Proposals from HM Revenue & Customs (HMRC) to take money direct from taxpayers’ bank accounts, without the need for a court order, have been branded “regressive and draconian” by the Law Society. The proposals, announced in March’s budget, will give HMRC the power to recover funds from building society accounts and ISAs where it believes there are outstanding tax debts, although at least £5,000 must be left across all the accounts. HMRC estimates 17,000 taxpayers will be affected annually.
The Law Society has put forward a number of objections.
- HMRC officers would in effect be acting as claimant and judge at the same time.
- The measures would put the state in a preferential position to other creditors. All other creditors would have to pursue their cases through the courts.
- The use of power without judicial supervision will lead to hardship where, as inevitably will happen, HMRC makes mistakes.
- HMRC is proposing that a taxpayer is given only 14 days to respond after the monies in their bank account are frozen before the monies are taken. This very short deadline might easily and accidentally be missed by a taxpayer and 30 days would be fairer, and the same period in which HMRC is meant to respond to enquiries.
HMRC’s Direct Recovery of Debts consultation on its proposals closed on 29 July 2014, and a response document is expected some time this autumn. Draft legislation will be published at the time of the 2014 autumn statement, with legislation introduced as part of the Finance Bill 2015.