Saturday, 29 March 2014

The Budget And HMRC

With all the silliness on and immediately after 19th March surrounding the recent Budget and measures regarding Bingo and Beer duty it was tempting to ignore it - very much like Parliament will largely do contrary to their primary duty of scrutinising it.

However one particular measure – tucked away – demonstrated more than anything the absolute need for the Harrogate Demands:
Buried deep in the Budget document, there's a pretty significant HMRC power grab.

If officials decide you owe them money, they now have the ability to take it directly out your bank account. No insolvency proceedings, asset freezes or debt collection agencies. Just the government taking out whatever it thinks it's owed.
Anyone who has dealt with HMRC as part of a SME will read that and quake in their boots. With this in mind I post a copy of an email sent by TBF senior (an independent financial advisor of many decades) to his local MP in response - it articulates many of the deep concerns and frustrations regarding this measure:
The Chancellor’s recent Budget introduced radical pension reforms, a welcome help for savers and encouragement for businesses.  George Osborne continued his theme of ensuring that everyone pays their fair share of taxes.  It's one of the small proposals under the “Debt Recovery” section of the Budget that gives me serious concern.
It is proposed that new powers are given to HMRC so that they are able to access Bank Accounts of people who, allegedly, refuse to pay their taxes.  On the face of it this seems reasonable as people should pay their fair share of tax but this power is a fundamental change in the principle of British Justice.  In the UK, the courts decide the law and who is guilty.  If this power is passed to HMRC then they decide the tax that is due, determine that the person has consistently refused to pay and will then be given the power to raid their Bank Account.  In other words HMRC becomes the Judge, Jury and Executioner.
We have been told that there will be safeguards and this new power will only be used where HMRC have tried to contact the Tax Payer on a number of occasions and receive no response.  It appears that HMRC will decide whether or not these safeguards have been met and regrettably, their reputation for mistakes is well known.  There may be a simple and valid reason why a person has not responded such as they are in Hospital, they have moved house, they may have a mild form of Dementia or indeed HMRC may have the wrong records.
The lower limit of £1,000 of tax owed is miniscule for this draconian measure.  It will affect somebody who may have just had a company car, a change in respect of Child Credit or purely a miscalculation by HMRC in previous tax years.  This is not a measure that is aimed at the person who is deliberately evading large amounts of tax, it is targeting normal people and small businesses.
We are told that HMRC will leave a minimum of £5,000 across Bank Accounts and if this is also going to apply to small businesses, this could be purely the amount that is needed to pay their staff at the end of the month.
My understanding is that the Enterprise Act 2002 abolished preferential status for Crown debts from 15 September 2003.  This proposed measure could circumvent this by allowing HMRC to recover their debt in preference to the other Creditors by taking taxes from the individual’s account prior to insolvency.
HMRC already have powers to recover unpaid debts.  Why are they not encouraged to use them rather than giving them further power?  We are told that Tax Authorities in other countries such as the US and France already have this power.  This is no reason whatsoever for us to follow suit.  After all we live in Britain, not France or the US.
If we give this power to HMRC then what next?  There are many people that do not pay their Council Tax and therefore shouldn’t Local Authorities be given the power to take this money from their Bank Accounts.  After all we all have to pay for people that don’t pay their Council Tax.   How about Motor Insurance Companies.  We all pay additional premiums for people that do not pay for car insurance, so should they be given the power to deduct car insurance premiums from our Bank Accounts.  I am sure that MP’s from all sides of the House would be up in arms if this was proposed.
We have seen powers introduced in the past for what appears to be the right reasons but is subsequently used for other purposes. For example the Regulation of Investigatory Powers Act 2000 being used to catch people putting out their wheelie bins too early!  It might well be that the current Government is bringing in these new powers with every good intention but there is no guarantee that future Governments may not decide to use this power to implement further draconian measures.
As one of your Constituents, I urge you to oppose this new measure.  We do not want to have to wait until there is a public outcry over people who have suffered under these draconian measures.  There will inevitably be an inquiry with the usual infuriating reply that “lessons will be learned”.  For once, let us learn from our history lessons.  It is with some irony that with the 800 anniversary of the signing of the Magna Carta due next year, George Osborne is proposing that we give HMRC the power to determine the tax that is due and deduct it direct from Tax Payers without any recourse to an independent Arbitrator; a very dangerous step.
Of course both of us are under no illusions that any objections will make any difference, especially given the sycophantic nature to Cameron of his local MP. Yet again it demonstrates how broken our so-called Parliamentary democracy has become - at the next election there will really be only two contestants: the political class and the people. Oh how we wish for Demand number 5:
5. No taxation or spending without consent: no tax, charge or levy shall be imposed, nor any public spending authorised, nor any sum borrowed by any national or local government except with the express approval the majority of the people, renewed annually on presentation of a budget which shall first have been approved by their respective legislatures;


  1. I recall a report from a British resident in Spain that the Spanish tax authorities have this power. Unfortunately I did not make a note or file the report but I would bet a pound to a pinch of snuff that this is another example of EU "harmonisation"

    1. That thought crossed my mind tbh when the measure was justified on the basis that other European countries like France do it.

  2. This was one that had passed over me, until i saw it mentioned in one of the comments on EU Referendum.

    I had a company car for a few years (not had it for 4 years now) but its taken for ever to to get straight via HMRC (not helped by the fact i am PAYE) so 2009 i got a note saying I owed £1400 so they adusted my tax code, 2010 - got a £1250 rebate, 2011 i owe £950 adjusted tax code, 2012 - £1000 rebate 2013 I owed £160 adjusted tax code.

    Now adjusting tax codes is one thing, but just to swipe it from a bank account, well that could have left me up the creek, especially as its clear it was their error in the first place (otherwise why the rebates) - Unless of course they are just planning to take £2000 from many people and small businesses, give them it back next year when they do the same to many other people and small businesses - ideal way for a system of interest free loans?

    1. Exactly, it will leave a lot of SME's in trouble...those are the ones HMRC will go for first because they can be more easily bullied. The lack of any independent oversight is truly worrying.

  3. The simple answer to this then is to adopt a cryptocurrency, which by it's very nature is not centralised, far out of the reach of government and based on consent the taxation of citizens would be voluntary and I think much better spent for fear of having the "revenue|" squeezed come the time of renewal.

  4. By its nature a "cryptocurrency" must be secret - so how do you persuade the butcher, the baker, the bus driver or builder to accept it and, even if you can, how is it stabilised as a secure store of value? If it has no central authority and no intrinsic value, why should anyone trust it?

    Not quite as simple as it may have appeared at first blush, I think. Although it is, of course, a nice idea.

  5. Good article, after the first days of the Budget one has to look very carefully for the catches in the small print. This is not what we expect in a so called free democracy. Unfortunately we do not live in any such Country, more and more of the freedoms we took for granted are disappearing day by day!