Thousands face tax raid on accounts, says HMRC.
Her Majesty’s Revenue and Customs (HMRC) has estimated that 17,000 people every year will have unpaid tax deducted from their accounts under proposed new rules. Chancellor George Osborne set out plans in the budget for new powers to recover unpaid tax from any individual owing over £1,000. The system has now been explained by HMRC and an accountancy body that previously warned the powers were “draconian” has now said that limits on the rules were “robust”.
The rules include:
- HMRC will only target those whose debts are long-term and where the individual has been sent at least four payment demands
- HMRC will ensure that the debtor is left with at least £5,000 across all of their accounts after the unpaid tax is seized: this will include their savings
- HMRC will freeze the amount owed by the debtor for a period of 14 days to allow them time to pay before the money is seized
The average amount of debt of those individuals likely to be targeted is said to be around £5,800. HMRC also said that around half of the debtors targeted presently had £20,000 or more in their accounts.
HMRC will be permitted under the new powers to seize money owed as unpaid tax or overpaid tax credits from bank, building society and any Individual Savings Accounts (Isas) owned by the debtor.
The ACCA accountancy body initially described the plans as “seriously draconian” following the Budget but are now satisfied, referring to them as: “less fearsome than first thought”.
Chas Roy-Chowdhury, head of taxation at the ACCA stated “On paper, the safeguards look relatively robust, and the reality is it is unlikely that anyone will be left penniless. The fact that there will be plenty of opportunity for those owing taxes to respond to HMRC and appeal before any funds are taken. There remain some concerns over how efficient HMRC can be in maintaining those safeguards, as well as whether this initiative is in fact a toothless one that will make no difference at all to collecting taxes owed. However, it is important now to have constructive engagement with HMRC to ensure the proposals are reasonable and proportionate.”
David Gauke, a Treasury minister, reminded people of the need to pay the owed tax promptly. “Providing HMRC with the powers to directly recover tax debts will reduce the debt owed to HMRC in the most effective way so that the government can continue to fund vital public services.”
The scheme still has its critics. HMRC have been asked by the Low Incomes Tax Reform Group to reassure those affected of their right to appeal against any seizure.
The plans are presently in the consulting stage. If ultimately approved by Parliament, they are expected to take effect from tax year 2015-16.
