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
    -25

    Comment number 134.

    "100.Tc1234
    the typical left wing ranting about tax collection changes drastically when it becomes about "me and mine" and not just targeted at "the rich""

    Spot on.

    It's easy to screech about how OTHER people should pay more tax but you'll find most lefties think it's a good idea that a 0% tax rate should apply up to the level THEY earn and 100% on anything above that.

  • rate this
    +3

    Comment number 133.

    Terrible idea. Where is any due process in this? My experience with HM Revenue is that they often get it wrong and misallocate funds or get the tax code incorrect. When they do get it wrong (almost always) they take extra time before correcting or paying back the amount. I'll move accounts to off-shore before I let an incompetent organization like this help themselves to my money.

  • rate this
    +4

    Comment number 132.

    Notice this is Peoples accounts not Companies!?

  • rate this
    +15

    Comment number 131.

    I pay my tax via PAYE, what happens if they get me mixed up with someone who doesnt pay by that method and has the same name as me-this could be disastrous!! Its very rare that any government department admits that they have made a mistake so what happens then-I dont have any confidence in the 'checks and balances' they say that will be put in place. This needs to be stopped.

  • rate this
    +1

    Comment number 130.

    An idea of the scale of the non-payment problem would be helpful. How much is currently owed to HMRC that they would potentially pull from bank accounts?

  • rate this
    0

    Comment number 129.

    Either simplify the tax regime and make EVERYONE (personal or business) pay ALL the tax up front and then they can claim it back if they deserve it.
    Or, go ahead and take 60% of what's owed so the person / business is not drained of cash, put it in Escrow and debate it from there with sensible arbitration. But if the person / company is found to be misleading the taxman, then they pay double.

  • rate this
    +5

    Comment number 128.

    The closer we get to the election, the more the average joe will be angered by the rich boy club in Westminster doing what they like. I believe a revolution in order. If only the Queen would use the powers bestowed upon her and dissolve our joke of a political system

  • rate this
    +3

    Comment number 127.

    Saw the headline and thought, what a good idea, getting at all of those tax avoidance individuals and companies. Then I read it was talking about those who may or may not owe a paltry £1000 or so and it became obvious who this was targeting Or more importantly who it wasn't. 90% of us are being shafted by this government and still people back it.

  • rate this
    +1

    Comment number 126.

    Not a chance! Gold price would go through the roof. No money left in banks. No liquidity. Banking system crashes. Childish idea.

  • rate this
    +2

    Comment number 125.

    Chased for 4 years, sent far more than 4 demands even though a) appealing b) asking for the case to go to the commissioners. All while out of work with no benefits living off savings and close to suicide. They almost pushed me over the edge. 4 years, an appeal to the Parliamentary ombudsman, 15 minute call to ex employer and hey presto Not taxable. With these powers I'd have been dead.

  • rate this
    +3

    Comment number 124.

    This will cause massive resentment and likely see major anti Government feeling as you can be 100% sure they will (a) target the middle/lower class (b) get it wrong (c) leave the millionaires and big business well alone.

    It is likely to INCREASE tax avoidance not reduce it as people seek ways of not being penalised.

  • rate this
    -61

    Comment number 123.

    What is all of the fuss plenty of safeguards, if you have nothing to hide why worry.

  • rate this
    +1

    Comment number 122.

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

    Bet they will be quick to take the money but if they later find there has been an error then it most likely won't be paid back in so quickly. Hope there are proper safeguards in place to cover errors etc.

  • rate this
    +11

    Comment number 121.

    What a truly horrible country we live in these days, stopped been a democracy a long time ago, just slaves now.

  • rate this
    +5

    Comment number 120.

    Great... Bernie Ecclestone please provide your account number and sort code so HMRC can collect the outstanding balance

  • rate this
    +2

    Comment number 119.

    With bank accounts offering such low interest rates I would suggest people stop banking cash in order that HMRC cannot take their money- god knows they are famous for making mistakes.
    That aside will HMRC being taking money from the large corporations who use aggressive tax avoidance schemes?

  • rate this
    -67

    Comment number 118.

    splendid news...if you have paid your tax you have nothing to worry about....

  • rate this
    +3

    Comment number 117.

    I can't see HMRC applying this to the billionaire class and multinational corporations, who seemingly are allowed to choose for themselves how much tax to pay.

    It will be applied to the ordinary taxpayer, and if HMRC get it wrong (as they sometimes will) the ordinary taxpayer will face a protracted ordeal of unanswered letters and unanswered telephone calls to get anything back.

  • rate this
    +14

    Comment number 116.

    I run a small business and have just been hit with a £54 interest charge for a small, so called, unpaid tax demand. The cheque had cleared 8 days before the date they have charged me until by...HMRC. I have just found out it had been allocated by them to the incorrect tax year. Their fault - not mine. They are refusing to of
    fset the Interest charge. This is all very scary stuff indeed.

  • rate this
    +1

    Comment number 115.

    George Osborne's view is only little people pay tax. His money is beyond reach in a tax haven and he wouldn't dream of tackling Google, Amazon, Starbucks and the rest. Seems like there is one rule for them and another for the rest of us.

 

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