Commentary on Sections Other Enforcement Powers Section 53: Recovery of debts from childcare accounts
231.Section 53 enables HMRC to recover debts arising under the Act directly from childcare accounts. Different rules apply depending on whether the debt is in respect of recoverable top-up payments, other debts, or a combination of both.
232.Subsection (1) provides that, in order for HMRC to be able to recover a debt from a childcare account, the account-holder must owe money because of something they did, or did not do, in connection with a childcare account that is held for the same child. They must also not have paid the debt by the time that it is due (as set out in sections 41(5) and 47(4)).
233.Subsections (5) to (8) apply when a debt has arisen as a result of HMRC recovering top-up payments from the account-holder. In this situation, HMRC can only recover the debt from the childcare account if it is not active when they make the direction. When the account provider removes the money from the account, they must also pay the account-holder either the amount that would need to be paid in to receive a top-up payment equal to the debt or, if the debt is more than the amount of top-up payments in the account, all of the remaining money in the account.
234.As an example, assume that an account-holder owes HMRC £400 of recoverable top-up payments. The balance in their account is £1,000, consisting of £800 of their own money and £200 top-up payments. The £200 top-up element is used to pay the debt, but the account-holder still owes £200 which is taken from the £800 of the account-holder’s money.
235.Subsections (10) to (13) apply when the debt is for anything other than recoverable top-up payments. In such situations, HMRC cannot recover more than a specified percentage of the funds in the account. If top-up payments are made at a rate of 25% of qualifying payments (as section 1(4) provides), this rate is 80%. When the account provider removes money to discharge a debt, they must also return the corresponding amount of top-up payments to HMRC. However, the corresponding top-up payment will not go towards discharging the debt because it is not the account-holder’s money.
236.Subsection (14) applies to debts which are a combination of recoverable top-up payments and other amounts. In this situation the amount of the debt that does not relate to recoverable top-up payments can be taken from the money that would otherwise be returned to the account-holder. The amount that would normally be paid to HMRC in respect of the recoverable top-up payments can be taken from the amount of corresponding top-up payment that is returned in relation to the other debt.
237.Subsection (15) provides that if childcare accounts are provided by HMRC, a direction cannot be made in respect of any fees that might be charged in relation to the childcare account.
238.Subsection (16) provides that the section has no effect on any of HMRC’s other powers to recover debts which are due and payable to HMRC.