MPs ‘concerned’ that taxman can raid your bank account

The cross-party Treasury committee called for further scrutiny of the debt collection proposals, adding that the plans had the potential for fraud and error, taking the HMRC’s previous record of mistakes into account.

The Treasury plan is designed to allow HMRC to take the money it is owed and was outlined in the budget, and the proposal would allow money to be taken out of joint bank accounts.

In their report on this year’s budget, the MPs said: “The proposal to grant HMRC the power to recover money directly from taxpayers‘ bank accounts is of considerable concern to the committee.

This policy is highly dependent on HMRC’s ability accurately to determine which taxpayers owe money and what amounts they owe, an ability not always demonstrated in the past. Treasury committee

“The committee considers a lengthy and full consultation to be essential. Giving HMRC this power without some form of prior independent oversight – for example by a new ombudsman or tribunal, or through the courts – would be wholly unacceptable.”

The committee dismissed the chancellor’s argument that the Department for Work and Pensions (DWP) already had similar powers to collect child maintenance, and said: “The parallel is not exact: in those cases, DWP is acting as an intermediary between two individuals.”

“HMRC would be acting not as an intermediary between two individuals but rather in pursuit of its own objective of bringing in revenue for the Exchequer.”

MPs also suggested the change could amount to a back-door reintroduction of the discredited crown preference rule – which gave HM Revenue & Customs (HMRC) priority access to assets when firms went bust.

Potential for error

They also highlighted the potential for fraud and error if the taxman was given direct access to millions of accounts. “This policy is highly dependent on HMRC’s ability accurately to determine which taxpayers owe money and what amounts they owe, an ability not always demonstrated in the past,” the report said.

“Incorrectly collecting money will result in serious detriment to taxpayers. The government must consider safeguards, in addition to those set out in the consultation document, to ensure that HMRC cannot act erroneously with impunity.

“These might include the award of damages in addition to compensation, and disciplinary action in cases of abuse of the power.”

A spokesman for the Treasury said the proposal was part of the government’s long-term economic plan to reduce the deficit.

“It is therefore important that people pay the tax they owe on time. Although the vast majority do this, there is still a minority that chooses not to pay, despite being able,” he said. “The proposed powers will give HMRC another tool to collect tax debt owed. The current consultation includes a range of safeguards to ensure the power is tightly targeted.”