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Budget 2015 to give HMRC power to raid current accounts and cash Isas

HMRC will be able to dip into individuals’ current accounts and savings held in cash Isas to recover tax debts from the autumn, it was revealed in yesterday’s summer Budget.

The controversial move was hidden on page 94 of the document, rather than announced by Chancellor George Osborne in his speech.

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The document reads: ‘This government will introduce legislation to modernise and strengthen HMRC’s powers to recover tax and tax credit debts directly from debtors’ bank and building society accounts, including funds held in cash Isas.

Through the backdoor: One accountancy firm have accused George Osborne of burying the bombshell deep inside the Budget document

‘Having widely consulted, this measure will be subject to robust safeguards including a county court appeal process and a face-to-face visit to every debtor before they are considered for debt recovery through this measure.’

The proposals were unpopular when unveiled last year, with the Building Societies Association saying it could lead customers thinking their cash is not safe and taking out their savings, leading to a return to ‘cash under the mattress.’

The Institute of Chartered Accountants also said HMRC would inevitably make errors that could have damaging consequences.

Richard Morley, who works in tax dispute resolution at accountancy firm BDO, said: ‘Although not mentioned at all in the Chancellor’s speech, today it has been formally announced that HMRC will be given the powers to directly collect tax debts from an individual’s bank and building society accounts.

‘The absence of any mention suggests the Government was trying to sneak in this very unpopular policy, through the backdoor.’

The move was originally announced in the 2014 Budget and will be applicable for tax debts over £1,000, BDO says.

As part of a number of safeguards to be put in place, taxpayers will be given the right to appeal through the courts before outstanding debts are removed from accounts.

Yet, despite this, BDO warns that the HMRC is going to need to reassure people that innocent taxpayers will not be caught out.

Tax raid: George Osborne will give the HMRC the ability to raid current accounts and cash Isas

Tax raid: George Osborne will give the HMRC the ability to raid current accounts and cash Isas

Richard adds: ‘If an individual has a joint bank account which holds £10,000, and is shared 50:50 with a partner, HMRC is able to take up to £5,000.

‘However, a lot of questions still remain around whether the hardened debtor, who is likely to keep funds offshore, will be caught.

‘HMRC can only seize money from UK bank accounts making it harder for them to get hold of funds outside the UK banking system. The devil is in the detail and it remains to be seen how this announcement will play out in practice.’

Previously, the plans did not have a court process before the money was raided. It is thought around 17,000 people a year would have money seized.

Official documents from last year revealed it expects to receive £375million from the scheme between 2015 and 2019.

The HMRC also previously said it will ensure its targets always have at least £5,000 left over after any raid on their accounts. 

It is part of a wider move to give greater powers to HMRC.  An £800million boost to HMRC’s firepower and a drive to simplify taxes were at the heart of a ‘major assault’ on tax dodging announced yesterday.  

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