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Concern over HMRC plans to take tax debts from bank accounts

16th May, 2014

Proposed plans to allow HMRC to recover tax debt directly from individuals' bank accounts have met with resistance from The Treasury Committee as Neil South, partner at Nottingham chartered accountants Clayton & Brewill explains.

Neil South of Clayton & Brewill chartered accountants

Neil South

The proposed new tax powers, announced in George Osborne's Budget, will enable HMRC to recover debts of over £1,000 from tax or tax credits directly from individuals' bank accounts. The new tax powers are currently under consultation and, should they be approved, will come into force for the tax year 2015-2016.

Unsurprisingly, there have been concerns that this leaves people at the mercy of HMRC should either they or HRMC have made a mistake in their tax calculations.

In the Treasury Committee's report, chairman Andrew Tyrie commented:

'People should pay the right amount of tax. But HMRC does not always ask for the right amount… Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable.'

HMRC meanwhile points to the safeguards it has put in place to ensure that the system will work fairly, namely:

  • It will only target those with long-term debts and who have received at least four demands for payment
  • At least £5,000 must be left in total across all debtor’s accounts, including savings accounts, after the unpaid tax is seized
  • HMRC will freeze the amount owed for 14 days to allow time for a debtor to pay before the money is seized

Whilst these safeguards undoubtedly give some reassurance, we have concerns at Clayton & Brewill as to how the recovery process will work in practice.

For example, how would HMRC deal with a situation where a debtor's account is held in joint names? There is clearly considerable detail to be worked through before these powers can come into force and we encourage interested parties to make their representations through the consultation route here.

At the very least, the new tax recovery powers will make it even more important that individuals submit accurate tax returns and to check any figures provided by HMRC. As Andrew Tyrie commented, it isn't completely unheard of for the tax authority to get things a little wrong!

Expert tax advice

Clayton & Brewill specialises in providing compliance, business and taxation services to owner managed businesses and SMEs across the Midlands, from its network of offices across the region in Nottingham, Long Eaton and Melton Mowbray. For help and advice call the Clayton & Brewill office on 0115 950 3044 or drop us an email.

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