Taxman scare

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.

Stop the tax evasion ‘endemic’

A restaurant owner from London has offered to work for free for HM Revenue and Customs as he calls for a clamp down on ‘endemic’ tax evasion.

Dev Biswal, the owner and chef of the award-winning ‘Ambrette’ restaurants in Kent and Sussex, backed the Chancellor George Osborne’s proposal to raise minimum wage last week.

He believes that better wages for the low paid working in restaurants, pubs, hotels and cafes would benefit both the catering sector and the wider economy as a whole.

Biswal, whose father recently retired from a senior post at the Bank of India, believes the short-term pain felt by restaurants’ rising wage bills, would be quickly offset by increased takings – especially if offset by a cut in employers’ national insurance contributions.

“Paying a living wage, would put more money in the hands of kitchen and waiting staff – which would be spent on the high street, boosting company profits and restoring the balance sheets in the beleaguered banking sector,” said Biswal.

CHANGE: Dev Biswal, owner of the Ambrette restaurants, wants to see more done to stop businesses in his industry avoiding tax expenses

“We seem to have a mentality in this country where the wealthiest people need generous tax breaks and enormous bonuses, whilst those at the bottom of the heap need to have their living standards cut.”

He added: “But economic history shows that businesses do better when ordinary people have a rise in living standard, not the other way round.”

Biswal says that someone working full-time on minimum wage, supporting a child and partner is typically entitled to benefits of around £1,500 a month.

“This means the government is subsidising exploitative employers, many of whom are national and multi-national concerns, which make hundreds of millions in profits and pay enormous boardroom salaries and bonuses,” he said.

The Ambrette pays its entire staff above the minimum wage, invests heavily in staff training and has reaped the rewards with a strong setup in the industry.

However, tax evasion is something Biswal acknowledges exists in his industry and explained what detrimental impact it could have for restaurants.

“Tax evasion is endemic in the restaurant business – most experienced staff I interview have received at least part of their wages in cash, with no deductions for tax or national insurance,” said Biswal who is offering free consultancy advice to the taxman on how to beat the cheats.

He explained how he would recommend starting by outlawing a ‘back door’ software function on modern cash registers whose sole purpose is tax evasion.

He would also send mystery diners into restaurants to pay for meals with cash, then ask for restaurants to account for the payment at regular VAT inspections.

Biswal, who believes many restaurants ‘pocket the cash’ only declaring credit card and cheque payments, is now urging customers to stop paying with cash if they want to see the government invest in roads, schools, state pensions, housing and sea defences.

He believes enormous quantities of undeclared cash are taken abroad by owners of ethnic restaurants and their families – usually to buy properties in their home towns.

“Why else do children need two-grand pocket money on a cheap family holiday?” he said.

Biswal currently has two restaurants, in Margate and Rye, employs 22 staff – but plans to double that number by April, with the opening of two additional venues and a centralise kitchen facility – ahead of continued expansion in 2014 and 2015.