New powers for the taxman

In this year’s budget the tax office is seeking powers to take money you owe direct from your bank account. You can read on page 53 of the Budget document which says:

The government will modernise and strengthen HM Revenue and Customs debt collection powers to recover financial assets from the bank accounts of debtors who owe over £1,000 of tax or tax credit debts, have the financial means to pay, and have been contacted multiple times by HMRC to pay. A minimum of £5,000 will be left across debtors’ accounts. This brings the UK in line with many other tax authorities which already have the power to recover debts directly from an individual’s account, such as France and the US.”

If you owe tax, the tax office will write to you requesting payment. If after being contacted four times you don’t pay they could use their new powers.

The restrictions are that:

a)      You must owe at least £1,000 in tax

b)      After taking money from your account you must be left with £5,000.

Currently, the tax office needs court approval to take money from your bank.

This wasn’t the only aggressive new power announced in the budget. The tax office can now take money out of your bank if they think you are using tax avoidance strategies that will fail in court. This means you are effectively guilty until you are proven innocent.

If the court rules in favour of the tax strategy, the tax office will return the money with interest.

What is really interestingly is that these rules effectively apply retrospectively. According to a Reuters article the British government estimates there are 65,000 outstanding tax avoidance cases.

Once again, no magistrate or judge ruling is required; the tax office will just be able to take the money.