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 334.

    sounds to me a little like communisum, but hey ho the goverment is over £1.3 trillion in debt and still borrowing upwards £100 billion a year, and trying hard to convince us all that we are coming up roses. They can only spend tax payers money and they have to get hold of it some how, I reckon there will be much worse to come yet.

  • rate this

    Comment number 333.

    #39 were already undemocratic as seen by the EU fiasco....and the fact we have a 3rd in a 3horse race as a so called "leader". were in a medievil witch hunt scenario everywhere....8 years for kissing a woman and 4 years for killing a bloke in bournemouth.

  • rate this

    Comment number 332.

    309. farkyss


    If you campaign on such a policy you will be branded a racist, sexist, a hater of the poor, or any other derogatory PC label in order to scare people into not having a debate about it.

    ukip's system will take from the poor to give to the rich, that's not racist or sexist and I am, supporting the poor. Increasing pensioners tax to 31% stinks.

  • rate this

    Comment number 331.

    Is this not about how the House does work. Something has been put in place by the chancellor which MPs have picked up on and are querying. That is good is it not?
    The article also says this system could be used against companies and people using tax avoidance. Maybe with some tinkering it actually could have some merit.

  • rate this

    Comment number 330.

    There is already a system for claiming back tax debts, the problem is that HMRC are too easily 'paid off' by the biggest debtors for a tiny fraction of the amount they owe, so they have to attack the smaller debtors to make up the difference.

    This won't affect Criminals, they hide their money, it will only open to door to other departments being able to access your account at will.

  • rate this

    Comment number 329.

    "If approved by Parliament, will take effect 2015/16"

    My political awareness is now vintage & I have to say that I have witnessed so much valid hatred & vitriol for this & the last administration, even more hatred than for Thatchers Government. So many demographic groups now feel UK democracy is dead.

    And if anyone thinks that Labour would reverse this latest wheeze, get your head examined.

  • rate this

    Comment number 328.

    Blimey, George Osborne and the government should be careful about this. It's all very well to be draconian with the sick and unemployed, but if they start that with the general population it's going to be much harder to spin it as acceptable.

  • rate this

    Comment number 327.

    Suddenly there is a lot of support for those who don't pay tax.

  • rate this

    Comment number 326.

    In the tax year 2005/6 I was given the wrong tax code and overpaid to the tune of £1,450. I got the money back - in April 2011. My concern is not that HMRC might make a mistake, but rather how reluctant they are to admit their mistakes and how slow they are to pay what they owe.

  • rate this

    Comment number 325.

    Being a P.A.Y.E. employee, and having 1st hand experience of how I was hounded for a late tax return, I have no faith that an inept HMRC will have any form of coherent strategy to ensure an even handed approach. As usual with Government agencies, they will always go after "soft" targets rather than pursue big corporations or rich individuals. It's disgusting that this is even being contemplated.

  • rate this

    Comment number 324.

    Great as long as we are all in this together. The Amazons, Starbucks, Ecclestones, big corporations, bankers, politicians and financiers as well as you and me. But that will never happen when they're allowed special arrangements to pay 10% of what they owe.

  • rate this

    Comment number 323.

    The Revenue allow Ecclestone to avoid [apparently] £2 billion in tax in return for paying £10 million , yet when I was working I received a demand for 1p that they said I owed.
    If there is a more corrupt and sycophantic organisation than the Revenue I have yet to come across it. To allow them access to people's bank accounts directly will be a disastrous.

  • Comment number 322.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 321.

    I'd love to see the looks on the faces of the execs at Vodafone if they came in one morning and their balance showed a £6bn shortfall with a short note from HMRC thanking them for settling the tax bill.

    It wouldn't happen though. As the other article states the average amount owed by those targeted by this policy is £5,800.

    Everyone should pay their share, not just the small guys.

  • rate this

    Comment number 320.

    As it stands HMRC currently owe me money for overpaid tax. Maybe I should just go to their offices and help myself to a couple of laptops or the petty cash tin.

  • rate this

    Comment number 319.

    I'd guess it WON'T apply to off-shore bank accounts !

  • rate this

    Comment number 318.

    If an individual were to take money from someone elses bank account they would be prosecuted for theft. Seemingly the CSA and now the rest of Government appear to be allowed to steal without recourse. Baffling and moving towards totalitarianism..

  • rate this

    Comment number 317.

    292.Random Advice
    This is going to do nothing to stop tax evasion as it's so easy to avoid if so inclined. Keep your money in Jersey and HMRC can't touch it for example. If they are so sure the money is owed why can't they prove it in a court of law. It can't cost that much or take long as every council in the land goes to coure over a £80 parking fine!

  • rate this

    Comment number 316.

    I can see DIY companies running out of hammers and floor board chisels as more and more people put their cash under the floor boards. keeping "hot" cash in a bank is a waist of time when you consider how much interest it generates.

  • rate this

    Comment number 315.

    Ok by me as long as debts only above a certain limit are taken - say above £10,000.

    That would stop HMRC from targetting the "small fry" and concentarte their efforts on the real offenders.


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