A bid to allow the taxman to settle unpaid demands by taking money directly from people’s bank accounts has been criticised by a group of influential MPs.
The cross-party Treasury Committee says it is very concerned because tax officials have a history of making mistakes and call for greater scrutiny over the plans proposed by Chancellor George Osborne.
In the announcement of the Budget, Mr Osborne outlined plans for new powers for HM Revenue and Customs (HMRC) to recover tax debts from anyone who owes more than £1,000 in tax or in tax credits.
This would allow the tax authority to seize the tax owed directly from debtors’ bank accounts.
But the committee said the plan was problematic owing to HMRC’s performance in the past when it has failed to accurately calculate tax bills.
“The proposal to grant HMRC the power to recover money directly from taxpayers’ bank accounts is of considerable concern to the committee,” a 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 major concern here is when incorrect amounts of money is collected from bank accounts as it may result in serious detriment to the taxpayers. At the moment the HMRC requires a court order to be able to seize money from accounts.
HMRC explained that the system would only target those who have long-term debts and have received at least four demands for payment and will ensure that at least £5,000 is left in total across all debtor’s accounts, including savings accounts, after the unpaid tax is seized.
HMRC will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized.
The plans are now going through a consultation process. If approved by Parliament, they will take effect in 2015-16.