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.


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.


More on This Story

From other news sites

* May require registration or subscription

The BBC is not responsible for the content of external Internet sites


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 54.

    1: Get big companies to PAY their taxes
    2: Increase taxes on anyone who has money in an offshore tax haven (harsh but needs must)
    3: Tax the elite, regardless of charitable donations
    4: Increase taxes on footballers (it's not like they need all that money to live)
    5: Stop foreign aid
    6: Decrease number of politicians
    7: Don't build HS2

    Just some ways to generate more money for the country

  • rate this

    Comment number 53.

    I'm dead against anyone having access to my bank account apart from me. For the taxman to get access into my private accounts is a step closer to a big brother state.
    I'd take my money out of the bank before that ever happened.

  • rate this

    Comment number 52.

    I can see problems, particularly with small businesses, if HMRC makes a mistake, takes the money and thereby wrecks cashflow. It could even cause a company to go under, and I can't imagine the interest on the stolen money would be fair compensation. This is a really bad idea.

  • rate this

    Comment number 51.

    I take it that this will also apply to large companies, so they can no longer "negotiate" on what they pay ! Seriously doubt it, so all in this together Mr Cameron ?. This stinks of George Orwell "1984" - but its real ! Osborne & Co take note, us individuals will hit back - via the ballot box.

  • rate this

    Comment number 50.

    The judge and jury point is very valid.

    For the tax system to work, we need fairness, in spending and collection.

    Too much money is wasted, in the public sector, on benefits etc, which undermines confidence in the system (no one likes paying high salaries to wasters, or benefits to the wilfully dependent)

    And collection has to be fair, too. So, go in hard on cheats, but don't abuse the powers.

  • rate this

    Comment number 49.

    If they get it wrong which they do with alarming regularity at the moment what hope is there of them getting this right.

    Access to bank accounts by third parties must only be allowed if a court grants it.

    My other half doesn't have access to my accounts so why should HMRC.

  • rate this

    Comment number 48.

    Is it plunder, your after me lads,Then follow me,

    ARRRH !!, were right behind you Cap'n Osbourne.

    All he is missing is an eye patch, wooden leg and parrot.....

  • rate this

    Comment number 47.

    Would not work - you would have to give HMRC permission to remove the money from your account otherwise it is theft - pure and simple. Banks would be held accountable (as they are now) for any loss of money from your account and as this would be classed as theft you can involve the police to investigate - Move banks if you need to!

  • rate this

    Comment number 46.

    (1) How are they going to get bank account details? They may have ONE set of account details from me, but I certainly DON'T give all account details to them. Are there any implications under the Data Protection Act?

    (2) Anyone who is going to avoid paying tax will certainly know where to hide money so that even HMRC can't find it.

    This is a move in totally the wrong direction for HMRC!

  • rate this

    Comment number 45.

    For HMRC to even think of granting itself the power to plunder people's bank accounts is absolutely appalling. Much tax is unpaid because the amount owed is in dispute, but if HMRC can help itself to whatever it thinks is due without bothering to properly check the facts then the number and magnitude of its errors will increase exponentially, and Getting refunds will become next to impossible too.

  • rate this

    Comment number 44.

    Another attempt to do things on the cheap when it is the people who will suffer.

  • rate this

    Comment number 43.

    If they could focus on large corporations which aren't paying tax rather than this I think their efforts would be more productive.

    The companies are avoiding tax because the law lets them.

    This means you need to change the law, something like a levy would be best.

    When you have local companies paying tax and competing against international ones that aren't, not hard to guess who'll win.

  • rate this

    Comment number 42.

    HMRC need to concentrate on large companies who avoid tax,middle class and poor people are bullied enough in this country.

  • rate this

    Comment number 41.

    Absolutely dangerous and downright unfair! GO AFTER THE BIG MULTINATIONALS INSTEAD OF BURGLING US!

  • rate this

    Comment number 40.

    It is seriously time to go back to cash. These people just can not be trusted.

    Of course they will target the man oweing £1250 but not the company oweing £27000000

  • rate this

    Comment number 39.

    This would be the start of a slippery slope towards state control of people's assets. It might start with the best of intentions but once the legislation is in place a future, less benign, government will be able to grab your money at will. Beware!

  • rate this

    Comment number 38.

    I can see this being targeted more at the lower end of the scale, where the not so well off will be hit.

  • rate this

    Comment number 37.

    This is simply unacceptable & open to abuse by HMRC who as the committee confirmed, regularly make errors. Allowing HMRC to act as judge & jury finding you guilty & payment 'removed' from your account, until proven innocent is just plain wrong.
    Let's just keep the current system where HMRC has to apply through the courts first.

  • rate this

    Comment number 36.

    How many millions can be recovered from Ebay I wonder?

    Why does this Govt always choose to target the individual rather than the multi national?

  • rate this

    Comment number 35.

    I have no problem with this as long as the same rule applies to corporate entities like Amazon, Google, Vodafone etc.


Page 65 of 67


More Business stories



From BBC Capital


  • Crashed droneClick Watch

    Drone maker introduces no-fly zones in the US, plus other technology news

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.