One of the more worrying 2014 Budget proposals is that, with effect from 2015, HMRC will be given powers to access individual and company taxpayer bank accounts directly to satisfy tax liabilities that HMRC believes are due. The new rules operate where tax or tax credits of £1,000 (or more) are due and represent an unprecedented extension of HMRC’s powers.
So far, the only indications that this policy will be operated with any degree of sensitivity are statements from HMRC that it will leave at least £5,000 in debtors’ accounts and that it will only make use of this power where the debtor has ‘the financial means to pay’. There is no mention of legal safeguards or clues as to how HMRC will assess a debtor’s financial means.
One can easily see this measure leading to a whole host of problems, including the insolvency of companies and individuals that are already struggling to manage cash flow. Significantly, years after the abolition of preferential treatment for the Crown in insolvency cases, the exercise of this power could result in HMRC being placed in a better position than other unsecured creditors.
It’s also easy to envisage this power forcing a solvent company or individual into an insolvency process when the tax in question remains in dispute and may never become due. Given that HMRC already has a well-established debt collection system and is compensated by way of charging higher than the normal interest rate on underpayments of tax, it is difficult to understand the motivation for this change. The implication is that, not content with the current arrangements, HMRC wants to obtain payment ahead of other creditors.
All in all, the UK has an effective and well understood legal system which obliges people to pay their tax bills, with penalties which are triggered only after a tribunal or court has passed judgement. What is now being proposed gives HMRC the right to help itself from taxpayers’ bank accounts without judicial approval or safeguards.
We’re expecting a consultation on this issue but if you have views or questions arising from this article please speak to Clare Munro or Phil Moss.