By Richard Johnstone | 9 May 2014
MPs have raised concerns over government plans to give Revenue & Customs the power to recover taxes directly from taxpayers’ bank accounts, warning that a lack of independent oversight made the scheme ‘wholly unacceptable’.
In its report on the 2014 Budget, the Treasury select committee said the proposal in Chancellor George Osborne’s statement that HMRC be able to recover funds needed ‘lengthy and full consultation’ before being introduced.
In particular, MPs said HMRC should not be given the increased power without some form of prior independent oversight – either through a new ombudsman or tribunal, or through the courts.
Under the plans, HMRC will be able to recover long-term tax debt, or overpaid tax credits, of more than £1,000 directly from bank accounts once a debtor has received four demands for payment. However, the money will only be taken if at least £5,000 will be left across all of a debtor's accounts, including savings, after the unpaid tax is removed.
Osborne said the power would mirror the existing right of the Department for Work and Pensions to take money directly from people’s bank accounts to pay child maintenance.
However, MPs said the comparison was incorrect, as HMRC would not be acting as an intermediary between two individuals, as the DWP does, but instead pursuing its own objective of bringing in revenue.
Committee chair Andrew Tyrie said the proposal was highly dependent on HMRC’s ability to accurately determine which taxpayers owe money and how much they owe, which it has not always shown itself capable of doing.
‘Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable,’ he said.
‘Exceptional powers such as this require prior independent oversight. The government must demonstrate that it has dealt with the committee’s concerns before proceeding. The committee intends to take evidence from HMRC on this, among other issues, shortly.’
The report also called on the government to ensure its reforms to pensions, which will give people easier access to their savings pot and free them from having to buy an annuity, were joined up with changes to social care funding.
From 2016, the government will introduce a cap on individual lifetime social care costs at £72,000 and increase available means-tested support.
Prime Minister David Cameron has warned retirees that pension lump sums will count towards their eligibility for support, and the committee said the government must ensure its guarantee to provide independent pension guidance was co-ordinated with information about long-term care costs.
