A House of Commons committee has called for an urgent review after looking at details of the plan to give Her Majesty’s Revenue and Customs (HMRC) the ability to take money from people’s bank accounts without a court order. The new power, which was announced in the 2014 budget, could lead to “fraud and error” leading to “serious detriment to taxpayers”.
The Treasury Select Committee says that it is vital that there is some sort of independent oversight. At present if if HMRC believes it is owed money by a taxpayer, they have to send a series of warning letters and then take them to court. Only the courts can order that money be taken.
Under the new scheme if HMRC believes it is owed money, they can send the letters and take the money from bank accounts. The Telegraph reports there is then a 14 day appeal process, after which only a court order will recover it.
HMRC cannot take less than £1000 and the account must still have at least £5000 remaining, but there are fears it is the slippery slope towards having no legal recourse.
This is not the only power of confiscation in the budget. The second applies to people in Tax Avoidance Schemes. In these cases a financial advisor will have to tell the HMRC that you are joining a scheme. The HMRC will decide whether they approve or not. If they do not approve the scheme they will take the tax money they deem to be owed before any court appearance.
If taxpayers win their respective cases, HMRC will give the money back with interest.
The committee also expressed fears that the new powers represented a return by “stealth” to the Crown preference. Under that scheme the taxman was always paid before anyone else, leaving others in hardship as a result.
The Chairman of the Committee Andrew Tyrie, said: “The proposal to grant the power to HMRC to take money directly from people’s bank accounts is very concerning.
“People should pay the right amount of tax. But HMRC does not always ask for the right amount.
Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable.
“Exceptional powers such as this require prior independent oversight. The Government must demonstrate that it has dealt with the Committee’s concerns before proceeding.
“The Committee intends to take evidence from HMRC on this, among other issues, shortly.”
HMRC is well known for making mistakes, and there are fears that giving them extra powers could lead to significant hardship for those they choose to target. In one case the Daily Mail reported, a retired postal worker had been forced to pay £2000 because he had failed to notice that the HRMC had got his tax bill wrong.
HMRC accidentally included a memo from a tax advisor in his final demand which described their actions as “unjust” but told them to collect the money anyway.
The new powers were passed in the Finance Bill with also no criticisms from MPs, raising serious questions about scrutiny of legislation by Parliament. This report comes after the House of Commons formally agreed to these proposals.
Read the full report here.