Proposals to tackle lower value tax debts: LITRG response

LITRG has responded to HMRC's consultation on proposals to introduce a new process for recovering lower-value tax debts directly from taxpayers' bank accounts. While the proposals target those who repeatedly fail to engage with HMRC, our response emphasises that apparent non-engagement is not always a matter of choice. For some taxpayers, barriers such as vulnerability, health conditions, financial hardship or difficulties accessing support may make engagement difficult, and these cases require appropriate safeguards and human oversight.

In our response, we recognise HMRC's objective of recovering tax that is genuinely due. However, we stress that robust safeguards are essential to protect low-income unrepresented taxpayers, and that lower-value debts should not be subject to a lower standard of protection simply because the amount involved is relatively small by HMRC’s definition.

We call on HMRC to ensure that any debts are accurate and undisputed before recovery action begins, to define clearly when cases should be escalated for human review, and to provide greater transparency around affordability assessments. We also raise concerns about the absence of a protected minimum account balance, the proposed 14-day notice period, and the risks that automated processes may fail to identify taxpayers who need extra support.

Our response recommends stronger safeguards, a clear process for challenging recovery action, and clearer routes into alternative arrangements such as Time to Pay. We emphasise that the proposals should not be considered in isolation from HMRC’s other debt collection mechanisms and wider changes to the tax system, and recommend further engagement on the detailed operation of the proposals before legislation is introduced.