Powers given to HMRC to take money directly from bank accounts has already saved the government £13m, the tax authority has claimed, due to the “deterrent effect” of the measure.
The controversial ‘Direct Recovery of Debts’ powers were introduced a decade ago but paused during the pandemic. HMRC as been reinstated with the powers since September last year following a decision made by chancellor Rachel Reeves at her 2025 Spring Statement.
Under the policy, banks, building societies and ISA providers are required to pay directly from the accounts when requested.
The powers will only affected “the minority,” HMRC claims, focusing on businesses and individuals who “can afford to pay what they owe but are choosing not to.” The order can be given to banks, building societies, and ISA providers.
Since the powers were reinstated, HMRC has claimed a total of £225,00 from accounts across 12 instances. This is equal to £18,750 per debtor.
However, the tax authority reports that a much more effective side-effect of the measure has been to put would-be tax avoiders off breaking the rules.
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,” she told The Telegraph.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
ADVERTISEMENT
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
ADVERTISEMENT
The tax authority was first able to make use of the powers in 2015, but put recoveries on hold during the Covid pandemic. Between 2015 and 2018, it only made 19 direct recoveries, clawing back £361,678.
HMRC says the powers can only be used when certain criteria is met, and with “stringent safeguards” in place. To be subject to a direct recovery, the debtor must owe £1,000 or more, have ignored HMRC communications, and can pay but refuses to do so.
The tax authority also says it will not take funds from an account where less than £5,000 would remain after the recovery.
Before taking any money, an HMRC agent must visit the person at home or work. During this meeting, they will check the debt is correct, discuss alternative ways they can repay the tax they owe, and make sure the person isn’t vulnerable.
A HMRC spokesperson 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.”