Institutes join forces against direct debt recoveryby
Parliamentary hearings on the 2014 Finance Bill saw early skirmishes on the big fight looming in next year’s legislation, when HMRC could get powers to dip directly into taxpayers’ bank accounts to recover debts.
In his Budget speech in March, the Chancellor promised, “We will give HMRC modern powers to collect debts from bank accounts of people who can afford to pay but have repeatedly refused to, like most other Western countries.”
All that followed was a brief paragraph (2.203) in the Budget document explaining, “The direct recovery of debts will focus on debtors who owe at least £1,000 and have been contacted multiple times by HMRC to pay. A minimum aggregate balance of £5,000 will be left across all accounts, including ISAs, after the debt is recovered.”
A consultation proposals was promised “shortly after Budget 2014”
AccountingWEB members were apprehensive about the proposed measure. Echoing concerns raised by other members of the risk that HMRC might misuse the process and try to collect liabilities that where not lawfully due, DMGBus commented: “A debtor can, via due legal process, serve a garnishee order on a creditor's bank or a creditor’s debtor. This is not new, rarely seen in practice and it seems now to be new to HMRC.”
The committee sought the views of Frank Haskew from the ICAEW Tax Faculty and the CIOT’s Patrick Stevens on whether the government’s approach to tax policy-making was working, particularly around the area of retrospective legislation.
But then Tory MP Jesse Norman turned his attention to the tax experts’ concerns about HMRC powers to remove cash from people’s accounts. “Could one of you explain why it is such an animating point for you?” he asked.
Stevens answered: “However many safeguards there are on the ability simply to take money from somebody’s bank account, it does rely on the authority having worked out how much money should correctly be taken from it in the first place.”
He and Haskew had sympathy for the government’s need to deal with persistent non-payers, but they alerted the committee to the growing tendency to enact wide-ranging tax legislation that had to be fleshed out with HMRC regulations.
Haskew commented: “One can understand in policy terms why HMRC is looking for increased powers, but a member told me only last week that a fundamental tenet of English law and our democratic society is that, unless I have agreed, there must be judicial oversight or a judge must approve taking money out of my bank account. That is a fundamental tenet of the UK’s democratic world in which we would like to live.”
Stevens questioned legal basis for any powers that would give HMRC the ability to take money from people’s bank accounts and added that the proposal was likely to be another instance of wide-ranging legislation narrowed by guidance.
“What that does is give the Revenue power to make their own guidance and therefore their own law,” he said.
The detailed proposals on this measure have not yet emerged from HMRC and given the political and media heat they generated, more work may be required in Whitehall before they are ready for public consumption.
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