The Law Society is concerned that under proposals being considered by the government, the taxman may be granted the power to dip into individuals’ bank accounts to reclaim money it claims it is owed, Gary Richards has said.
The chairman of the Law Society’s Tax Law Committee said: “We remain very concerned that HMRC has a tendency to press on even when it has not demonstrated any need for additional powers or why it cannot operate under existing procedures that other creditors have to follow.”
Powers outlined in the March Budget would give HMRC the power to recover unpaid tax directly from bank accounts. The proposal is currently going through a consultation process and, according to HMRC, concerns a small number of taxpayers who deliberately avoid engaging with the authority.
A spokesman for HMRC said: “Most people pay the taxes they owe on time, but there are a persistent few who have the means to pay but refuse to. Under the proposals, HMRC will only recover debts from those who have a tax debt of over £1000 and would always leave at least £5000 in their accounts.”
Using the example of follower penalties and accelerated payments laid out in this year’s Finance Bill, Mr Richards added: “It is exactly when the state is asserting the right to take taxpayers’ property that access to independent courts becomes crucial to preserving the rule of law.”
HMRC emphasised it would exercise its power to recover established and undisputed debts from people who have had numerous chances to pay but have chosen not to.
The spokesman said: “These are people who will have been contacted at least four times by HMRC and simply refuse to pay what they owe. There is no question of those who genuinely cannot pay being affected as HMRC provides help through Time to Pay arrangements.”
Joanna Elson, chief executive of Money Advice Trust, said: “Unless there are clear safeguards, the powers could be used inappropriately, be subject to HMRC error and make life more difficult for vulnerable people.
“Individuals and small business owners may have limited funds in the bank which are intended for living expenses, household mortgages and bills, or cashflow for employee wages, suppliers’ bills. We are concerned that the vulnerable who are not financially aware will be the most likely to be affected.”
Mike Dailly, principal solicitor at Glasgow-based Govan Law Centre said that HMRC already enjoy fast track powers through the courts to empty people’s bank accounts .
He said: “The reason we have due process of law in the UK is so consumers can complain to the court if the enforcement action is incompetent or unjust. We need checks and balances because HMRC - like any massive organisation - gets things wrong a lot.”
Adviser view
Steven Pyne, partner at London-based Holden and Partners, said: “If you allow this, does it make it easier to claim overdue taxes in the future directly without permission and how will it work with a third-party taking money? There are obvious data protection and security issues.
“On the other side, if they have the money to pay, HMRC has the right to retrieve a debt and can see it would save money not going through the courts. It needs to be properly thought through and guidelines need to be rigid - and should be for exceptional circumstances and a last resort.”
