In the Budget, George Osborne outlined plans for new powers for HMRC to recover tax debts from anyone who owes more than £1,000 in tax or in tax credits. This would effectively allow the tax authority to seize the tax owed directly from debtors’ bank accounts Currently HMRC need a court order to be able to seize money from accounts.
A number of concerns have been raised over the new proposed measures regarding the volume of calculation errors made by HMRC and the potential for taxpayers to have incorrect amounts deducted which they would then have to fight to reclaim. From experience, we know this can be a lengthy process. Says Treasury Committee chairman Andrew Tyrie. “People should pay the right amount of tax. But HMRC does not always ask for the right amount”
HMRC however insists that safeguards are in place and taxpayers will not be left penniless, including:
- HMRC will only target those who have long-term debts and have received at least four demands for payment
- At least £5,000 must be left in total across all debtor’s accounts, including savings accounts, after the unpaid tax is seized
- The tax authority will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized
Plans are now going through a consultation process, and if approved by Parliament, they will take effect in 2015-16.