NEW POWERS which will allow HMRC to raid bank accounts are "draconian" and could lead to an abuse of power suggest a tax reform group and ACCA.
The March Budget saw HMRC given powers to take money from bank accounts on debtors who owe more than £1,000 in tax or tax credits. In the Budget papers it said that the change would bring the UK in line with many other tax authorities such as France and the US.
However, ACCA head of taxation Chas Roy-Chowdhury argued that these countries' tax collection systems should not be role models, and that the taxman has a record of making mistakes, the BBC reports.
Roy-Chowdhury, explained that a company which has had its accounts raided, could find itself in a position where it is unable to pay staff wages.
An HMRC spokesman said there would be safeguards, although no details are yet available. However, it has been announced that money will only be seized once the debtor has been contacted several times and a minimum of £5,000 much be left in an account.
"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," the spokesman said.
"This will only affect a tiny number of debtors whom we have contacted a minimum of four times to ask for payment."
HMRC is also in danger of superseding insolvency law. Usually in a bankruptcy or administration the taxman is one of the last to be paid, as an unsecured creditor. But, details of how these bank raiding powers will work and whether they will only be applicable to tax avoidance schemes means that conclusions cannot yet be drawn.
"To let HMRC raid their bank accounts without safeguards or recourse to the courts - or with inadequate safeguards - would be to flout the rule of law in a manner unworthy of a public service body. It is not the same as seizing physical goods, it is depriving the debtor of the very means to live," said Low Income Tax Reform group's chairman, Anthony Thomas - an initiative of the CIoT.
"Given the way HMRC continually fail to deal with taxpayers properly or fairly this provision is hugely worrying. To introduce such draconian measures without proper safeguards could well lead to an abuse of power," he added.
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.