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.


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  • rate this

    Comment number 194.

    HMRC shouldn't be able to access peoples bank accounts unless they have warrant from a magistrate. That would give people the opportunity to defend themselves in the courts.

    I'm surprised (and slightly worried) that the Treasury select committee are opposing this on the grounds that HMRC are prone to errors, not that it's an unacceptable expansion of state power.

  • rate this

    Comment number 193.

    This is a joke! HMRC admit that 20% of tax demands that they send out are sent knowing that they are wrong. They are an organisation that is rude, complacent, condescending, adheres to double standards ( big business pays nothing or decides its own tax bill) and not fit for purpose. Close it down and start again so that it serves the tax payer and not the other way round.

  • rate this

    Comment number 192.

    A certain german facsist regime also wanted to exercise control over peoples bank accounts

  • rate this

    Comment number 191.

    So Govt is telling us their rights are greater than ours. That's Marxism.

  • rate this

    Comment number 190.

    This will not work not ever, never ever.

    The people most affected by this are people who have money in their banks, typically working middle income home owners, who are likely to vote Tory.

    How long before they decide that enough is enough?

    Lower income families and workers simply do not have the funds as they tend to live payday to payday, and are taxed at source so not likely to owe Tax

  • rate this

    Comment number 189.

    139 milo mindbender

    'Because tax is determined by your Unique Tax Reference (UTR) linked to your National Insurance Number, not your name'

    That hasnt stopped the incompetent idiots in the past what makes them suddenly so efficient now?

  • rate this

    Comment number 188.

    I'm still waiting on my 2012-2013 tax rebate, I've got a letter from them saying it's due, I've phoned them several times and still no money. Can I please have access to HMRC bank accounts to retrieve it. It might not be a lot of money but it is to me.

  • rate this

    Comment number 187.

    All HMG thinking these days (and this is all parties) is based on the supposition that everyone is "up to something" or trying to hold back what they believe belongs to HMG. The real rot started under Brown and his utter contempt for small business (pension fund raids, IR35 etc) and has got steadily worse with each successive administration. Taxation Minority Report is here for folks.

  • rate this

    Comment number 186.

    No way in the world is this acceptable in a free country. This is what you might expect in a totalitarian dictatorship

  • rate this

    Comment number 185.

    HMRC do mistakes . Its a bad idea.

  • rate this

    Comment number 184.

    Oh....does this mean I can get their bank details and get back the £130 they have owed me since January???

    Didn't think so.

  • rate this

    Comment number 183.

    So Our Beloved Regime has embraced the Communist belief that all property is theft (except for the property of Tory MP's).

  • rate this

    Comment number 182.

    Happened to me ..HMRC reckoned I owed them £2000.This was due to an error on my tax return.
    I phoned them 3 times-I mailed them -all ignored and the demands kept arriving.
    The 4th one was threatening so I contacted my MP.
    It was only on his intervention that it was sorted.
    HMRC sent me £180 to cover cost of my phone bill!
    Under this proposal, I would have lost that £2000.

  • rate this

    Comment number 181.

    it would only apply to people who have ignored 4 demands for payments over a long period, accounts would be frozen first & they'd be given a chance to negotiate payment at that stage or indeed, take legal action so it would only apply to people who refuse point blank to communicate with HMRC or do anything at all about their tax bill.
    The problem as the commitee points out is if a mistake is made

  • rate this

    Comment number 180.

    149. Totally agree. I am no leftie either. I employ 25 people and have always paid my due tax. The incompetence of our HMRC is staggering. They even sent a heavy round to my house a few years ago and freaked my family out because they allocated the CIS to the incorrect year. It has happened on six occasions in four years and every time - their fault! no apology - nothing. Just arrogance.

  • rate this

    Comment number 179.

    HMRC can already seize funds with a court order, having satisfied the court that the debt was legally due.

    So these proposals are essentially giving HMRC the right to bypass the legal process - why would any honest, competent, transparent body want such powers?

  • rate this

    Comment number 178.

    Everyone should pay the correct amount of tax applicable to them. They should be doing more to close tax avoidance loopholes first though. This would bring in lots of extra money. Unfortunately they are reluctant to do this as lots of MPs take advantage of these loopholes.

  • rate this

    Comment number 177.

    "On paper, the safeguards look relatively robust" say a chap from ACCA head od taxation.

    We seen data breaches in the past, we simply can't trust the HMRC with access to our bank account......they can't even work out our tax returns correctly in the first place.

  • rate this

    Comment number 176.

    The banks already have the right to offset unpaid credit bills at will, refuse withdrawals, etc, and all creditors have the right to freeze accounts via a fairly easily obtainable court order. My beed is that, instead of pursuing offshore scam operators such as Google, Microsoft,Amazon, Apple, Starbucks, Regus, BSkyB and ITV, they are tackling soft targets - the people

  • rate this

    Comment number 175.

    So when they take it wrongly from someone, who then cant pay their bills\loses their house - then what - an apology if your lucky


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