MPs raise concerns over new tax powers in Budget

 
Cash on bank statement The plans would allow the tax authority to take tax debts from accounts

Plans to allow the tax authority to settle unpaid demands by taking money from people's bank accounts have been criticised by a group of MPs.

The Treasury Committee says it is very concerned because tax officials have a history of making mistakes.

Chancellor George Osborne unveiled the plan at this year's Budget.

But in a wide-ranging report, the committee did welcome another Budget plan - to allow greater flexibility on how pension savings can be used.

In the Budget, Mr Osborne outlined plans for new powers for HM Revenue and Customs (HMRC) to recover tax debts from anyone who owes more than £1,000 in tax or in tax credits.

This would allow the tax authority to seize the tax owed directly from debtors' bank accounts.

HMRC Performance

But the committee said the plan was problematic owing to HMRC's performance in the past when it has failed to accurately calculate tax bills.

"People should pay the right amount of tax. But HMRC does not always ask for the right amount," said committee chairman Andrew Tyrie.

Planned safeguards

  • HMRC will only target those who have long-term debts and have received at least four demands for payment
  • At least £5,000 must be left in total across all debtor's accounts, including savings accounts, after the unpaid tax is seized
  • The tax authority will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized

"Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable."

He said the committee also had "deep reservations" about changes to tax policy that would require upfront payment of any disputed tax associated with tax avoidance schemes.

"Retrospection should be considered only in wholly exceptional circumstances. The latest measure would have to be justified on those grounds," Mr Tyrie said.

"Retrospection puts policy on a slippery path to arbitrary taxation, discouraging investment and innovation and creating the scope for great unfairness."

Committee member Mark Garnier, a Conservative MP, said at the moment HMRC needed a court order to be able to seize money from accounts.

The committee is concerned that the current system of checks and balances could be upset.

Budget measures for savers

piggy bank
  • New Individual Savings Accounts (NISAs) will shelter up to £15,000 a year tax-free from July
  • 10% tax rate on savings abolished
  • Number of monthly £1m Premium Bond prizes increased to two
  • More generous Premium Bond savings limits
  • New Pensioner Bond for the over-65s.

"What we worry about is... that essentially HMRC will be acting as judge and jury," Mr Garnier told the BBC.

HMRC recently explained how the system will work.

It will only target those who have long-term debts and have received at least four demands for payment and will ensure that at least £5,000 is left in total across all debtor's accounts, including savings accounts, after the unpaid tax is seized.

HMRC will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized.

The Low Incomes Tax Reform Group has called on HMRC to give more concrete assurances about the right to appeal against any seizure.

But the ACCA accountancy body, which after the Budget described the plans as "seriously draconian", now calls them "less fearsome than first thought" after more detail was published.

"On paper, the safeguards look relatively robust, and the reality is it is unlikely that anyone will be left penniless," said Chas Roy-Chowdhury, head of taxation at the ACCA..

The plans are now going through a consultation process. If approved by Parliament, they will take effect in 2015-16.

Pensions

The Treasury committee also called for pensions and savings to be taxed in the same way.

Savings pot The Budget included major changes in the way people save

The most eye-catching measure in Mr Osborne's Budget was a plan that effectively abolishes the requirement for some people to buy an annuity - a retirement income for life.

From next year millions of people reaching retirement age will be able to spend their pension pot in any way they want, including cashing in their pension savings in one, taxed, lump sum. Temporary rules are in place in the meantime.

The committee said that all of the witnesses it heard from welcomed the "greater flexibility and choice" that the reforms proposed.

However, it said the guidance that was being promised ahead of retirement should be clear and at least offer an opportunity of face-to-face help.

The changes are likely to lead to the creation of a variety of new financial products for retirees, and the committee said these must be sold responsibly.

"Following the financial crisis, and the mis-selling scandals, the reputation of the industry is under scrutiny," said Andrew Tyrie, who chairs the committee.

He added that it would be a "great prize" were the tax treatment of pensions and savings treated in the same way.

The chancellor announced an extension to the amount that could be saved in an tax-free Individual Savings Account (Isa) from 1 July 2014 to up to £15,000 either as cash or shares.

 

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  • rate this
    +1

    Comment number 1334.

    We all hate tax dodgers & would not want to discourage the HMRC for extracting all dues, indeed they should be as vigorous the DWP in pursuing fraud & no more cosy lunches with CEO's to agree a lighter bill. However, the HMRC should be fully & publicly liable when they are stupid, careless & just plain wrong. Their apologies should be as full as the false accusations they make - frequently

  • rate this
    0

    Comment number 1333.

    1315.the masked crusader - well if you have nothing in your bank account you would not be touched, you have to have more than £5000. I am fairly sure most comments are not based on article just on presumption. HMRC have had right to access bank accounts for eons, but people seem not to have known this. No money can be taken out before 4 requests for payment for long-term debts.Pay your due tax NP

  • rate this
    +1

    Comment number 1332.

    The PM said this week that he knew it was a possibility he could be leaving No 10 next year. Dave I think this is a sure bet. People have had enough of dictatorship and their patience is very thin. Attacking the poor and vulnerable is all that is happening and now just in case we have anything left you will help yourself to it direct from our banks. On the street protests could be very close

  • rate this
    0

    Comment number 1331.

    1328 Truth logic

    Once this snatch system is in place it would not take much to adapt it very very quickly and prevent people to have warning & time to take their cash out, if government wanted to snatch it quickly.
    ~~~
    Yes, thin end of the wedge. Selling your data too. Yet another reason to buy gold or silver when possible or when funds allow.

  • rate this
    +2

    Comment number 1330.

    Don't forget this is the government that wants to SELL your personal data, despite being the national guardian of the Data Protection Act.

    This lot are worse than spivs. Would sell their own granny.

    How about going after Google, Amazon Stanbucks etc etc, rather than the ordinary worker or small businessman? One raid on Amazons bank account for unpaid taxes would equal a million smaller raids.

  • rate this
    +4

    Comment number 1329.

    Don't understand the fuss....as @1321 points out we just keep accepting whatever they throw at us....hundreds of billions extorted from Team PAYE to keep Hedgemobs' eternal bonus fountain replenished.
    Perhaps the cartels are slipping pacifiers into the water?

  • rate this
    +3

    Comment number 1328.

    Greece & Portugal have shown that banks are not safe.

    If sugar hits the fan, then government can & WILL just grab your cash or find numerous ways to take extra taxes.

    Once this snatch system is in place it would not take much to adapt it very very quickly & prevent people from having warniong & time to taking their cash out, if government wanted to snatch it quickly.

  • rate this
    0

    Comment number 1327.

    This is looking more like a bail-in strategy than a taxation strategy.

  • rate this
    0

    Comment number 1326.

    1317.Billythefirst
    Rubbish. HMRC designed to be dysfunctional by Panama Dave

    HMRC & the rest of the public sector is dysfuntional because of the culture of accepting incompetance built up over many years. This is more a function of strong unions blocking modernisation and performance management and Labour creating a wealth on non-jobs to hide their failure to develop a strong private sector.

  • rate this
    +5

    Comment number 1325.

    1311.
    David
    Incorrect tax avoidance schemes are often set up on the advice of accountants who are testing the law.
    --
    Time for the games to cease and the onus of responsibility shifted from underfunded gamekeeper to duplicitous poachers who should explicity check with HMRC before trying anything that deviates from letter or spirit of law.Failure to check to be retrospectively punishable.

  • rate this
    +1

    Comment number 1324.

    1323! You assume entirely wrong! I assume you don't earn enough to pay much tax in the first place. Correct?

  • rate this
    +5

    Comment number 1323.

    990.
    RonnieP
    4 Hours ago

    For those of you who do not agree with this proposal, I assume you are quite happy that millions of pounds are lost in tax annually by non payment.
    HMRC should be given all the powers it needs, to stamp down on any tax non payment. That is fair.

    ---------

    Not when corporations are excluded from the same policy it isn`t. Fair means a level playing field and this is not.

  • rate this
    +2

    Comment number 1322.

    These are supposed to be professionals who have had decades to get it right. So why the need for such "robust" safeguards? This simply offers more than one opportunity to stubbornly deny they're wrong. No change there then. Perhaps if appropriate penalties were imposed on them as they would be on the layman for getting it wrong, they wouldn't be so inclined to 'shoot first & ask questions later.'

  • rate this
    +6

    Comment number 1321.

    1308.Lord Haw Haw
    "This seems to me to erode some of the rights a person has as a citizen. Something we ought to think very carefully before allowing"

    Yes clear pattern emerging-ordinary people attacked on all fronts, with most of us blissfully aware! Where was the uproar about legal aid cuts, re fetters on judicial review, re planned curbs on worker's rights, list is endless but we accept it

  • rate this
    0

    Comment number 1320.

    1314
    See what you are saying. The treasury excuse is they changed computer systems so they could not trsut what the evidence was even though it was staring them in the face. Do you look for things in paperwork when you do not know if they are there? I rest my case.

  • rate this
    +2

    Comment number 1319.

    They do that in the US and its destroyed entire businesses when their accounts are raided by their IRS. Even if they make a mistake it takes years to corrects and by then many people are left homeless.

  • rate this
    +4

    Comment number 1318.

    Access to personal Bank Accounts should only be granted by court order after submission of all the facts by both sides and the details of the amount being claimed is truly ACCURATE.

    I suspect there wouldn't be that many court orders issued on this basis!!

    Bet there wouldn't be legislation on court orders to access accounts of large conglomerates we all know that class is above the law!

  • rate this
    +1

    Comment number 1317.

    #1257
    All these public bodies, including the HMRC, are wasteful and incompetant and that's my tax being wasted
    ----
    Rubbish. HMRC designed to be dysfunctional by Panama Dave and the other lobby driven vegetables.New Labour also guilty of harbouring the famous Dave "luncheon voucher" Hartnett
    These clowns are supposed to represent us - that they don't should be abundantly clear even to the dimmest

  • rate this
    0

    Comment number 1316.

    People.... This is for a small minority of people who owe money to HMRC and in turn this country..stop moaning about it!.... If you owe it you have to pay it! Simple as.. I am sure if someone owed you money you would want it back asap. End of the day, this is tax you and I have paid. Money doesn't grow on trees and getting back what is owed will help keep our taxes lower!

  • rate this
    +2

    Comment number 1315.

    they will find it hard to get any money out of my bank account there's nothing in it i am struggling to live and survive but then i live in the real world

 

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