bank accounts of a debtor.

No court approval will be required before accessing the bank account, effectively making HMRC “judge and jury” if a debt is disputed. Limited safeguards are to be put in place, including a requirement for a visit to take place first.    

It’s forecast that these new powers could be used against 17,000 businesses and people each year.

What Types Of Bank Accounts Are Included?

Businesses (limited companies) could find their trading or savings accounts raided. This could be disastrous for companies that rely on access to cash to purchase essential stock or services necessary for their work.

Sole traders could find their business bank accounts and personal bank accounts have been accessed to help clear their tax debts. Once again this poses a particular threat for businesses which make significant upfront purchases as part of their work (building materials for example). 

Individuals deemed to owe HMRC money could also find that savings accounts, such as ISAs, are targeted. Those with joint accounts might find that up to 50% of a credit balance has been removed.

The government has stated that individuals will be left with a minimum of £5000 in total in their bank accounts even after this type of direct debt collection activity by HMRC. This may however not be sufficient for some businesses to carry on trading.

The Self-Employed and Debt Problems

According to research by StepChange, the self-employed typically have higher levels of debt and lower levels of income than those in regular employment. This can make it very difficult to set aside enough money to cover future tax liabilities due to HMRC.

In our experience it’s very common to find that self-employed people (including Directors of limited companies) have significant tax debts as well as the usual credit cards, bank loans and overdrafts.

HMRC gaining this new power will pose new problems for some people amongst this group:

  • Where previously negotiation could take place with HMRC on a similar basis to other creditors, in the future enhanced collection powers (direct from bank accounts) could seriously diminish the scope for negotiation on tax repayment schedules.

  • Some business and individuals might effectively be put out of business if they lose the capacity to purchase stock and services. For many these purchases are an intrinsically necessary part of their business model and losing access to working capital at short notice could be catastrophic.

Is A Scottish Trust Deed An Answer?

Any individual or business facing debt repayment difficulty should aim to get professional debt advice as early as possible. Debt problems tend to get worse over time – acting early can result in less detrimental solutions with fewer negative consequences.

This advice is only made more relevant by the new powers HMRC are soon to receive to access bank accounts. This type of direct debt recovery could disastrously affect your ability to deal with other creditors thereafter. It’s very important to start addressing a debt problem before this stage is ever reached. Some types of debt solution will prevent HMRC from taking this type of direct debt recovery action in the future.

Could a trust deed in Scotland be the right answer for you? It might be, but it all depends upon your unique personal circumstances. After reviewing your circumstances an adviser might also suggest further consideration of the debt arrangement scheme or sequestration. It might also be identified that your finances can be effectively rescheduled without the need to access a formal type of debt solution.

Contrary to what you may have read elsewhere, Directors of companies are typically able to enter trust deeds without having to cease being involved in a company. Sequestration (bankruptcy) will however prevent you from acting as a Director until you have been discharged.

If it’s a limited company that has the debt problem (rather than you personally) we suggest that you may wish to read this article, consult with an insolvency practitioner firm, or get in touch with Business Debtline as a matter of priority.

Company Directors have personal legal responsibilities not to carry on trading their businesses if they’re insolvent, so early action is especially strongly advised. Business DAS may turn out to be a workable alternative to formal insolvency proceedings for your firm. 


If you have questions on this (or any other) subject please contact us directly or ask our experts online after registering for our forum.

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