MPs raise concerns over new tax powers in Budget

 
Cash on bank statement The plans would allow the tax authority to take tax debts from accounts

Plans to allow the tax authority to settle unpaid demands by taking money from people's bank accounts have been criticised by a group of MPs.

The Treasury Committee says it is very concerned because tax officials have a history of making mistakes.

Chancellor George Osborne unveiled the plan at this year's Budget.

But in a wide-ranging report, the committee did welcome another Budget plan - to allow greater flexibility on how pension savings can be used.

In 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.

HMRC Performance

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.

"People should pay the right amount of tax. But HMRC does not always ask for the right amount," said committee chairman Andrew Tyrie.

Planned safeguards

  • HMRC will only target those 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 tax authority will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized

"Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable."

He said the committee also had "deep reservations" about changes to tax policy that would require upfront payment of any disputed tax associated with tax avoidance schemes.

"Retrospection should be considered only in wholly exceptional circumstances. The latest measure would have to be justified on those grounds," Mr Tyrie said.

"Retrospection puts policy on a slippery path to arbitrary taxation, discouraging investment and innovation and creating the scope for great unfairness."

Committee member Mark Garnier, a Conservative MP, said at the moment HMRC needed a court order to be able to seize money from accounts.

The committee is concerned that the current system of checks and balances could be upset.

Budget measures for savers

piggy bank
  • New Individual Savings Accounts (NISAs) will shelter up to £15,000 a year tax-free from July
  • 10% tax rate on savings abolished
  • Number of monthly £1m Premium Bond prizes increased to two
  • More generous Premium Bond savings limits
  • New Pensioner Bond for the over-65s.

"What we worry about is... that essentially HMRC will be acting as judge and jury," Mr Garnier told the BBC.

HMRC recently explained how the system will work.

It will 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 Low Incomes Tax Reform Group has called on HMRC to give more concrete assurances about the right to appeal against any seizure.

But the ACCA accountancy body, which after the Budget described the plans as "seriously draconian", now calls them "less fearsome than first thought" after more detail was published.

"On paper, the safeguards look relatively robust, and the reality is it is unlikely that anyone will be left penniless," said Chas Roy-Chowdhury, head of taxation at the ACCA..

The plans are now going through a consultation process. If approved by Parliament, they will take effect in 2015-16.

Pensions

The Treasury committee also called for pensions and savings to be taxed in the same way.

Savings pot The Budget included major changes in the way people save

The most eye-catching measure in Mr Osborne's Budget was a plan that effectively abolishes the requirement for some people to buy an annuity - a retirement income for life.

From next year millions of people reaching retirement age will be able to spend their pension pot in any way they want, including cashing in their pension savings in one, taxed, lump sum. Temporary rules are in place in the meantime.

The committee said that all of the witnesses it heard from welcomed the "greater flexibility and choice" that the reforms proposed.

However, it said the guidance that was being promised ahead of retirement should be clear and at least offer an opportunity of face-to-face help.

The changes are likely to lead to the creation of a variety of new financial products for retirees, and the committee said these must be sold responsibly.

"Following the financial crisis, and the mis-selling scandals, the reputation of the industry is under scrutiny," said Andrew Tyrie, who chairs the committee.

He added that it would be a "great prize" were the tax treatment of pensions and savings treated in the same way.

The chancellor announced an extension to the amount that could be saved in an tax-free Individual Savings Account (Isa) from 1 July 2014 to up to £15,000 either as cash or shares.

 

More on This Story

From other news sites

* May require registration or subscription

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +10

    Comment number 331.

    Is this not about how the House does work. Something has been put in place by the chancellor which MPs have picked up on and are querying. That is good is it not?
    The article also says this system could be used against companies and people using tax avoidance. Maybe with some tinkering it actually could have some merit.

  • rate this
    +92

    Comment number 269.

    This proposal would fundamentally alter the relationship between the individual and the state. The state should certainly be able to pursue unpaid tax through the courts just like any creditor, it shouldn't have the right to just dip into your bank account.

  • rate this
    +3

    Comment number 181.

    it would only apply to people who have ignored 4 demands for payments over a long period, accounts would be frozen first & they'd be given a chance to negotiate payment at that stage or indeed, take legal action so it would only apply to people who refuse point blank to communicate with HMRC or do anything at all about their tax bill.
    The problem as the commitee points out is if a mistake is made

  • rate this
    +15

    Comment number 131.

    I pay my tax via PAYE, what happens if they get me mixed up with someone who doesnt pay by that method and has the same name as me-this could be disastrous!! Its very rare that any government department admits that they have made a mistake so what happens then-I dont have any confidence in the 'checks and balances' they say that will be put in place. This needs to be stopped.

  • rate this
    +35

    Comment number 52.

    I can see problems, particularly with small businesses, if HMRC makes a mistake, takes the money and thereby wrecks cashflow. It could even cause a company to go under, and I can't imagine the interest on the stolen money would be fair compensation. This is a really bad idea.

 

Comments 5 of 8

 

More Business stories

RSS

Business Live

  1.  
    11:09: UK GDP
    George Osborne

    The Chancellor says the latest GDP figures show the UK is the fastest growing "major economy". We're not sure that's technically correct given that China, the second largest economy in the world, grew by 7.4% in 2014. Also the US economy was charging ahead in the third quarter of last year and we've not yet had final GDP figures from across the pond.

     
  2.  
    FCA grilling Via Email Ramzan Karmali Business reporter, BBC News

    Financial Conduct Authority Chair and CEO being quizzed by MPs on the Davis Report which was highly critical of the FCA and how it leaked highly sensitive information to the media. Martin Wheatley insisted that it was not part of the FCA's culture to generate headlines

     
  3.  
    Apprenticeships Via Email Greig Kelly, Business live reader

    "I am currently three and a half months into a markets operations apprenticeship at HSBC in Canary Wharf, I have found it to be very fruitful both socially and with the opportunities I have been given, whilst earning a competitive salary. I feel apprenticeships are undervalued in industries such as banking where experience means as much, if not more, than a degree."

     
  4.  
    10:31: UK GDP

    In fairness to the OBR, it did originally forecast GDP growth for 2014 of 2.7% back in March last year. We wonder why it revised up its prediction?

     
  5.  
    10:22: UK GDP
    Graph showing components of UK GDP

    It's worth noting a couple of things from today's GDP figures. The first is that the official estimate is below the forecast from the Office for Budget Responsibility at the time of the Autumn Statement that economic growth would be 3% in 2014. The second is that while, as the ONS says, there has been widespread growth across all major components of GDP since the start of 2013, the service industries remain the largest and steadiest contributor to economic growth.

     
  6.  
    10:06: Easyjet trading update
    An easyJet plane,

    Easyjet is up 3% after reporting a 3.8% rise in revenue to £931m for the three months to the end of December. It adds passenger numbers grew by 4.1% in the quarter to 14.9 million. Easyjet says first half bookings are in line with last year and that it expects to report a first half pre-tax loss of between £10m and £30m assuming normal levels of disruption compared to the £53m loss reported in the first half of last year.

     
  7.  
    Apprenticeships Via Email Martyn Fenton, Business live reader

    "So who is largest supplier of apprenticeships in UK? The armed forces. And where have been government cuts been focussed on - the armed forces. Double speak or Mr Cameron doesn't know his brief."

     
  8.  
    09:30: Banking figures
    key

    Some banking stats from the British Bankers' Association, which lobbies for the industry. ISA deposits in 2014 were 57% higher than in 2013 after the increase in investment limits. House purchase approvals up 9% in 2014.

     
  9.  
    09:30: UK GDP

    For the whole of 2014 the UK economy grew by 2.6%. That marks the best economic performance since 2007, the Office For National Statistics says.

     
  10.  
    UK GDP 09:30: Breaking News

    The UK economy grew by 0.5% in the last three months of 2014, official figures show.

     
  11.  
    GDP preview Via Email Tom Turner, Business live reader

    "Is Richard Portes suggesting we should find a different surgeon then? Because the only two on offer are; the one that nearly killed us and the one that has us recovering.... If a little slower than he thought it might."

     
  12.  
    09:16: Universal benefits BBC Radio 4

    Asked if well-off pensioners could lose benefits such as free travel passes and the Winter Fuel Allowance after the next election , something the prime minister promised would be protected at the last election, Mr Cameron says: "I've always said there aren't huge savings to be made by axing these benefits... I don't think it would be fair to ask pensioners to make the biggest adjustment." He adds pensioners have £800 more in their pension than before he came to power.

     
  13.  
    09:02: Paper review
    paper

    More Greek analysis from the newspapers this morning. Greece and its creditors "dig in" over the debt struggle, says the FT. The Wall St Journal says Europe's "political establishment moved quickly to douse hopes" of a debt restructure. The Times's business section leads on a drop in Greek bank shares. The Telegraph has more on that benefit cap cut proposed by Mr Cameron.

     
  14.  
    Via Email Flydubai spokesperson

    After landing at Baghdad International Airport (BGW) on 26 January 2015, damage to the aircraft fuselage consistent with small arms fire was discovered on flydubai flight FZ 215. All the passengers disembarked normally through the jet bridge. No medical attention was required at the airport. Passengers from Baghdad to Dubai were accommodated on a replacement aircraft. An investigation is underway to establish what happened.

     
  15.  
    08:43: Market update

    Small movements early on in European share trading. London's benchmark FTSE 100 index of top companies has nudged 0.08% lower to 6,846.74 points, Frankfurt's DAX 30 shed 0.12% to 10,785.90 and the CAC 40 in Paris lost 0.07% to 4,671.76 points.

     
  16.  
    08:36: Aircraft fired on
    plane

    Flights between the United Arab Emirates and Baghdad have been suspended after a FlyDubai aircraft was hit by gunfire as it approached the Iraqi capital. No-one was injured in the attack, the budget carrier said. Etihad and Emirates have also suspended their services to Baghdad as a precaution.

     
  17.  
    08:33: Economy BBC Breakfast
    Miliband

    "There are big economic and social challenges," says Labour leader Ed Miliband on Breakfast. "They [the Conservative party] say everything's fixed... I don't agree. People are £1,600 worse off at the end of this parliament than the beginning."

     
  18.  
    08:28: Welfare to work BBC Radio 4

    Did you hear the starting gun? It's 100 days until the general election, so campaigning begins. Mr Cameron's talking on Today about proposals to cut the benefit cap to £23,000. Will that mean more people go out and find work? The Prime Minister says that around 40% of people that have been effected by the current cap have gone out and sought work. He says the government will use the money saved from reducing the benefit cap - if the Conservatives win the election - to create 3 million apprenticeships.

     
  19.  
    08:17: GDP preview BBC Radio 4

    Economic professor Richard Portes of the Centre for Economic Policy Research takes up Mr Littlewood's surgical metaphor in relation to the government's economic policies but says "the patient almost died". The actual proportion of people in work is still lower than before the financial crisis while wages are 6% lower than they should be, he says. If the government points to the way in which the deficit has been handled its story ahead of the election isn't very good at all, he adds.

     
  20.  
    Apprenticeships Via Email Chris Pocock, a Business live reader from Sheffield

    "The pay of apprentices at Ford Dagenham is not typical. The government's own evidence to the Low Pay Commission indicates shockingly high levels of non-compliance by employers in paying apprentices the national minimum wage."

     
  21.  
    07:53: Carpetright sales

    Carpetright has reported a 7.5% rise in UK like-for-like sales in the three months to 24 January. It has also kept its full year profit guidance unchanged. Like-for-like sale in the rest of Europe rose 1.7%, it adds.

     
  22.  
    07:40: GDP preview BBC Radio 4

    The government hasn't stuck to its deficit plans, says Mark Littlewood on Today, but it has stuck to its spending plans. We have several more years before we will be living within our means but "the direction of travel" is the most important thing. "If the government had said to hell with this, we're going to carry on as before, then markets would have had more of a wobble," he says, but a deficit reduction target of five years achieved in eight, while disappointing, is far less of a concern.

     
  23.  
    07:25: Apprenticeships BBC Breakfast
    Cameron

    Prime Minister David Cameron is on Breakfast. He's talking about apprenticeships: "we overplayed university and downplayed apprenticeships" he says, whereas "both are important." He says after visiting apprentices at Ford in Dagenham trainees can earn £30,000 after four years. Does that match your experience, readers? bizlivepage@bbc.co.uk

     
  24.  
    Facebook down Via Twitter Rory Cellan-Jones Technology correspondent

    "Hacker group Lizard Squad -@lizardmafia - claiming it's taken down Facebook, Instagram and other sites."

     
  25.  
    07:14: Aer Lingus bid

    British Airways owner IAG says the board of Aer Lingus has indicated "that the financial terms of [its] proposal are at a level at which it would be willing to recommend [the takeover approach] to Aer Lingus shareholders" after Monday's €2.55 per share offer for the Irish carrier. Aer Lingus appears to be letting IAG have a look at its accounts, granting it access to "perform a limited period of confirmatory due diligence."

     
  26.  
    07:12: Facebook back!
    facebook

    Facebook appears to be back. Panic over, everyone.

     
  27.  
    07:10: Facebook down

    Facebook is down in France, Australia, Spain and Singapore, readers and colleagues tell us. A colleague is busy furiously poking the organisation to find out what's going on. Reader Kath Olliffe in Sydney writes in: "It's a strange feeling because you kind of want to post a status that FB is down and what are we all to do. You want to look up FB to see if there is something wrong with FB!"

     
  28.  
    07:07: GDP preview BBC Radio 4

    The latest estimate of UK economic growth will be released at 9:30 today and the economic recovery is looking increasingly likely to be the government's main story during the election. Has it a good story to tell? Mark Littlewood, director general at the Institute of Economic Affairs, tells Today that broadly, yes it does. He thinks the government will say: "we're only about half way through the surgery and May isn't the time to change the surgeon".

     
  29.  
    06:55: GDP preview BBC Breakfast
    stoke

    Not to be out-done by Wake Up to Money's trip to Aston, Breakfast has sent presenter Steph McGovern to a ceramics factory in Stoke to see if the predicted GDP growth is benefiting people. Lisa Grimley says supermarket prices remain high, especially food. Energy bills need to come down before things improve. Since the credit crisis, petrol prices have reduced and that's about it. "It's a struggle for young people."

     
  30.  
    Facebook down Via Email Steven Weerdenburg Business live reader

    It's 1.50 am and Facebook is down in Toronto. Looks like I might have to go to sleep after all.

     
  31.  
    06:47: GDP preview Radio 5 live

    Wake Up to Money presenter Adam Parsons is in East End Foods in Aston, near Birmingham. "It's like being in Terminal 2" he says. He's there in preparation for today's GDP figure. Jason Wouhra, director of the firm, says stable interest rates have helped confidence in investing. Curry ingredients, corn flakes and coke are the more popular items.

     
  32.  
    06:38: Facebook down
    offline

    Forget the GDP figures. This is much bigger news. Facebook is offline everyone. Facebook is down! Is this just a UK problem? Get in touch and let us know at bizlivepage@bbc.co.uk or tweet us @bbcbusiness to tell us how you are coping.

     
  33.  
    06:32: GDP preview Radio 5 live

    Virginie Maisonneuve of asset manager Pimco is on Wake Up to Money talking about GDP. She expects 0.6% growth in this fourth quarter first estimate from the Office for National Statistics. GDP is forecast by a number of experts to have grown by 2.6% for the year, the same level as in 2007 and up from 1.7% in 2013.

     
  34.  
    06:23: Market update Radio 5 live

    Virginie Maisonneuve of asset manager Pimco is talking on Wake Up to Money about the markets. They were mainly up yesterday. Minority parties taking power in Europe has "not been taken seriously" by the market she says.

     
  35.  
    06:07: Greek election fallout Radio 5 live

    More from Yannis Zabetakis, a lecturer at the university of Athens, is on Wake Up to Money. Youth unemployment at 50% is another dangerous signal for the country, he says. He also denies Greece is a special case. While there's growth in Britain under austerity, the wealth gap is widening and there are more people in poverty, he says.

     
  36.  
    06:02: Greek election fallout Radio 5 live
    A supporter of Alexis Tsipras, leader of Syriza left-wing party, holds the Greek and French flag

    Yannis Zabetakis, a lecturer at the university of Athens, is on 5 live talking about the debt burden on Greece. More than a million unemployed means paying off the debt is very difficult, he says. Employment prospects for his students are very poor and he recommends setting up an export company or going abroad. Salaries are going down and tax up, he adds.

     
  37.  
    06:01: Matthew West Business Reporter

    Morning folks. Get in touch at bizlivepage@bbc.co.uk ot tweet us at @bbcbusiness.

     
  38.  
    06:00: Howard Mustoe Business reporter

    Good morning. At 09:30 we expect the first estimate for fourth quarter gross domestic product for the UK. There'll also be company results from 07:00. Stay with us.

     

Features

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.