Lawyers have “fundamental objections” to HMRC plans

A consultation on proposals by HM Revenue & Customs (HMRC) that would allow the department to recover tax and tax credits directly from debtors’ bank accounts without the need for a court order has been criticised by lawyers.

The consultation, which was launched in May, asks whether giving the department the power to take debts directly from debtors’ accounts would work in practice, including “which safeguards would be proportionate and balanced to ensure that debtors do not suffer undue hardship”.

In its response, the City of London Law Society (CLLS) has warned that the proposals, introduced in this year’s Budget, are ‘seriously misguided’ and could impact on innocent taxpayers and cites two key objections to them – the potential for mistakes to be made by HMRC and the fact it will be the taxman and not the courts making decisions.

Calling the proposals “deeply flawed”, the CLLS also believes that they represent a dangerous precedent regarding the balance of power between the Revenue and taxpayers and criticises the consultation document for failing to say how the change will be legislated for and calls for details to be set out in primary legislation subject to parliamentary scrutiny. The Society also suggests that the proposals could be vulnerable to challenges under the Human Rights Act.

The CLLS is not the only body to respond in a negative vein. While many business organisations accept that non-payment of legitimate debt is a real problem for the Revenue, they tend to agree that more safeguards are needed before the proposals become law.

However, according to Treasury Secretary David Gauke, the ‘modernised’ powers would only be used against hardened serial debtors who had defaulted regularly on tax payments; who owe more than £1,000, who have ‘established’ debts and have passed the timetable for appeals and who have not responded to at least four attempts by HMRC to make contact.

The consultation closes today (29 July) at 12.00.

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Nigel is the Managing Partner and Head of Litigation and Dispute Resolution in the London office of Mackrell Turner Garrett.