‘The new measures undermine the inalienable rights prescribed in the Magna Carta.’
That’s what the Taxpayers’ Alliance has said about the new powers granted to HMRC which give the tax authority the unrestricted right to raid bank accounts and cash ISAs in a bid to seize overdue tax payments from employees and businesses. Accountants have also expressed concerns about the nature and scope of the new powers, but have stopped short of making such direct criticism. But is the Taxpayers’ Alliance right? Is there any truth or justification behind this claim?
The new tax-gathering measures which were unveiled in the Summer Budget 2015 will give HMRC the ability to freeze all but £5,000 of an individual’s or firm’s assets even if the authorities simply believe someone ‘appears’ to owe tax. These ‘direct recovery’ powers, the Taxpayers’ Alliance report suggests, would cut out the legal process altogether.
How will the new direct recovery powers work?
Well, a business or individual will be issued with a ‘hold notice’ on their funds: if they fail to object in time, HMRC will serve a ‘deduction notice’ forcing the bank to transfer the requested funds. Any person wishing to fight an HMRC notice of a tax raid must do so within 30 days: however there is no set period within which the tax authority must consider the objection.
Why is the Taxpayers’ Alliance claiming the new powers are objectionable? Well, according to Francis Hoare, barrister at Field Court Chambers, the new measures verges on treating individual property as the property of the state and it’s that that flies in the face of everything that’s enshrined in the Magna Carta – which secured the right of taxpayers to challenge any demand for tax through the courts:
“The proposal itself is objectionable in principle. The greatest legacy of the Magna Carta is the principle that the executive is subject to the law as much as the people, and yet the direct recovery legislation places the Crown in a superior position to individuals and businesses in its rights to enforce debts,” said Mr Hoare.
“It denies access to the courts for the resolution of disputed tax liability before property is frozen, and delays a judicial remedy for an indeterminate period.”
“Most dangerously of all, it treats individual property as the property of the state once the state has determined it so.”
Is the Taxpayers’ Alliance right to be worried?
Well, HMRC’s recent record with administrative errors is not good, and therefore the concerns that some taxpayers could be left unable to pay their bills if funds are seized in error or a case is being dragged out unnecessarily is perhaps justified. Small firms working on tight budgets could face similar problems too, forcing them into insolvency through no fault of their own.
Jonathan Isaby, chief executive, Taxpayers’ Alliance, said:
“HMRC made 5.5 million errors last year, and giving the organisation powers over and above that set out in the principles of Magna Carta is hugely worrying.”
“Eight hundred years ago, the principle was set down that individuals would have recourse to the courts when challenged by the Crown or by what would become Parliament. Removing that protection is profoundly dangerous and we urge the Government to reconsider this legislation as quickly as possible.”
If you would like further clarification about HMRC’s new ‘direct recovery powers’, or would like more information on self-assessment, then contact Steven Glicher accountants on 0161 485 8007 or email info@ .