HMRC Consulting for New Powers to Take Money Owed Directly From Your Bank Account
In the Spring budget 2014, George Osborne outlined plans for HMRC’s proposed new powers: to recover tax debts directly from anyone who owes more than £1,000!
Assuming, then, that consultation becomes legislation, this will mean that along with penalties if you’re late filing you tax return and the further fines due if you’re late paying the tax you owe, HMRC will have the right to withdraw the amount owed to them, providing you have over £5,000 in your bank account(s).
Who will this affect?
It is estimated that under the new rules proposed (for tax year 2015/16) 17,000 people a year will have unpaid tax taken directly from their bank accounts. HMRC reckon that the average debt of those likely to be targeted is £5,800 and added that in half these cases, debtors had more than £20,000 in their accounts.
Which debts and which accounts, what, any of them?
Under the proposal, HMRC will be able to take money owed in tax (VAT, NI, Income Tax, PAYE), or as a result of tax credit overpayments. HMRC would be able to take the money from bank accounts, building society accounts, and Individual Savings Accounts (Isas.
How will the system work?
- HMRC will only target debtors who have long-term debts and have received at least four demands for payment;
- At least £5,000 must be left in total across all debtor’s accounts, including savings accounts, after the unpaid tax is seized;
- The amount owed will be frozen for fourteen days to allow time for a debtor to pay before the money is seized.
What about security and human error?
One has to hope that the safeguards are in place so that no one is left without funds, or that the wrong person won’t get his or her bank account raided for someone else’s debt. Of course, one also might be concerned that HMRC may calculate the debtor has £5,000 but be unaware that another payment, such as a direct debit is due, which will take the individual below the agreed amount of funds.
As one accounting professional remarked: "On paper, the safeguards look relatively robust, and the reality is it is unlikely that anyone will be left penniless. The fact [is] that there will be plenty of opportunity for those owing taxes to respond to HMRC and appeal before any funds are taken."
The plans are going through the consultation process, and if approved by Parliament, they will take effect in 2015/16.
The best thing to do is to file and pay up on time; don’t ignore reminders or statements or letters, or any other correspondence from HMRC, and if you’re in difficulty, contact your account manager who’ll contact HMRC on your behalf and arrange for time to pay.
Any questions? Request a callback from our experts.