The HMRC is set to crackdown on fraudulent claims with bank account checks(Image: Getty Images)

New HMRC bank account checks and what it means for millions claiming benefits

by · ChronicleLive

As the benefits clampdown gets tighter on people (and their wallets), new powers mean that HMRC can check millions of UK bank accounts and even seize cash from them.

The new Public Authorities (Fraud, Error and Recovery) Bill will require banks and building societies to monitor accounts for capital levels above the threshold for claiming income-based benefits. The bill is currently in the committee stage and is not yet in place, but a third reading is expected on March 20.

Suppose you're found to be in breach of conditions for receiving income-based benefits without meeting the criteria. In that case, the bill enables anti-fraud powers to seize assets and impose fines directly on the person's bank account.

The Finance Act 2011 allows HMRC to request bank details to verify that people are paying the right amount of tax. Richard Las, HMRC's chief investigation officer and director of the Fraud Investigation Service, said the powers are used for "bulk data gathering" on certain larger accounts, known as "interest-bearing".

He elaborated: "We have a huge amount of controls over how we manage that information and how we use it and protect it; they are our normal requirements as with any other taxpayer data." In other words, it wouldn't take much for these surveillance powers to be extended.

If your cash, savings, and investments exceed £6,000, your benefit will be reduced by £4.35 for every £250 between £6,000 and £16,000. An additional £4.35 is deducted even if the extra amount saved falls short of £250. For instance, if you have £6,300 in savings, no deductions are made on the first £6,000, but the remaining £300 would result in a deduction of £8.70 from your payments. These figures stand for standalone and joint accounts.

The new rules stipulate that officials must request at least three months of bank statements before directly taking funds from people's accounts, ensuring the individual has sufficient resources to foot the bill. If there are insufficient funds, the bank must inform the government.

In instances where recovery proves difficult, officials will also have the authority to go to the courts to apply to confiscate assets owned by the debtor. Cabinet, under Secretary Georgina Gould, outlined the circumstances where these powers would come into play.

She said: "While the bill will provide the powers to seek recovery directly through bank accounts and PAYE earnings, these might not always be the most appropriate or effective recovery route. For instance, the liable person might hold significant other property assets or keep assets or money abroad. In those cases, it would be unfair for us not to seek recovery.

"We therefore wish to work through established legal procedures to ensure that we can seek to pursue recovery through the most appropriate and effective mechanisms - for example, liability orders."

DWP minister Andrew Western laid out the significance of the measures in battling benefit fraud: "More than 50% of the fraud and error that we see in Pension Credit comes from two principle sources, which the eligibility verification measure specifically seeks to address. One is the issue of capital fraud, where there is a relatively easy indicator."

He elaborated: "The provision also has the benefit of helping us to establish when somebody has been out of the country for longer than their benefit entitles them to be. For instance, it would provide a flag on an account when somebody's bank account suggested they had been making purchases abroad and so on."

He added: "We would not receive the transactional data or know specifically where the purchases were made but it would give us specifically the date that somebody left the country, and thereby show whether they were in breach of the length of time they are allowed to be away."

At the mention of pension credit, it could cause concern for many pensioners. Western explained: "In 2023-24, £520 million in pension credit was overpaid, and pension credit has one of the highest rates of capital fraud and error, with £198 million lost in 2023-24 alone. The rate of fraud in pension credit increased by more than 50% in 2023-24, as against the previous year, so we have a clear problem. The under-declaration of financial assets and claimants staying abroad for a longer period than is allowed remain the two main causes of pension credit overpayments in ’23-24. As I said previously, they accounted for more than 50% of all overpayments," he said.