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A certain hullabaloo has taken place in the national press over a suggestion that HMRC have direct access to taxpayers' bank accounts without having to obtain permission from the courts first. This is one of the proposals in another recent HMRC consultative document 'Payments, repayments and debt: the developing programme of work'. The operative words here are 'consultative document'.
The accompanying HMRC press release explains that the consultation paper forms part of the department's work to modernise its powers, deterrents and the accompanying safeguards and invites comments on a range of ideas to make it easier for taxpayers to pay on time and improve the way HMRC deal with those who do not.
It goes on to say that the document seeks views on how HMRC might address the following in relation to managing payment and debt:
- a more taxpayer focused approach — focusing less on debts arising from individual taxes and more on the taxpayer's whole interaction with HMRC;
- making it easier to pay — providing a range of payment methods, making it easier for taxpayers to pay their tax at the right time; and
- tackling the problem of debt — having made it easier to pay, and supported those who genuinely find it hard to pay, HMRC need the right tools to tackle those who choose to pay late.
According to HMRC, the options in the document aim to align and modernise rules across HMRC's tax responsibilities, where doing so would provide greater clarity, consistency, efficiency and reduced costs for taxpayers and HMRC.
Perhaps HMRC were being a trifle disingenuous in their third point, simply saying that they 'need the right tools to tackle those who choose to pay late'. When they are in fact suggesting pretty draconian powers, i.e. access to taxpayers bank accounts without first obtaining a court order. Chapter 5 of the document explains HMRC difficulties in collecting tax owed by some taxpayers. It says that each year, HMRC make 400,000 visits to collect tax and obtains 200,000 court orders for unpaid tax. So clearly, there is substantial problem.
It is also worth noting, as chapter 5 does, that the suggestion of direct access came from the House of Commons' Public Accounts Committee, so perhaps by including it in the consultation, HMRC are gauging public reaction. In October 2004 in its 49th Report, the committee recommended:
'The department [Inland Revenue as it was then] should seek additional powers for enforcing debts, similar to those of other tax authorities. These include recovery of debt from a person's salary or from funds held by their bank or other third party without the need to go to court. Recovering debts through court action is expensive for the department and yet it has had to make increasing use of this method of enforcing debts.'
HMRC in the consultative document say that any such measure would require safeguards. The idea of direct access to bank accounts is an emotive one and HMRC appears to have been aware of the likely reaction, when it backs up the suggestion pointing out that the revenue authorities in Australia and France already have powers of direct access in some circumstances. Even if readers do not have time to read the whole document, it is some 40 pages long, it is worth reading chapter 5 for more information about HMRC's thoughts on direct access.
Grant Thornton's Francesca Lagerberg says that 'at face value, the proposal is quite shocking', however it is only a proposal and has gone for consultation, so it has some way to go before it could, if it ever did, become law. Putting it into context, she adds that back in 2004 HMRC was told by the Public Accounts Committee to do something about collecting all the tax that they are owed, so they are trying to work out what to do. Direct access may not be the best idea, but if all else failed, maybe with the right safeguards it would be the answer. Such a measure would, says Francesca, have to be tightly ring fenced to ensure that it was only used in very specific circumstances, and not when more vulnerable taxpayers, especially the unrepresented, need support and help, rather than a 'raid on their bank account'. It would also be very important, she says, for such provisions to be carefully worded in the primary legislation.
Andrew Watt of Chiltern, having read the document, feels that 'it is a well-thought out paper' and, 'like anyone else who pays tax through PAYE or on time', has no problem with HMRC chasing those who do not pay up. He mentions that the paper contains various other proposals relating to payment, talking about flexible options, payment by credit cards and offsetting tax repayments against tax due. He says the paper is a 'laudable effort to modernise the system after the merger of the Inland Revenue and Customs'. He is interested in how HMRC would obtain bank and building account details in the first place, and would want to be sure that such information is totally safe, bearing in mind the way that organised gangs managed to infiltrate the tax credit system last year.
A 'dreadful development' is how PKF's John Cassidy describes the idea of direct access, although he says other aspects of the paper could be useful. For example, payment of tax by credit card could be helpful, although it would have to be used carefully, given the interest rates that can be charged by the card providers.
Paul Aplin of AC Mole and chairman of the Tax Faculty says that he welcomes 'anything that results in people paying the tax that they genuinely owe' and he fully supports HMRC in seeking to achieve that aim'. He says that the idea of seeking powers to recover money direct from a taxpayer's bank account without going to court 'is, however, an idea that brings with it some serious concerns around practical issues as HMRC acknowledge in the consultation document, for example the need to consider the position of joint account holders. The Tax Faculty will be considering these practical issues carefully, and seeking members' views, before responding formally to the consultation document'.
Rob Ellerby, president of The Chartered Institute of Taxation says, in an open letter that it is understandable that HMRC are examining their current powers and that, where liability is very clearly established, options such as direct access to bank accounts are considered. However, he raises potential problems which need to be explored. For example, 'if someone has a joint bank account, what redress does the “innocent party” in the relationship have?' He asks further what would happen 'where HMRC and the taxpayer do not agree whether anything is owing and the issue is being handled properly through existing channels?' The CIOT will demand that safeguards exist for the taxpayer, and Robert also mentions that the institute has 'long argued for a taxpayers' charter setting out rights and responsibilities'.
All the options would require legislative change, if they were adopted, and would therefore be subject to full Parliamentary scrutiny and debate. The document can be found at www.hmrc.gov.uk/consultations/index.htm. Comments should be sent by 17 September 2007 to: HMRC and Payment, Room 1C/03, 1st Floor, 100 Parliament Street, London SW1A 2BQ, e-mail: powers.review-of-hmrc@hmrc.gsi.gov.uk.
Taxation will be giving readers the opportunity to submit comments into a consultation response, which Taxation will send on their behalf. More details will be included in a later edition of the magazine.
HMRC news release dated 25 June 2007
