Plan to let HMRC take tax debt straight from bank accounts under fire

MPs highlight potential for fraud, error and a back-door reintroduction of the discredited Crown Preference rule

Tomas Jivanda
Friday 09 May 2014 17:18
The report said: 'Incorrectly collecting money will result in serious detriment to taxpayers.'
The report said: 'Incorrectly collecting money will result in serious detriment to taxpayers.'

An influential group of MPs has attacked a controversial Government plan that would allow the taxman to seize debt straight from the public’s personal bank accounts.

The cross-party Treasury Committee expressed “considerable concern” over Chancellor George Osborne's new proposals for tax collection, calling for far greater scrutiny over the plans.

In their evaluation of this year's Budget, the MPs suggest the new powers could mean a back-door reintroduction of the discredited Crown Preference rule, which gave HM Revenue & Customs (HMRC) priority access to assets when firms went bust.

“The proposal to grant HMRC the power to recover money directly from taxpayers' bank accounts is of considerable concern to the committee,” the report said. “The committee considers a lengthy and full consultation to be essential.

“Giving HMRC this power without some form of prior independent oversight -for example by a new ombudsman or tribunal, or through the courts - would be wholly unacceptable.”

The committee was dismissive of the Chancellor's argument in support of the scheme that the Department for Work and Pensions (DWP) currently has similar powers to collect child maintenance, concluding that the “parallel is not exact”.

“In those cases, DWP is acting as an intermediary between two individuals,” the MPs said. “HMRC would be acting not as an intermediary between two individuals but rather in pursuit of its own objective of bringing in revenue for the Exchequer.”

They also highlighted the potential for fraud and error if the taxman was given direct access to millions of accounts.

“This policy is highly dependent on HMRC's ability accurately to determine which taxpayers owe money and what amounts they owe, an ability not always demonstrated in the past,” the report said.

“Incorrectly collecting money will result in serious detriment to taxpayers.

“The Government must consider safeguards, in addition to those set out in the consultation document, to ensure that HMRC cannot act erroneously with impunity.

“These might include the award of damages in addition to compensation, and disciplinary action in cases of abuse of the power.”

A spokesman for the Treasury said: “The Government's long-term economic plan is to reduce the deficit so that we deal with our debts.

“It is therefore important that people pay the tax they owe on time. Although the vast majority do this, there is still a minority that chooses not to pay, despite being able.

“The proposed powers will give HMRC another tool to collect tax debt owed. The current consultation includes a range of safeguards to ensure the power is tightly targeted.”

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