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.

 

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

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +10

    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
    +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
    +3

    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
    +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
    +35

    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.

 

Comments 5 of 8

 

More Business stories

RSS

Business Live

  1.  
    Fiat-Chrysler Via Email Russell Hotten Business reporter, BBC News
    Sergio Marchionne

    Fiat-Chrysler's boss thinks it is great that Google and Apple are moving into car technology - but it also makes him feel uncomfortable. Sergio Marchionne (pictured here with a Ferrari) said at the Geneva motor show that the industry needs "disruptive interlopers. It's a good thing. But when you're the guy whose life is being disrupted, it's not necessarily a good feeling."

     
  2.  
    11:29: Australian rates
    Sydney

    The Reserve Bank of Australia left interest rates unchanged at 2.25% today after cutting by a quarter of a point in January for the first time in 18 months. Further easing remains on the cards to help drive down the Aussie dollar and drive growth. Greg Gibbs, an RBS analyst, said "unusually clear guidance" meant the RBA is keen to keep a lid on the dollar.

     
  3.  
    Geneva motor show Via Email Russell Hotten Business reporter

    Aston Martin unveils plans to broaden its range of cars to attract younger and female buyers. New sports cars, a four-seater - and a small SUV - are all in the pipeline. The British carmaker may be synonymous with James Bond, but its buyers are frequently middle-aged enthusiasts. "The brand has to be relevant," says boss Andy Palmer. "Less dependent on a narrow portfolio and one type of customer."

     
  4.  
    11:01: Treasury Committee
    Carney

    Mr Habgood says he never thought that the terms of reference for Lord Grabiner's inquiry were restrictive. Mr Carney agrees that the barrister was able to investigate freely and had unlimited resources to do so.

     
  5.  
    10:49: Treasury Committee

    The Bank's internal investigation, led by barrister Lord Grabiner, began in March 2014 following allegations that a senior member of staff had been told of "attempts to move" the foreign exchange market. It resulted in the Bank's chief foreign currency exchange dealer, Martin Mallett, being dismissed in November. Mr Carney told MPs that Mr Mallett was aware of possible misconduct into the forex market but failed to share that information with his superiors: "He did not escalate these issues."

     
  6.  
    10:43: M&A statistics

    The Office for National Statistics says the number of mergers and acquisitions involving UK companies fell to the lowest figure since 1987 last year. "The downward trend of domestic M&A may be a result of UK political instability as UK businesses experienced uncertainties about the outcome of the Scottish referendum, held in September 2014, and the impending general election," the ONS said.

     
  7.  
    10:27: Treasury Committee

    Bank of England governor Mark Carney and chairman of its court, Anthony Habgood, are giving evidence to MPs on the Treasury committee about the Bank's own foreign exchange market investigation. Labour MP John Mann asks how deeply ingrained the concept of a "nod and a wink culture" is at the Bank. Mr Habgood admits there is a need to professionalise the working practices.

     
  8.  
    Via Email Beef ban Simon Atkinson Editor, India Business Report
    Water buffalo

    Bad news for beef farmers - and for those who like a burger. Cows are holy to Hindus - slaughtering the animals was already illegal. But in Maharashtra state, that ban has now been extended to bulls and bullocks. The beef industry here says thousands of jobs in will be lost. Water buffalo (like the pair above) survive though - or rather - don't …. so the beef substitute will still be available.

     
  9.  
    09:54: China trade Radio 5 live
    Shoes

    Parcelforce Worldwide's ales and marketing director, Helen Wylde, was on 5 live earlier talking about sales to China from the UK. Baby milk, children's clothing, shoes, toys, educational books from Britain all sell well in China. The most odd? Bicycles. Chinese buyers like trusted brands.

     
  10.  
    09:37: Construction data
    Pinnacle

    The purchasing managers' index for the construction sector rose 1 point to 60.1 in February, defying expectations for a fall as growth picked up across the housing, commercial and civil engineering sectors. Tim Moore, senior economist at Markit, says some construction companies think the general election outcome could prove a "temporary bump in the road" for new work.

     
  11.  
    09:21: Paddy Power results
    World Cup

    It's a lucky day for Paddy Power investors after the company said it will return €392m cash to shareholders after failing to find any potential bid targets. Operating profit jumped by a better than expected 19% to €163.8m for 2014, helped by last summer's World Cup, which was won by Germany.

     
  12.  
    Barclays results Via Email Chirantan Barua Bernstein Research

    Dividends were held flat for the fourth quarter at 3.5p as compared to last year and came in lower than consensus at 3.7p. Non-progressive nature will be taken as marginally negative and also highlights that the bank's key focus continues to be capital build.

     
  13.  
    08:53: Business Matters World Service
    Royal Enfield

    Can India's cities become cleaner and greener? Business Matters on the World Service is live from Chennai all week. In the first programme Fergus Nicoll asks whether the infrastructure is fit for purpose - and visits an Indian success story with its roots in Britain: Royal Enfield motorcycles. Listen here.

     
  14.  
    08:41: Barclays
    Barclays shares

    Shares in Barclays are down 2.3%, or 6.15p, at 256.6p in morning trading in London. The stock has not moved much over the past 12 months given that it's just 8.7p higher than the price on March 4 last year.

     
  15.  
    08:27: Ford BBC Radio 4
    Ford Mustang

    Jim Farley, Ford's European president, tells presenter Simon Jack on Today that he hopes Britain does not leave the European Union. One in three engines made by the company comes from the UK, which he described as the "centrepiece" of its global enterprise. Asked about the Russian market, Farley said Ford believed in it in the long term but admitted that some short-term adjustments were required because of the volatile economy.

     
  16.  
    08:14: Taylor Wimpey results
    house

    If you're a house builder and you're not making piles of money, then something is very wrong. Fortunately for Taylor Wimpey that is not the case. Annual pre-tax profits are up two thirds to £450m before one-off deductions as 12,454 homes were completed across the UK - 758 more than in 2013 - with an 11.5% rise in average selling price to £213,000.

     
  17.  
    07:56: Barclays results
    Barclays

    While Mr Jenkins takes his first annual bonus with Barclays, the overall 2014 bonus pool for the bank is down £520m to £1.86bn. Most of the total - £1.05bn - goes to the investment bank. Its capital ratio, a measure of strength against unexpected losses, is up to 10.3% from 9.1%.

     
  18.  
    07:44: Barclays results BBC Radio 4
    Jenkins

    Barclays chief Antony Jenkins is on Today. The bank is the healthiest it has been since the financial crisis, he says. Changing culture at the bank takes a long time, Mr Jenkins adds, but the "vast majority" of his 130,000 bankers "want to do the right thing". He is taking a bonus of £1.1m after the "huge amount of progress" the bank has made. Asked about the topic du jour, Mr Jenkins says he pays all his tax in the UK and as a US green card holder.

     
  19.  
    07:37: Barclays results

    Barclays wrote down the value of its education, social housing and local authority loan portfolio by £935m. Last year the portfolio was valued at just less than £16bn, but at that time, the lender reclassified the loans as "level 3" assets. That's City-speak for loans you cannot value easily because they don't sell very often.

     
  20.  
    07:24: Direct Line results
    Direct Line website

    It's been a good 2014 for Direct Line, with pre-tax profits up 12% to £456.8m and a windfall of £430m from the sale of its international business. Shareholders will pocket total dividends of 27.2p per share, up from 20.6p in 2013. Harvey Keitel probably pocked a pretty penny too for featuring in its TV ads.

     
  21.  
    07:16: Barclays results

    Antony Jenkins will take his first bonus as chief executive of the lender: £1.1m. The bank also said it would increase its provision for payment protection insurance (PPI) by £200m for the last three months of 2014, taking the year's total to £1.1bn. Excluding these provisions and other things the bank considers one-offs, pre-tax profit rose 12% to £5.5bn. But including the nasties, the figure sank 21% to £2.26bn.

     
  22.  
    07:03: Barclays results
    bank

    Barclays have posted their 2014 results. They have set aside an extra £750m after those investigations for foreign exchange manipulation, taking the pot to £1.25bn.

     
  23.  
    06:53: Barclays BBC Radio 4
    Barclays

    Chris Wheeler, of Atlantic Equities, has also popped up on Today. He tells Simon Jack that Barclays is doing only "averagely well ... it's still work in progress". He expects pre-tax profits to be about £5.2bn when the bank reports its annual results at 7am.

     
  24.  
    06:35: Markets performance Radio 5 live

    Justin Urquhart-Stewart of 7 Investments is still on 5 live. "We are dealing with companies that make a profit and make things," he says of the Nasdaq's rally. The dotcom boom was based on companies that failed to make money, although "we have to be wary" because markets in 2015 are gorged on cheap money and cheap debt.

     
  25.  
    06:23: Barclays results Radio 5 live

    Chris Wheeler of Atlantic Equities is talking about Barclays. £5.2bn pretax profits are on the cards for the bank in its annual results, he estimates - a tad ahead of last year's result. However, "it's the return on equity that counts", he says. The bank is struggling to make 10%, which for a high-risk endeavour like banking is not where you want that figure, Wheeler adds. Results come at 07:00.

     
  26.  
    06:11: Markets performance Radio 5 live

    Justin Urquhart-Stewart of 7 Investments is on 5 live as the markets guest. "You have a global economy in pretty good shape and in the eurozone some better figures," he says, following soaring US markets. The FTSE 100 may grow further if there's better sentiment from China, he adds.

     
  27.  
    06:02: Mobile World Congress Radio 5 live
    Kazuo

    Rory Cellan-Jones, technology correspondent, is in Barcelona at the Mobile World Congress. Sony chief executive Kazuo Hirai is "making some tough decisions" and focusing Sony on things like films and games and camera technology: the areas that make money, he tells 5 live. Like many companies, it's finding mobile phones a tricky market.

     
  28.  
    06:00: Chris Johnston Business reporter

    Get in touch via email bizlivepage@bbc.co.uk or on twitter @BBCBusiness

     
  29.  
    06:00: Howard Mustoe Business reporter

    Good morning! US stocks hit record levels, with both the Dow Jones and the S&P 500 closing at all-time highs and the Nasdaq breaking the 5,000 barrier for the first time in 15 years. Is that going to last? Stay tuned for more.

     

Features

  • Mukesh SinghNo remorse

    Delhi bus rapist says victim shouldn't have fought back


  • Aimen DeanI spied

    The founder member of al-Qaeda who worked for MI6


  • A man shutting his eyes tightlyStrange light show

    What do you see when you close your eyes?


  • Man in pollution mask in BeijingSmog storm

    Chinese climate film inspired by baby's tumour goes viral


From BBC Capital

Programmes

  • Former al-Qaeda double agent Aimen DeanHARDtalk Watch

    Islamic State is about revenge says former al-Qaeda member turned spy Aimen Dean

Try our new site and tell us what you think. Learn more
Take me there

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.