Individuals and businesses who owe more than £1,000 to HM Revenue and Customs (HMRC) may have their funds raided for the money owed.
Chancellor George Osborne's Summer Budget confirmed plans to introduce new laws to "modernise and strengthen" HMRC's powers, meaning it will soon have the power to recover tax and tax credit debts directly from debtors' bank, savings and ISA accounts.
The rules will come into force in England, Northern Ireland and Wales under the Summer Finance Bill 2015, which is expected to take effect this autumn. HMRC estimates around 11,000 individuals and businesses a year will be affected by the move.
The controversial measure was first announced in the 2014 Budget and has since been consulted on, which has resulted in additional safeguards being created to prevent the rules being applied in the wrong circumstances. See below for more on this.
MoneySavingExpert.com creator, Martin Lewis, has previously written about his concerns over the move and argued that banks should also be stopped from doing the same. See his Huge anger over HMRC wanting to raid people's savings blog post for more on this.
HMRC says: "This measure will contribute towards making the tax system fairer for those who pay what they owe on time. It will enable HMRC to recover debt directly from cash held in the bank and building society accounts, in credit, of debtors who have the means to pay but choose not to do so."
The new rules won't apply to Scotland as it already has existing processes in place enabling HMRC to recover debts in a similar manner.
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How will HMRC be stopped from taking money incorrectly?
Following a consultation on the measure, HMRC says it will guarantee to carry out a face-to-face visit to every debtor before it can take money from their account.
It can also only take debts from those who owe at least £1,000, and only if taking the money means people will still have at least £5,000 left across their accounts.
If it does decide to take the cash, banks will actually freeze the money for 30 days before it goes to HMRC. So you then have 30 days to object to HMRC about the money being taken. This is an increase from the 14 days originally planned.
If HMRC disagrees and takes the cash anyway, you also then have a right to appeal its decision at the County Court – a measure, which was also introduced following the consultation.
How can HMRC currently recover debts?
At present, HMRC can only take debts directly from bank accounts if it has first been granted court permission to do so in England, Northern Ireland and Wales.
It does however have the ability to seize physical assets belonging to debtors to sell at auction if a debt is not paid – something which it will continue to be able to do.