HMRC is making widespread use of powers to deduct tax debts owed directly from the earnings of individuals, with 428 people having cash taken straight from their pay packets in 2017/18, according to research from UHY Hacker Young.
The firm says that this method of debt recovery, known as ‘attachment of earnings’ orders, often appeals to HMRC as it does not allow individuals to reduce payments to HMRC if they are short of money one month.
In contrast, when HMRC has to physically seize control of goods and then sell them through auctions, the process can often drag out for long periods of time before debts are fully recovered. Goods at auctions also typically go for far less than their equivalent market value.
Attachment of earning orders also appeal to HMRC as they are not confrontational and require limited interaction with the debtor themselves, the firm said.
To determine how much a debtor should pay from their earnings, the court works out a minimum amount the debtor needs to live on, known as the ‘protected earnings rate’. The sum owed is then deducted from money earned above this amount.
UHY Hacker Young says HMRC is becoming increasingly impatient over chasing outstanding debts and continues to build up its recovery teams. For example, HMRC spending on private sector debt collectors rose by 62% to £39m in 2017, up from £24m in 2016.
Simon Browning, partner at UHY Hacker Young, said: “An attachment of earnings order is one of the most aggressive tools HMRC has at its disposal. They allow HMRC to quickly seize an individual’s hard-earned cash before it even reaches their bank account.
“Overall, HMRC’s use of attachment of earning orders could be seen as yet another example of its dash for cash against people who can’t pay their bills.”
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