At the Labour Conference this week, Chancellor Rachel Reeves announced plans to create a new “hit squad” tasked with recovering money owed to the British people. She declared: “We want our money back” to invest in schools and the NHS. To a responsive audience at a party conference, this might sound like an effective way to ensure taxpayers’ money is reclaimed efficiently. In reality, a plan to take money directly from a debtor’s account is one that’s riddled with practical challenges and risks significant harm to businesses and individuals alike.
As someone who works closely with businesses on their HMRC affairs, I can’t help but find the idea fundamentally flawed. The policy allows HMRC to recover money owed directly from a debtor’s bank account or ISA, can be used where debtors owe £1,000.
Known as Direct Recovery of Debts (DRD) it is meant to be used when an individual or business can afford to pay what they owe but chooses not to. HMRC says these powers were used “only 19 times in two years”, before pausing during the Covid-19 pandemic.
This ignores the day-to-day realities of tax accounting. Many businesses and individuals can accrue such sums temporarily due to cash flow issues, bank errors, or delayed allocations. A £1,000 threshold is, frankly, trivial. For larger businesses turning over millions, these amounts are barely a blip on the radar; but for the taxpayer – an individual sole trader for example – an automated extraction could be catastrophic.
Take, for example, situations where HMRC figures are duplicated due to payroll changes or misallocated payments. I recently handled a case for a plumbing company in Wales: HMRC’s records suggested they owed £15,000, but in reality, £7,000 in maternity credits and £8,000 in CIS refunds had simply not been properly allocated. Without my intervention, HMRC could have directly withdrawn £15,000 from their account. That would have been money the business never truly owed and recovering it would have been a nightmare.
The bigger issue is that HMRC is already struggling with a backlog of corrections, often taking 18 months to two years to resolve disputes. Another client, for example, had paid £50,000 in liabilities, but HMRC had allocated it to the wrong account. The client was hounded, to the point that debt collectors turned up to remove goods. This was HMRC’s error, and it has taken two years to put it right. So, what happens when this new “hit squad” goes after debts automatically? They are not going to wait two years to chase debts. It’s a recipe for financial chaos.
This policy also threatens to create a massive administrative burden, not just for HMRC, but for the payroll companies and accountants who support businesses. To avoid wrongful withdrawals, we’d need to monitor every client account meticulously every month. For firms like mine, with hundreds of clients, this would essentially double our workload, requiring additional staff and resources. Yet the burden should not fall on us, it should fall on HMRC, whose systems are meant to ensure accuracy in the first place.
I’m not against HMRC collecting money that is genuinely owed. But there is a huge difference between targeted, accurate enforcement and a blunt-force approach that risks punishing the wrong people. The government must focus on streamlining HMRC’s systems, reducing backlogs, and ensuring errors are resolved before considering measures that could devastate livelihoods.
In short, a “hit squad” might make for dramatic headlines, but in practice, it’s impractical, unfair, and potentially harmful. HMRC debt recovery should be precise, not punitive and until the systems catch up, this policy is nothing short of ludicrous.
