According to the ICAEW, HMRC should scrap plans for new debt recovery powers because the process is “unconstitutional” and “wrong in principle”.
Under the new plans, HMRC will be able to deduct tax owed from a debtor’s bank account proving at least £5,000 is left across all their accounts including ISAs.
HMRC has insisted that these measures would be used against those who have repeatedly refused to engage with them and would be used as a last resort, but the ICAEW have deemed that the proposals fail to meet the criteria of being “fair, proportionate and accompanied by robust safeguards”.
The ICAEW said: “It is necessary to go back a step, to re-think the policy and consult upon the strategies by which HMRC can tackle those who willfully refuse to pay,” adding that it was unconvinced the HMRC needed these powers considering the tools at HMRC’s disposal.
It also said there was a high risk of errors on HMRC’s part, risking damage to public trust in the system.
The institute said: “Under UK law, if someone owes you money, you cannot just help yourself to it; permission of the court is required. Further, where the creditor is the state, a separation of powers is essential… It is a fundamental principle of justice that nobody should be a judge in their own cause. For these reasons, the proposed direct debt recovery procedure is unconstitutional and wrong in principle.”
Concerns were also raised over where HMRC would stand in relation to other creditors the debtor might owe to.
“This is unfair to other creditors. It may also be unfair to the debtor, such as a vulnerable person with many debts for whom the practical priority might be to pay their housing costs before HMRC.”
A spokesperson for HMRC said: “There is no question of those who genuinely cannot pay being affected by this measure. The average debt will be £5,800, owed by those with an average of £20,000 in the bank. These are people who simply refuse to pay what is owed even though they can.
“It’s hard to see why a tiny minority of people who can pay the tax they owe, but refuse to, should enjoy an advantage over the vast majority of people who respect the rules.
Businesses who are finding themselves in financial difficulty and who are struggling to pay tax debts should speak to The Business Debt Advisor.
We have a great track record of negotiating informal as well as formal settlements with HMRC.