HMRC’s bank raiding powers

HMRC’s bank raiding powers

George Osborne announced a proposed new system during the 2014 Budget that would allow HMRC to seize assets from anyone that owes more than £1,000 in tax or tax credits.  That in itself isn’t really anything new, HMRC can already seize property or cash if they go through the Courts, but these changes would allow HMRC to simply to take money from a taxpayer’s bank account with no Court approval!

HMRC, who say they lose £35 billion a year by cheats who refuse to pay their taxes or find ways to avoid them, have stated:

“Most people pay their taxes on time, but a minority do not and some refuse to engage with us at all. It is wrong that this should hand an advantage to those who simply dodge their obligations, and is unfair on the vast majority who pay their taxes in full and on time,” he said

“We will shortly be consulting on a new measure with appropriate safeguards to help level the playing field, and tackle those who have the means to pay but are choosing not to. These are people who have, on average, over £20,000 in their accounts but are refusing to pay their debts.

“This will only affect a tiny number of debtors whom we have contacted a minimum of four times to ask for payment.”

Details of what the safeguards will be have not been released, but we do know that HMRC will have to leave a minimum balance of at least £5,000 across all bank accounts.

Frank Haskew, head of the tax faculty at the Institute of Chartered Accountants in England and Wales, says “it is a fundamental tenet of our English law and our democratic society that money cannot be grabbed from somebody’s account without a judge agreeing to the move”.

He said the change, which could come into force in just 12 months’ time, would be “unprecedented in the UK”.

And that: “At the end of the day, we can’t have HMRC as judge and jury on this.”

Mr Haskew also highlighted the fact that HMRC have a long track record of making mistakes and harassing innocent taxpayers – something that sadly most accountants will have seen first-hand.

Finally, this change would effectively see HMRC reinstated as a preferential creditor, a status that was removed from them in 2003, thus violating insolvency law.

Thankfully these new powers are not yet law, but are subject to Consultation.  With the ACCA calling the measures “seriously draconian” we can hope that they won’t become law without a fight, but with similar systems are already in place in countries such as France and the US it may be a forgone conclusion…….

 

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