HM Revenue and Customs (HMRC) is reportedly set to be given new powers to deduct funds and interest from current and savings accounts of people and businesses who do not respond to demands for payment, with the move expected to be announced in next week's Budget.
The closely-watched fiscal event will be John Healey's first as Chancellor, having been appointed to the role by the Prime Minister, Andy Burnham, in July. It comes as the Government looks to recover some £4billion in existing unpaid smaller tax debts. That's made up from some 4.8million people and businesses that owe less than 10,000, according to HMRC's own figures.
Current rules and proposed changes
Among the individual taxpayers the average unpaid debt is around £950. HMRC currently only has the power to take money directly from accounts if the debt is over £1,000 and they would be left with a minimum of £5,000 across their accounts so the deduction does not cause hardship.
A new approach could see the minimum debt lowered to just a few pounds, the Times reports. The Government already has powers to take funds from your account without a court order in some circumstances. It comes as the Government looks to clampdown on the billions of tax it fails to recover each year.
Concerns over safeguards
HMRC revealed the figure for the last tax year was around £60billion in total. Dan Neidle, founder of Tax Policy Associates, voiced concern about the idea of an automatic system, suggesting it could mean people who are facing financial difficulties could be treated the same as those deliberately avoiding paying tax.
He told the newspaper: “It would be good to understand the safeguards that will be put in place.” The Times also quoted a Government source as saying that "rigorous" protections would be in place to protect vulnerable people.
Proposed protections
The measure was proposed earlier this year, with HMRC saying "strong safeguards are at the heart of the proposal". The UK tax authority said in corporate report that this would include:
- using this power after more than 10 attempts to contact customers to pay what they owe
- identifying customers who may need extra support
- giving clear and multiple opportunities to explain personal circumstances
- setting repayments at an affordable level
- clear rights to challenge decisions, including independent review
HMRC said the protections "are designed to ensure the power is used fairly, proportionately and only where appropriate". The Express has approached the HM Treasury for comment.
