MPs turn up heat on HMRC debt recovery plans

Outrage went up a notch this week over HMRC plans set out in the Budget to recover unpaid tax directly from bank accounts without a court order.

The Commons Treasury Committee today put a spotlight on the proposed “draconian powers” in its report into the Budgetand pointed out HMRC’s history of mistakes.

The committee said taxpayers could suffer “serious detriment” if officials are able - either by mistake or through an abuse of power - to take money from people who have done no wrong.

“The ability directly to have access to millions of taxpayers’ bank accounts raises concerns about the risk of fraud and error,” the report said. “This policy is highly dependent on HMRC’s ability accurately to determine which taxpayers owe money and what amounts they owe, an ability not always demonstrated in the past. Incorrectly collecting money will result in serious detriment to taxpayers.”

The tax authority's consultation document says...

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Comments
johnjenkins's picture

How the hell    11 thanks

johnjenkins | | Permalink

can HMRC say it will bring in an extra £100m from 17000 people EVERY YEAR. I really wish I had their crystal ball but then we know HMRC figures are bollony.

Do they not know that those that don't pay, know they don't pay, and won't pay and will make sure that there is no money in the account to take.

What about fraudulent preference, or are HMRC above that.

Let's go down the normal route. Most people pay their taxes. Some can't pay due to lack of funds. Some won't pay for whatever reason. Do HMRC really think these people that won't pay will make sure there is enough money in the bank for them to take it?

What sort of idiot dreams this crap up. Then the committee say it's alright in principle (NO IT'S NOT ALRIGHT FOR JUST HMRC IN PRINCIPLE) but we're worried about errors. ERRORS! they can't even open the post. I'm just waiting for the collections to be privatised then any Tom Dick or Harry can take money out of your account.

Oh yes we've got to be in line with the rest of Europe. They're doing really well aren't they. Let's all become Scots join the SNP pull away from England and Europe and really go for it.

Just as they turn up the heat

arnold28 | | Permalink

ACCA is reported on BBC as backing down and understanding HMRC's position

http://www.bbc.co.uk/news/business-27308811

 

johnjenkins's picture

Interesting, how    3 thanks

johnjenkins | | Permalink

does HMRC know that 8500 tax payers who owe £5800 have more than £20k in their accounts? The bullshit that comes out of HMRC gets more and more incredible.

Of course all the majors will back down, because the "committee" have said it's ok in principle. Why? because we need to catch up with the rest of Europe. This Government really is in for a big shock come election time.

Yes, of course debts have to be paid but if HMRC aren't preferential why should they have "preferential" status. 

Level playing field.    18 thanks

Kublai Khan | | Permalink

Can we take fees out of clients bank accounts? How about us being able to take refunds out of HMRC's account?

johnjenkins's picture

Getting back to the plot    1 thanks

johnjenkins | | Permalink

We now know that DC's plan all along is to raise taxes. Good diversion DC. Even Tony Blair had the honesty (yes I am being sick) to say that if you want a decent NHS it has to be paid for, then stuck 1% on NIC's.

Old Greying Accountant's picture

So, what about companies?    2 thanks

Old Greying Acc... | | Permalink

HMRC say the power will not create or increase an overdraft, so run your business through a compnay, don't take dividends just rack up a large directors overdrawn loan, they won't be able to collect the s455 tax if you keep the bank on or just below £0.00 - all the serious defaulter will do this, the law-abiding with a dispute or Revenue cock-up to deal with will be the only ones to pay.

Credit issues

DHarris | | Permalink

Its been a long time since I looked but I thought that HMRC are not preferential debtors therefore how can HMRC start taking control of peoples money when they might owe preferential debtors. Not all taxpayers default on debt through choice and HMRC should only have access to cash through the courts.

Yet another reason why i am    4 thanks

jholmes | | Permalink

Yet another reason why i am glad i knocked my membership to ACCA on the head!

Why can’t HMRC use same count systems as we are forced to use?    1 thanks

ringi | | Permalink

I don’t see why HMRC cannot just get a CCJ and enforce it in the normal way to recover its depts.   I know that the CCJ does not work well, is slow and hard to enforce judgments.

But it would be better for CCJ to be given real power and access to all the information that HMRC can access for the recovery of all depts.  Also make CCJ responsible for the enforcement of orders using the same effort for all including HMRC rather than expecting each ‘winner’ to enforce their own judgments.

EU and all that    2 thanks

KMACS | | Permalink

Can we really believe a government that is proposing these type of actions, is really going to renegotiate our position in Europe so that the EU parliament has less control of our lives?

Easy work arounds    3 thanks

Mekabear | | Permalink

This seems like it would only affect people who are not expecting it, because anyone playing the system is going to make sure none of their accounts have over 5k in them.  So it will probably mostly affect people who have suffered HMRC mistakes.....

A Fine mess    2 thanks

Ian McTernan CTA | | Permalink

I can already see the scenario.  Company owes HMRC £20,000 after the result of adjustments to a previous year's accounts, which the company have reluctantly accepted and plan on starting a case against their previous accountants to recover this money.  Company receives £25,000 into it's account from a client.  HMRC takes the £20,000.  Company now needs to pay it's suppliers £10,000, account for VAT of £4,167, and pay it's employees £7,000.  It can no longer afford to do so.

So a perfectly good company is forced into insolvency proceedings by the actions of HMRC.

HMRC should not get this power without a Court Order to enforce a debt.

Those attacking the government about this are way wide of the mark- HMRC comes up with these crazy ideas all by themselves and the politicians are left to deal with the consequences.

The problem with the major bodies is they are too close and cosy with HMRC and don't want to upset the apple cart for the future by objecting too strongly to anything.

Outrageous!    2 thanks

Michael C Feltham | | Permalink

As local authorities and commercial landlords, income tax, VAT etc are Common Debts.

Common debts can be attempted to be collected by sending in a bailiff; or, as more usually, posting distraint via a "Walking Possession Order".

However, even local authorities are unable to attach lien to any bank account without prior court action: usually in terms of Council Tax or UBR, a magistrates court.

Anyone, in theory can "Garnishee" a bank account: however this doesn't mean they can thereafter draw funds: all it means is the account is frozen to prevent a debtor moving or dispersing the funds.

To suddenly try and seize such draconian powers by a government flies in the face of jurisprudence and established law. It is the effective face of fascism and totalitarianism.

On a practical note, all of us in practice knows first hand two realities: HMRC hide themselves behind a communications firewall; too often lose letters, fail to respond in reasonable time and enact endless mistakes and foul ups.

To date in British legal history, the only similar powers flow from the Proceeds of Crime Act: however the relevant authorities have to make pretty damned sure a case and action is 100% accurate and supportable before they sequestrate a suspect's assets!

To empower the flawed and dysfunctional agency HMRC has become - thanks to downsizing experienced staff, constant statutory and organisational changes and moves of operational front-line bases - is simply asking for trouble!

By such actions, HMRC could easily drive SMEs into insolvency and non-incorporated traders into personal bankruptcy: particularly at a time when banks, operating also via equally dumb and clueless call centres offer little or any real urgent need support.

UKIP for me: on the simple premise they aren't LibLabCon!

 

 

Is this supposed to be a    2 thanks

KIKISROSSIDES | | Permalink

Is this supposed to be a democratic country or has Mr Puttin being over here in secret? Talk about blunders just before a general election? Mr DC this is basic staff and any good politician and I mean good politician does not allow his government to make such mistakes.

Enacting laws with retrospective effect is also another blunder so how many is one allowed to make before is kicked out?

BetterTAX.org's picture

How Scary Is This!    3 thanks

BetterTAX.org | | Permalink

I along with you, find this proposal outrageous to the point of disgusting - with all the implications that go with it.

It has been proven time and again that HMRC get their figures wrong. What's worse is how much they drag their feet when trying to untangle messes - can you imagine how long it would take to get funds back from them when taken incorrectly?

It's so obvious how they target the "small man" who doesn't have a room of legals to get support and protect him.

Close the loopholes the big corporates favour using and the debt would be reduced considerably!

 

ACA Backs down

TaxMatters | | Permalink

It is hardly surprising that the ACA backed down. Our institute does very little to PROTECT our status as Chartereds. Once again I have a case on my desk where the client had turnover of £34k and PBT of £16K. The previous unqualified "Accountant" put in a tax return showing Turnover of £6.5k and PBT of £6k. These people need to be prevented from offering accounting services to the public but the Institute does nothing.
 Now HMRC is proposing draconian collection measures - I see little hope that the Institute will do anything to defend the proposition.

HMRC is claiming that I will bring in extra millions - highly unlikely! HMRC will get the tax that is owed come what may. Where is the £100m EXTRA coming from? They have all the powers they need!

johnjenkins's picture

@Kikisrossides

johnjenkins | | Permalink

On Andrew Marr yesterday morning DC more or less said he won't be PM after the next election. So he can really spout or do anything with no comebacks.

ICAEW is not ACCA    2 thanks

David Heaton | | Permalink

Just to correct a misconception that appears above, the ICAEW is not sitting idly by, and there is no cosy relationship that means we can't say difficult things to HMRC.

The ICAEW's position is not the same as the ACCA's.  The statement put out by ICAEW includes this:

"We accept, of course, that HMRC has a duty to collect tax which is legitimately due, and that it should take firm action against those who can pay but won’t.

However – we do not support the introduction of this new power and do not think the safeguards are adequate.

We think it is wrong in principle and infringes fundamental civil liberties that no-one should access someone else’s bank account without their permission or under the supervision of a judge.

The safeguards listed are welcome, as far they go, but they do rely heavily on the accuracy of HMRC’s records and on its judgement:

  • Can we be confident that HMRC will have correct figures for “established debt”? ICAEW has seen numerous cases recently of HMRC chasing debts which are not due.
  • How reliable is HMRC’s information about bank accounts?
  • It will  beup to HMRC to decide what funds should be left in the accounts for essential personal or business expenses.
  • It also appears that it will be up to HMRC to rule on any objection the taxpayer might make, including whether DRD will cause hardship.

The safeguards do not go far enough."

This has already been said to HMRC and the minister (I personally challenged David Gauke in a post-Budget open Q&A at the Institute to explain how this infringement of the basic principles of justice was compatible with the Magna Carta rights that the Chancellor was praising in his speech).  Those who are Tax Faculty members can read the full written statement here: http://www.ion.icaew.com/TaxFaculty/post/Direct-recovery-of-debts---a-power-too-far-#comments.

johnjenkins's picture

Surely safeguards

johnjenkins | | Permalink

don't come into it if in principle it's wrong. How anyone even thinks about it further is beyond me.

Leadtime is Critical!

Michael C Feltham | | Permalink

johnjenkins wrote:

don't come into it if in principle it's wrong. How anyone even thinks about it further is beyond me.

My main concern, John all apart from the clear and indisputable reality such action is unconstitutional, inequitable and excessive, remains as a simple point.

Assuming HMRC base a cash grab on erroneous data, how long -really! - might it take to:

 

1.  Find someone with much of a brain to speak with, bearing in mind HMRC's purposive obfuscation of telephone systems, non-use of email and fax and general malaise in providing and maintaining cogent points of human contact:

2. Rectify glaring and wholly fallacious internal errors?

Previously, taxpayers could run to the civil court; challenge bailiff's actions and walking possession orders et al.

No longer, it would seem. Suddenly, HMRC have been empowered to become police, judge and jury: at one stroke!

And no checks and balances.

Now, this is the thin end of the wedge and deeply worrying.......

Reminds me of the robber barons and their absolute rights to send in the boys, seize the serf's food stores and animals and let them bloody starve!

At the same time as denying them the right to collect fallen branches from forests for firewood, fish, catch small animals and even "Wracking Rights" (i.e. gather seaweed etc from the sea and lock shores.

Yet at the same time, Gary Barlow has been involved with others in a totally contrived and non-scheme approved tax avoidance scam and Dave hasn't the balls to take back his CBE!

 

Smokescreen?    1 thanks

dmmarler | | Permalink

HMRC know that accountants and taxpayers alike will object to their proposal to take funds out of taxpayers' accounts - so what else is there in the proposed legislation or consultations which they are trying to slip through? 

Tax and CIS repayments Due

taxbakbristol | | Permalink

If we had the power to take out of HMRC bank account all the monies owing to our clients then we would have chaos and a lot of happy clients!! But t out of it may come some good (SCRAP CIS and CGT)............have a UKIP goverment and professional bodies that work for their fee paying members and dont toady up to HMRC. Am I just dreaming ?

CBE for tax avoidance

taxbakbristol | | Permalink

I wonder how many members of our honest and illustrious bunch of MPs are involved in these scams? You can bet your life that there are many and no doubt even more in the ranks of HMRC and all the other dreadful government organisations .That's why DC will not say anything about these celebrity scams . Next time I have a client caught with his tax trouser down I will plead  that he does a lot for his dear old Mum and charity".

Only plans at the moment

AndrewV12 | | Permalink

I have been waiting for this topic to surface, I think the plans will become statute Law, it will only effect 17,000 taxpayers, and most of them have the money and just like to sit on it as long as they can.

johnjenkins's picture

@Andrew

johnjenkins | | Permalink

If you think it will only affect 17000 taxpayers then you obviously have never had many dealings with HMRC.

I cannot see how it will ever get on the statute book. Anyway DC has already (not in so many words) said that he is going to raise taxes and will not be PM after the next General Election.

DC

AndrewV12 | | Permalink

On reflection 17,000 is a bit light, however I believe in most cases tax payers have the money but prefer to sit on it.

 

The only way DC will not be prime minister after the next election is if the Conservative party  cannot do a deal with the Lib Dems.  Other than that I believe he will remain PM for the foreseeable future.

johnjenkins's picture

DC said

johnjenkins | | Permalink

on the Andrew Marr show that if the Tories didn't get in with an overall majority and therefore no referendum on Europe, in that case he wouldn't be PM. So what he was saying was that he would not lead any kind of coalition. Bottle job.

How many big firms sit on their money and don't pay small business?. Some take 90 days and counting.

So, Andrew, what do think these taxpayers who prefer to sit on their money will do? Move it about or let HMRC take it. Not difficult to answer is it? So when HMRC don't get their dough out of them who do you think they will come looking for?

I will have to ask Ken Dodd

AndrewV12 | | Permalink

I will have to ask Ken Dodd that one.

johnjenkins's picture

No Doubt

johnjenkins | | Permalink

he will sleep on it.

Direct Recovery of Tax Debts.

BRIGHTAMEDODAH | | Permalink

HMRC make lots of mistakes in the correct assessment of Taxes. in most cases their determinations are wrong as well. To allow HMRC to take tax out of the bank accounts of taxpayers would truly make HMRC the Judge, Jury and the Executioner. Taxpayers should be educated about their moral duty of paying their tax when due rather than extracting it from their bank accounts without knowledge of what the savings are planned for. The courts are already empowered to make the order for the debts recovery and the law should be left to take care of that. Not HMRC.  

HMRC debt recovery plans

greenw2m | | Permalink

In my experience when dealing with HMRC, there is a high occurrence of errors made which seems to be on the increase.

When I asked a member of staff at HMRC why, when they made estimates of tax owing, the figures that they came up with were quite obviously way too high, they actually said that it was their intention to scare the individual/ business or company into paying the estimated amount of tax owing.

When I asked why, when they came up with immense tax demands, there was a few pence added to the figure, they said that this made the demand look more realistic than demanding a rounded amount.

Also, unfortunately, there seems to be a sharp rise in the number of staff at HMRC who have little idea of what they are talking about and when you try to suggest, diplomatically the correct method that they should be using, they usually become very indignant or even downright rood.

I can only suggest that HMRC trains their staff a bit more thoroughly before letting them loose on the HMRC telephone answering service but, I worry that there may be very people left at HMRC that are capable of training new staff correctly as they have themselves been promoted from the pool of people who have not been trained correctly.

To round up my comments, the fact that HMRC staff, who may not be trained well enough to come up with a figure of tax owing may be allowed direct access to tax payers bank accounts is " VERY " worrying and can only hope that it does not come to be.