HM Revenue and Customs's document, on Direct Recovery of Debt expands on proposals announced in this year's Budget which were criticised at the time for lack of safe-guards.
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 for debtors who owe the taxpayer £1,000 or more.
On Budget day, the Low Incomes Tax Reform Group (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 said: “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.”
The Government has said that it would like to gather views on how best to implement this policy, including which safeguards would be proportionate and balanced to ensure that debtors do not suffer undue hardship.
HMRC estimates that:
this will apply to around 17,000 cases a year;
- the debtors affected by this policy have an average of £5,800 in tax and tax credit debts; and
- around half of the debtors affected by this policy have more than £20,000 in their bank and building society accounts and ISAs.
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Susie Hughes © Shout99 2014