HMRC new system for tax debtors
HM Revenue & Customs has expanded its powers through increasing the amount of money you can make from the salaries of employees to recover unpaid bills and taxes, causing concern that the tax collector is intruding too much on the privacy of individuals.
Currently, up to £3000 can be recovered by the customs officer, but from April next year, HMRC can collect up to £17,000, depending on salary.
Under the new system, people rather than pay what they owe, when they want, will see the tax codes that have been paid with contributions for income tax, capital gains tax or Social Security changes. This means that every time you get paid through the PAYE system, more money than usual is automatically taken from your salary and paid to the tax collector.
HMRC points out that the system is fairer and removed all amounts spread over twelve months. In addition, the taxman says it will be able to recover more debt a year from people who earn more. This is because the limit is determined by the income of the debtor. Anyone who earns less than £30,000, for example, will see their ceiling unchanged at £3,000, while those with a salary of more than £90,000 will pay up to £14,000 more.
Tax Information and Impact of Note (Tiin) by HMRC says the tax collector hoping to raise an additional 115 million pounds in the financial year 2015-16 and £50 million between 2016-17 is due to the implementation of the new rules.
The agent may receive a public horror similar to previous proposals made by the Treasury to allow the tax collector to raid bank accounts for unpaid taxes without the consent of the court. Described as “draconian and regressive” by industry organisations, Chas Roy-Chowdhury, head of taxation at the Association of Accountants, says that the development creates an unpleasant precedent. Roy-Chowdhury said: “This is another creeping power of HMRC, which are biased towards each other and from taxpayers.”
Tim Stovold, from accountancy firm Kingston Smith, warned that the new rules could be harmful to society as HMRC plans to take funds directly from personal bank accounts. He said: “It has much less attention than those sharply criticised for the direct recovery of debts from bank accounts… HMRC are more likely to use these new powers to collect money and wages in return.”
It is worth noting that the government seems to be doubling their efforts to recover unpaid taxes that could reach billions of pounds, as well as bring their principle of “accelerated payment” from next month. Focusing on businesses and individuals, the rules ask debtors to pay the disputed tax in advance before their cases are heard in court, drawing accusations from critics of injustice. For more on tax and accountancy, check out The Cheap Accountant.