THE ICAEW has warned that HMRC is in danger of violating insolvency laws with its new bank raiding powers.
The March Budget saw HMRC given powers to take money from bank accounts of 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, the ICAEW’s tax faculty is warning that HMRC will effectively supersede insolvency law and make itself a preferential creditor under the new rules, as reported by Accountancy Age in March. This could lead to perverse effects such as people keeping money in cash rather than bank accounts and moving funds offshore, the institute warns.
“We believe it is imperative that there are proper safeguards and there should be proper judicial oversight of any decisions made with rights of appeal,” said ICAEW Tax Faculty head Frank Haskew.
He told Accountancy Age that at the moment the details on how the bank raiding powers will take effect are not clear but a consultation before the Finance Bill in 2015, implementing the change, should take place later this year.
HMRC could find itself taking money from a debtor who then enters bankruptcy proceedings. In this scenario an insolvency practitioner appointed to the bankruptcy will have no choice but to pursue HMRC for funds legally belonging to all the creditors.
Haskew added that in this scenario the new rules would be “counter-productive” but that he hoped the consultation and actual rules would tackle this issue.
“Although it is possible [in this scenario] I’d be surprised if it wasn’t looked at. I would have thought some of these problems would be flushed out,” he said.
Head of Editorial Kevin Reed looks at the week's news, including the BHS and Austin Reed administration, Accountex and much more.
MPs launch probe into the sale of BHS that will look at role of auditors and accountancy firms in sale process
A short moratorium will give struggling companies a chance to be open with their creditors and negotiate a way out of their problems transparently, says Sykes
Out of a dozen sectors profiled only oil and gas and manufacturing were deemed to have a higher than normal risk of insolvency