Safeguards proposed to stop the taxman abusing his incoming power of being able to raid the bank accounts of 17,000 people who have refused to pay what they owe don’t go far enough.
This alert by the Low Incomes Tax Reform Group was issued this week in response to HM Revenue & Customs outlining how its Direct Recovery of Debts power will work from 2015-16.
In order to “provide certainty to taxpayers,” the department says it will only use DRD against savings account holders with “established debts” whose timetable for appeals has passed.
Such individuals will have been approached for payment up to nine times (and a minimum of four), and will only face DRD where they have tax and tax credit debts of over £1,000.
HMRC adds that it will “always” leave a minimum of £5,000 in total across the debtor’s accounts, including building society accounts and ISAs, after the unpaid tax is seized.
The tax authority will also put a hold on the debtor’s account and give them 14 days to get in touch to arrange payment of the liability, “before any money is taken” under DRD.
Also according to HMRC, the average sum of unpaid tax it will net is just under £6,000, yet its consultation paper claims that half the people it will target have over £20,000 in savings.
The LITRG is not reassured, however, as it says vulnerable people on low incomes who fall into financial difficulty will be the hardest hit of the 17,000 cases identified by HMRC.
The group adds that the 14-day hold period is “so short few will be able to comply with it,” and described the Revenue's assurance of a judicial appeal for the aggrieved as “vague and unspecified.”
And while the other safeguards may be “broadly effective” in stopping HMRC from misusing the power, the charity believes that, for all taxpayers, DRD flouts the rule of law.
That’s because the proposal says HMRC should be granted direct access to a tax debtor’s bank, building society or ISA account without any reference to the courts.
Anthony Thomas, LITRG’s chairman reflected: “We strongly urge HMRC to think again about this aspect of their proposals as the application of the rule of law in this country is fundamental to citizens being treated properly in a civilised society. The right of access to the courts should never be denied, particularly not in the name of administrative efficiency.”
The government is seeking views from all interested parties on safeguards and other operational aspects of DRD, in a consultation that will be open until July 29th 2014.