Treasury Select Committee Voices Worries Over HMRC Debt Recovery Power

Under plans announced by Chancellor George Osborne during his Budget speech, HMRC would be able to reach into people’s bank accounts and take the money needed to cover their tax obligations. This idea, however, does not sit well with the Treasury Select Committee, which has raised serious concerns over the proposal.

The committee recently published its report on Budget 2014 and some of its recommendations relate to this proposal. The most important among them is the absolute need for independent oversight: HMRC must not be vested with the power of direct debt recovery unless such a safeguard is put in place, it argued.

Tyrie described the proposal as “very concerning.”

In comments on the matter, Treasury Select Committee chairman Andrew Tyrie described the proposal as “very concerning.” UK citizens should not pay a penny more than the amount they owe to the taxman but HMRC has been known to often get the amount wrong. It would be unacceptable to have money withdrawn from the accounts of some taxpayers and later pay it back, Tyrie said.

While the government consultation paper does include a number of safeguards, more have to be considered to eliminate the risk of HMRC error and ensure proper punishment in cases of error. Such measures could include damages awarded on top of compensation plus disciplinary action when abuse of power is established, the report suggested.

Under the proposed changes, HMRC would be able to use this power to recover tax obligations of more than £1,000. As the government stressed, the taxman would only go after people with long-term debts and a minimum of four demands for payment. When the amount owed is withdrawn, the debtor’s accounts must have no less than £5,000 remaining – a figure that covers the value of assets in every account, including savings.