Introduction Background Note
8.This section and Schedule give HMRC the power to collect small debts through the PAYE system, allowing debtors to spread payments and reducing HMRC’s costs. Small debts account for a large proportion of the volume of tax debts but a small proportion of their value.
9.HMRC’s aim is to secure immediate payment of debts in full or, where this is not possible, to set up a Time to Pay arrangement to reschedule the debt. If neither of these options are feasible, HMRC would consider collecting smaller debts through PAYE as one of a number of remedies available to it as a creditor. If the debtor did not want to pay in this way, HMRC would expect them to make other arrangements for payment. If no such arrangements were forthcoming, HMRC would have the ability to collect debts in this way at its option.
10.The right to object to collecting underpayments of income tax and capital gains tax under Self Assessment, where the due date had not already passed, would not be disturbed. The right to object to collecting tax credit overpayments in this way would also not be disturbed. A taxpayer would, as now, be able to appeal against their tax code. The existing safeguards, limiting the amount that may be collected in this way through the PAYE system and protecting the level of the taxpayer’s income, would be preserved.
11.This measure was the subject of initial consultation in June 2007 and further consultation in December 2008 (Payments, Repayments and Debt: the Next Stage). A response document together with a final Impact Assessment was published in April 2009