STRINGENT SAFEGUARDS to HM Revenue & Customs’ direct debt recovery (DRD) powers have been met with encouragement by accountancy and tax institutes, tempered by a few caveats.
There has been much controversy surrounding the introduction of the powers, which allow HMRC 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.
But in the Summer Finance Bill, three safeguards were revealed in order to counter the potential for error. The first condition for the use of DRD is that the sum due has to be greater than £1,000, the second is that it is an “established debt”, with no possibility the sum, or any part of it, will cease to be due. The third condition is that HMRC is satisfied that the person is aware that the sum is due and payable by the person to the commissioners. Only if all three conditions are met will the use of DRD be permitted.
The moves have been largely met with approval by the institutes, although some argued the government should have gone further.
“The government has given an undertaking not to apply this debt recovery power before a face-to-face meeting with the taxpayer, and not to apply it at all where the taxpayer is adjudged vulnerable. This is welcome. However, these commitments do not appear in today’s Bill and unless they are legislated for they will be unenforceable in any court and entirely dependent on HMRC’s discretion, which is an unsatisfactory state of affairs,” said Anthony Thomas, chairman of the Low Incomes Tax Reform Group.
Chairman of ICAEW’s Tax Faculty Technical Committee Paul Aplin echoed Thomas’ sentiment, adding: “While we would have preferred to see all of the safeguards set out in primary legislation, we welcome the fact that the government’s intentions regarding the safeguards and the way in which the power is to be used by HMRC have been very clearly stated.
“We would urge the government to ensure that HMRC has adequate resource to use the power exactly as envisaged,” he said.
The Summer Finance Bill also brings in ‘triple lock’ legislation to rule out increases in income tax rates and VAT for the duration of this parliament; an increase in the personal allowance to £11,000 in 2016/17 and £11,200 in 2017/18 and; a shift in higher 40p rate of tax to £43,000 in 2016/17 and £43,300 in 2017/18. It also includes a cut in the corporation tax rate to 19% in 2017 and 18% in 2020.
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