HMRC powers too much?

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The ICAEW has criticised plans to increase HMRC’s powers to allow it to take money directly from the banks of tax debtors, saying the proposals risk causing undue hardship to taxpayers say Harris & Co accountants Northampton

The institute is calling for the government to provide more details of how HMRC will use the new powers to take money directly from bank accounts of those with tax liabilities.

Speaking after an appearance before the Treasury Select Committee on the Budget Frank Haskew, head of the ICAEW tax faculty, said the announcement that HMRC will be able to take money directly from the bank accounts of tax debtors who owe more than £1,000 in tax or tax credits needed more clarification.

Haskew said:

‘This proposal is of considerable concern to many taxpayers and accountants as this power is unprecedented in the UK. Other than a comment that a minimum of £5,000 would be left in debtors’ accounts, there are no details yet of any judicial or other safeguards that could protect taxpayers. It is likely to be particularly serious for those on low incomes struggling with debt problems.’

HMRC has said it will only use this new power where debtors ‘have the financial means to pay’ and have been contacted multiple times.

Haskew said the ICAEW wants to know how will this be determined, and whether the databases the HMRC uses - to assess who has defaulted - are up to date.

The ICAEW is also asking about the steps that will be put in place to ensure funds that are not due are not seized, and to make sure that hardship does not follow seizure of funds.

Under the new rules, HMRC is effectively made a preferential creditor in any bankruptcy proceedings, which it warned could lead to perverse effects – for example, people holding money in cash rather than in a bank account or moving funds offshore.

Haskew said:

‘Once these questions have been answered, we should get a clearer idea of how these new powers will work and how they will impact on the taxpayer. We believe it is imperative that there are proper safeguards and there should be proper judicial oversight of any decisions made with rights of appeal.’

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