HM REVENUE & CUSTOMS should scrap the planned introduction of new direct debt recovery powers because the procedure is "unconstitutional" and "wrong in principle", according to ICAEW.
Under the plans, HMRC will be able to deduct tax owed directly from the accounts of debtors, providing at least £5,000 is left across all their accounts including ISAs. It is estimated around 17,000 taxpayers will be affected each year.
The taxman insists the measure will be reserved for those who have repeatedly failed to engage with them, but the institute is against the proposals which fail to meet the criteria of being "fair, proportionate and accompanied by robust safeguards".
The institute raised concerns over a lack of independent judicial oversight of the powers in its reponse to a government consultation on the controversial proposals which closed today.
"It is necessary to go back a step, to re-think the policy and consult upon the strategies by which HMRC can tackle those who wilfully refuse to pay," the institute said and added it was unconvinced the powers are necessary given the range of tools at HMRC's disposal.
It also said the risk of errors on HMRC's part is too great and stands to damage public trust in the system.
ICAEW added: "Under UK law, if someone owes you money, you cannot just help yourself to it; permission of the court is required. Further, where the creditor is the state, a separation of powers is essential... It is a fundamental principle of justice that nobody should be a judge in their own cause. For these reasons, the proposed direct debt recovery procedure is unconstitutional and wrong in principle."
Concerns were also raised over where HMRC might stand in relation to other creditors a debtor might have.
"This is unfair to other creditors. It may also be unfair to the debtor, such as a vulnerable person with many debts for whom the practical priority might be to pay their housing costs before HMRC," ICAEW said.
An HMRC spokesman said: "There is no question of those who genuinely cannot pay being affected by this measure. The average debt will be £5,800, owed by those with an average of £20,000 in the bank. These are people who simply refuse to pay what is owed even though they can.
"It's hard to see why a tiny minority of people who can pay the tax they owe, but refuse to, should enjoy an advantage over the vast majority of people who respect the rules.
"Direct recovery of debt levels the playing field firmly but fairly."
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