Barely a week goes by without HM Revenue and Customs getting us into another fine mess; or a potential one. I could hardly believe my ears, when I heard that Mr Taxman may soon have the power to seize money from bank accounts. HMRC wants the power to take money from any account – including ISAs and incredibly also joint accounts – if it believes that someone owes taxes or money is owed as a result of tax credit overpayments.
This strikes me as yet another barmy plan by Mr Taxman designed to frustrate and to charge us tax that we may not even owe. Also, what happens if the account is a joint one and an innocent party is penalised? Many couples do not even know what their other half is contributing to the account or may not even be aware that he/she is being chased for tax.
Even the Treasury select committee has attacked the plan: “This policy is highly dependent on HMRC’s ability to accurately determine which taxpayers owe money and what amounts they owe – an ability not always demonstrated in the past. Incorrectly collecting money will result in serious detriment to taxpayers.” I couldn’t have put it better myself. It all feels rather like HMRC in asking for this power is trying to set itself up as some sort of state-sponsored pay day lender. Currently only by securing a court order can HMRC seize tax owed from bank accounts. These new plans will almost certainly result in error and potential fraud.
HMRC insists it will not take any money unless the person has at least £5000 left across all their bank accounts, including ISAs, after the debt has been paid. It will not create or increase overdrafts – that is the plan anyway. Innocent victims of the policy could include pensioners who put money into a joint account, managed by younger relatives. If their younger relative owes taxes, the money could be seized, even though it belongs to the elderly person.
Around 17,000 people a year will be affected by the plans which will apply to anyone who owes more than £1000 and has at least £5000 left across all bank accounts – including ISAs. HMRC plans to only target those who have long-term debts and have received at least four demands for payment. The plans are currently going through a consultation phase and, if approved, will be implemented in 2015/16.
This tactic should absolutely be the option of last resort and should only happen after a court order has been secured to prevent any ‘omnishamble’ type mishaps. HMRC should look at instituting a more rigorous incremental system of fines, seek a court order for recovery and, if all else fails, sell on the debt to a reputable business debt collection agency – but only once steps 1 and 2 have been followed.