What did your business make of George Osborne’s announcement in the recent budget that HMRC will be given new powers to go after individuals and companies that consistently fail to pay their tax dues? On the face of it t seems reasonable enough; after all we’re apparently all in this together so it’s only right and proper that we all contribute equally to the national coffers. However, what it is perhaps not quite so reasonable is that these new powers go way beyond just giving HMRC the powers to collect overdue tax: they also give it the power to go into people’s bank accounts and take the money. The announcement has caused concern in the accountancy world as you might expect, so much so that the Association of Chartered Certified Accountants (ACCA) has publicly criticised the move and described the new powers as ‘seriously draconian’.
So what will HMRC now be able to do to collect unpaid taxes? Well, under the plans HMRC will now have the power to seize assets from anyone who owes more than £1,000 in tax or tax credits. There are caveats to that power however. Firstly HMRC will only be able to seize money after they had contacted the debtor several times, and secondly HMRC will not be allowed to empty accounts either to recover the debts as it must leave a minimum of £5,000 in the account. The new powers bring the UK in to line with a number of other major tax authorities like the U.S. and France which already have the authority to obtain debts directly from an individual’s account.
The new system is not, as yet, set in stone, and it will now be the subject of consultation within the industry. However, the ACCA is still critical of the proposal on the basis that HMRC has a record of making mistakes.
Chas Roy-Chowdhury, head of taxation at the ACCA, believes the UK’s tax collection systems should not be regarded as role models, and argues that the seizure of assets could have dangerous effects; particularly for business accounts, who could find there is not enough in the kitty to pay their staff, for instance.
However, an HMRC spokesman has since insisted that safeguards will be put in place to ensure honest taxpayers aren’t targeted:
“Most people pay their taxes on time, but a minority do not and some refuse to engage with us at all. It is wrong that this should hand an advantage to those who simply dodge their obligations, and is unfair on the vast majority who pay their taxes in full and on time.”
“We will shortly be consulting on a new measure with appropriate safeguards to help level the playing field, and tackle those who have the means to pay but are choosing not to. These are people who have, on average, over £20,000 in their accounts but are refusing to pay their debts. This will only affect a tiny number of debtors whom we have contacted a minimum of four times to ask for payment.”
The spokesman also confirmed that those affected would always have the right to appeal against any tax reclaim move.
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