New measures announced in the Budget yesterday will mean HMRC will be able to access individual bank accounts. The new powers, expected to be in place by 2015, will allow the Revenue to access the bank accounts of individuals owing upwards of £1,000 in unpaid tax bills and take the money directly, in an attempt to counter tax-avoidance.
Osborne said that HMRC would have an increased budget to tackle non-compliance, andwarned that block transfers of profits between companies within groups to avoid tax will be banned. Tax credit debt recovery rates for those with sufficient earnings will also be increased, the chancellor pledged, alongside the “modern powers” to collect debts directly from bank accounts.
In his speech, Osborne confirmed that money would only be taken from bank accounts if they were left with at least £5,000.
Baker Tilly's Andrew Hubbard raised concerns over the ethical implications of the new power, saying,"the chancellor evoked the Magna Carta in his speech to the House, but by giving HMRC powers to raid the accounts of potential tax avoiders, is he overstepping the legislative certainty that the charter demanded?"
Simon Massey, tax partner at Menzies, agreed, saying, “This extra power to access our bank accounts seems a bit like 'Big Brother' looking at our every move.
“The government has said that it will consult on the draft primary and secondary legislation, and on the implementation of the measure. It has also said it will include safeguards to prevent hardship, but we are apprehensive about these powers as HMRC’s approach is to chase first and ask second.”
Those believed to have taken part in any registered scheme since 2004 will now also have to pay any disputed tax upfront. If a court later rules against HMRC, then the money will be returned to the taxpayer with interest. It is expected this move will bring in an extra £4bn in upfront payments over the next five years, and is expected to hit around 65,00 current users of tax avoidance schemes.
It is the single biggest source of additional revenues over that period unveiled in the Budget. The chancellor promised to "fundamentally reduce the incentive to engage in tax avoidance in the future."
Ronnie Ludwig, head of the private wealth group at Saffery Champness said, “These new measures are clearly meant to show that the government is flexing its muscle when it comes to tackling tax avoidance.
“The requirement to pay tax on disputed tax avoidance schemes is a further bayonet into the dying corpse of aggressive and abusive tax avoidance schemes in the government’s anti-avoidance battlefield.”
James Bullock, partner at Pinsent Masons expressed concerns over the powers, and said HMRC was “rising like Russia”.
“The requirement to pay tax up front in new, disclosable tax avoidance schemes is likely to send promoters offshore - where they will not be subject to a penalty if they wrongly advise their customers not to disclose a scheme and thus avoid upfront payment.
“It may drive avoidance underground and reduce the information HMRC has about new forms of tax avoidance”
Jason Collins, partner at Pinsent Masons, said that although data had not been supplied, it could be presumed that those individuals who had failed to pay their debts are likely to be on lower incomes.
Frank Haskew, ICAEW head of Tax Faculty, warned that "the Treasury needs to be careful though in predicting revenues from tax avoidance as the amount actually collected has been lower than the forecasts.”