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HMRC debt proposals contain insufficient curbs on possible abuses

HMRC debt proposals contain insufficient curbs on possible abuses

The publication of HMRC’s consultation document on Direct Recovery of Debt does not completely allay the fears expressed by the Low Incomes Tax Reform Group (LITRG) when the proposal to recover tax debt directly from the bank accounts of certain debtors was first announced on Budget day.

In brief, HMRC propose to strengthen their powers to recover tax and tax credit debts from those who refuse to pay what they owe, by enabling direct access to their bank, building society or ISA accounts without reference to the courts. On Budget day, LITRG said that the new power risked flouting the rule of law if there were insufficient safeguards to prevent it from being used inappropriately against debtors on low incomes who simply got into difficulties.

LITRG Chairman Anthony Thomas commented:

“While the published document reveals some safeguards that may be generally effective in preventing HMRC from using their new power inappropriately, it is far less clear just what remedies there will be for those – hopefully few – occasions when the safeguards are indeed breached, whether accidentally or by oversight.

“The power is intended for use only against those debtors who have been asked ‘repeatedly’ to pay what they owe, and have sufficient funds in their bank accounts. If strictly observed, the safeguards and conditions as set out should be broadly effective but if they are disregarded in any particular, vulnerable taxpayers will suffer – and that is far too great a risk.

“Should that happen, one would expect to see robust remedies to reverse the impact of any misuse of the power, and provide for compensation. In fact, all the consultation document proposes is the right for an aggrieved debtor to object to HMRC within a timescale that is so short few will be able to comply with it, combined with a vague and unspecified assurance of a ‘judicial appeal’. We still do not know what kind of ‘judicial appeal’ is being proposed, but unless it is guaranteed by a statutory right of appeal, lies to a tribunal that is accessible to the unrepresented debtor, and can operate swiftly in a costs-free environment, we fear it will be insufficient to rectify any mistakes and repair any damage.

“We strongly urge HMRC to think again about this aspect of their proposals as the application of the rule of law in this country is fundamental to citizens being treated properly in a civilised society. The right of access to the courts should never be denied, particularly not in the name of administrative efficiency.”

 


 

Notes for editors:

1.       HMRC’s consultation document, Direct recovery of debts, can be accessed here.

 

2.       The Low Incomes Tax Reform Group (LITRG)

 

LITRG is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

 

3.       The Chartered Institute of Taxation (CIOT)

 

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

 

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

 

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.


Matthew Oliver
External Relations Officer

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