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
    +3

    Comment number 274.

    Will this apply to Bernie Ecclestone and large multinational corporations too?

  • rate this
    +4

    Comment number 273.

    Another crass idea from HMRC. First they want to sell my personal details to the world and its wife, now they want to take money which may not belong to me regardless of whether my name is on the account or not. Having had a fight with HMRC a few years ago and proved that what they were claiming was overstated, I don't trust them to get anything right

  • rate this
    +2

    Comment number 272.

    The truth is that they already do this. If you ask them to give details of the 'debt' they point blank refuse and the 'debt' itself may relate to something a decade past. If you do not then pay they can (and have done) extract it directly from your earnings. The truth is that if your details are in the public domain powers that be can extract it at will. Time to emigrate perhaps...................

  • rate this
    +4

    Comment number 271.

    Knowing how bad HMRC at getting the records and sums right, this is totally insane. They told me I owed over £2000 for a period when I was not working and they knew that as not only had I told them in writing but they had confirmed they had the info - then decided I had underpaid tax on nil earnings!
    They must NEVER be allowed access to an account without a court order.

  • rate this
    -1

    Comment number 270.

    Who voted for this one ? Still only a year to go . Remember the first thing the coalition did was make sure no election for 5 years , just before the hike in tuition fees . Are they trying to make it easy for the " swivel eyed loonies " ?

  • rate this
    +92

    Comment number 269.

    This proposal would fundamentally alter the relationship between the individual and the state. The state should certainly be able to pursue unpaid tax through the courts just like any creditor, it shouldn't have the right to just dip into your bank account.

  • rate this
    +7

    Comment number 268.

    Does this mean that Bernie Ecclestone, Vodafone, Google, Starbucks, Amazon I could go on...will be getting their bank accounts raided by HMRC?

  • rate this
    +2

    Comment number 267.

    As ever it's the people at the wrong end of this problem that are targetted with draconian measures. Instead of freezing/taking (same thing?) £1,000 from hard-up families, why don't they invrease the limit to £50,000 and bring in powers to directly repatriate off-shore funds from people who can well afford to pay their tax, and halve our deficit in doing so.

  • rate this
    +5

    Comment number 266.

    take it , go on take it all and pay everyone the same sum whatever work they do , thieves and parasites all , this is the most Marxist thing I have ever heard about

  • rate this
    +9

    Comment number 265.

    As a business owner I can tell you the HMRC is ridiculous... A letter one week telling you they're taking you to court, one the next telling you that they owe you a fortune.

    If you call to ask they'll likely say one or both are incorrect and to ignore them and then send more and more ... And more.

    If this bunch had the right to access bank accounts it'd be a disaster.

  • rate this
    +6

    Comment number 264.

    This should only be allowed once the amount has been proved in court.
    HMRC is run by an army of temps who make frequent mistakes.

  • rate this
    +4

    Comment number 263.

    251.Martin
    "Can't wait to see the faces of the accountants who look after the multi-national tax avoiders when they get their bank accounts raided "
    ...
    You'd be waiting awhile. Tax avoidance is legal (unlike tax evasion), and this is aimed at the individual, not corporations.

  • rate this
    +6

    Comment number 262.

    A simple tax system seems like much a better idea?

  • rate this
    +4

    Comment number 261.

    Bad move George. Tory Central Office are going to be really cross at you with an election coming up next year!

  • rate this
    +2

    Comment number 260.

    Perhaps we should just hand over all income to the Government and let them return to us an amount we need to live on......

    Um think this might have been tried in communist USSR.

  • rate this
    -3

    Comment number 259.

    When you see all the safeguards that they intend putting in place it is hardly the draconian, all-encompassing measure that many on here are suggesting. Perhaps a generous rate of interest on money wrongly taken would soften the blow even further.
    Where this system is used, e.g. France, it certainly concentrates the minds of the slippery eels amongst us.

  • rate this
    +2

    Comment number 258.

    Outrageous! Who dreams up these ideas? From HS2 to Uni fees to this.....All bonkers ideas, and the politicians (from all parties) are not focusing on the important issues - whoops, too difficult.

  • rate this
    +3

    Comment number 257.

    39.Grumpyoldman
    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!
    ======
    Same as grabbing/ freezing the assets of people who are of foreign nationality when the politics deem it to be right to do so.

  • rate this
    +2

    Comment number 256.

    The rich pay what they want, I really don't know how this is still happening. They pay what they want...

  • rate this
    +4

    Comment number 255.

    To be honest my main concern here would be HMRC's history of losing data into the wrong hands, just imagine a list with thousands of bank account details getting into the wrong hands..........this is all to open to going horribly wrong and lets face it it wont be HMRC who suffer, it will be Joe Public!

 

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