In a report this morning, the Treasury Select Committee (TSC) criticised plans to grant HMRC new powers to recover funds directly from taxpayers’ bank accounts and said they were “of great concern”.
The new powers, announced in March's Budget, are expected to be in place by 2015. They 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.
The TSC highlighted the dependency of the policy on HMRC’s ability to accurately determine who owes money and the amount they owe. An ability the Revenue has “not always demonstrated in the past”, it said.
The TSC also queried the chancellor’s argument that the measure can be justified because the Department for Work and Pensions already has an equivalent right to recover money for child protection. The TSC highlighted that in these cases the DwP is “acting as an intermediary”, while HMRC would be acting “in pursuit of its own objective”.
Andrew Tyrie, chairman of the committee, said, “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.”
The committee also joined calls for some form of oversight, in the shape of an ombudsman, tribunal or through the courts.
Tyrie said, “Exceptional powers such as this require prior independent oversight. The Government must demonstrate that it has dealt with the Committee’s concerns before proceeding.”
Commenting on the report, Frank Haskew, head of ICAEW’s tax faculty, said, “Today’s report from the Treasury Select Committee reflects the considerable concern that both taxpayers and accountants have about proposals to allow HMRC to take money directly from the bank accounts of those owing tax.
“Fundamentally, we believe that money should only be taken from someone’s bank account by agreement or under the supervision of a court.
“The Treasury and HMRC need to make a better case as to why such powers are needed above and beyond the system of court orders that already exists. They also need to set out in detail what safeguards, judicial oversight and rights of appeal they intend to put in place if such a measure were to be introduced so as to ensure that the rights of taxpayers are protected.”
Lynne Rowland, tax partner at Kingston Smith, said the move “seems a sledgehammer to crack a nut”.
Rowland added, “HMRC say that they will have made “multiple requests” of the taxpayer and may have been in touch up to 9 times before taking action. The document actually admits that in some cases this may be as little as on 4 occasions and those communications may have been fairly generic and include notices to file tax returns and standard notices to pay tax on normal due dates.”
HMRC said earlier this week that up to 17,000 people could be affected this year.