HMRC chief under fire from MPs over plans to access bank accounts

HMRC chief under fire from MPs over plans to access bank accounts

Commons Treasury committee pressed for court approval before HMRC could deduct money from personal bank accounts.

An influential parliamentary committee has warned it continues to have “considerable concern” about proposals for HM Revenue and Customs to be allowed to deduct money directly from debtors’ bank accounts, despite a defence of the scheme by the country’s most senior tax official.

The proposal in George Osborne’s March budget came under attack from MPs at a hearing of the Commons Treasury committee, where HMRC’s chief executive, Lin Homer, rejected claims that it breached Magna Carta protections for the individual against the state.

Homer confirmed that the plan would enable taxmen to obtain bank and building society statements dating back 12 months, but insisted that this was purely to ensure individuals were not forced into hardship by deductions from their accounts.

The committee had warned in a recent report that the new powers would be “wholly unacceptable” without a requirement for independent approval from a court, ombudsman or tribunal before money was taken.

But Homer rejected this safeguard, which she said would deprive HMRC of any additional powers and give the upper hand to about 17,000 “recalcitrant debtors” who deliberatelywithheld tax payments for as long as they could in the hope that the expense of recovering the money would mount so high it would be written off.

“I believe that for the taxpayer as a whole, it is right that we have sufficient powers to stop these limited numbers of people avoiding paying tax,” said Homer.

More than 90% of people pay their taxes, but a minority take the view that they will delay paying for as long as they can get away with it, she said. These debtors owe an average of £5,800, despite the fact that half of them have £20,000 or more in savings and 5% as much as £100,000.

“We are talking about 17,000 people who don’t dispute the tax is due, they just don’t pay. We will have written to them, we will have engaged with them and they just fold their arms and wait for us to take some other action.

“Of course, we can go to court, but the cost both in time and money of going to court will often outweigh or seriously diminish the amount of tax collected. In these cases, we believe with proper safeguards… this is a fairer way of extracting the tax everybody is due to pay.”

The Liberal Democrat committee member John Thurso said: “We are talking here about the ability for one organisation of state … to have the unique right to go against the Magna Carta charter and all the other things we have established and to go in and seize , without judicial process or review, a bank account.

“I just want to know if it is justified, because my sense is that parliament is going to reject it.”

Thurso said that HMRC was trying to become judge, jury and executioner and to remove legal protections from those who it believes owe tax, simply because it was slow and expensive to follow the legal processes.

Following the hearing, the chairman, Andrew Tyrie, made clear the committee was not convinced by her arguments: “The proposal to grant HMRC powers directly to recover money from taxpayers’ bank accounts remains of considerable concern to the Treasury committee in the light of today’s hearing.

“Prior independent oversight is essential. Mistakes could have serious financial consequences for taxpayers, and risk undermining public confidence in HMRC.”

Homer said HMRC expected to gather an additional £375 million over four years by using the new power, which was similar to systems used in countries including the US, France and Australia, but that she would be “delighted” if she never had to invoke it.

But the Tory MP Steve Baker told her he was horrified by the plan, while the Labour MP George Mudie said that accessing 12 months’ bank statements amounted to “an additional intrusion into people’s lives”.

He demanded to know whether the taxman would pay compensation in full if it removed money from people’s bank accounts or Isas in error and their house purchase fell through or they missed out on a windfall from rising share prices as a result.

Homer said the size of any compensation payment was likely to be determined by the courts, adding: “In the rare cases where a mistake is made, we would rectify that. That is an important part of the safeguarding.”

She said: “I don’t think this is against Magna Carta. I don’t think it is substantially different from the PAYE arrangement.

“This is not disputed tax, this is tax that is due, that people who are not subject to PAYE are choosing simply not to pay and they are creating an environment within which the normally very low collection cost of tax is made substantially higher by their action, in a way which in the vast majority of cases is wilful.”

People whose bank accounts were targeted would have had the opportunity to challenge the tax demand in tribunal and would have been contacted by HMRC at least four times, and on average nine times, she said. They would be informed that their accounts were being frozen and given 14 days to engage with the taxman before any money was removed.

  • The Guardian, 

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