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UK Banks Criticize HMRC 'Bank Raid' Powers

by Robert Lee, Tax-News.com, London Friday, August 22, 2014

The British Bankers' Association (BBA) has expressed concern over the apparent lack of judicial oversight provided for in plans to grant HM Revenue and Customs (HMRC) the power to recover money directly from taxpayer bank accounts.

BBA Chief Executive Anthony Browne has written to the Chancellor of the Exchequer, George Osborne, in response to a consultation on the proposals. He asked Osborne to reconsider the initiative, and warned that "the lack of checks and balances could create problems for citizens, particularly if HMRC makes mistakes."

In particular, the BBA said that the due process for the use of direct recovery is not sufficient. It said: "HMRC would effectively be a judge in its own cause. The importance of independent oversight and scrutiny are already accepted as necessary by HMRC before sanctions are applied in order to ensure fairness. We think such procedural requirements are necessary when HMRC is considering directly accessing an individual's bank account."

The Government says that the power will be used only against taxpayers who have repeatedly ignored correspondence from HMRC. Anyone who owes more than GBP1,000 (USD1,660) will be liable to have their funds seized, but taxpayers will always be left with at least GBP5,000 in their accounts.

The BBA is not persuaded that the rights of those affected by the proposals are sufficiently protected. It has encouraged the Government to obtain further advice on whether the scheme could potentially contravene the Human Rights Act 1988. Browne also cautioned Osborne that the GBP1,000 materiality threshold is "likely to mean that the profile of the taxpayers caught by these rules could include a significant number of unintentionally non-compliant, vulnerable taxpayers."

The information gathering powers that HMRC would need to use to obtain transaction data about customers could run contrary to the requirements imposed by Parliament. The letter points out that HMRC can currently only obtain information from third parties with either the agreement of the taxpayer in question, or the approval of the First Tier Tax Tribunal. The BBA added that "there may be a proportion of 'debtors' with whom HMRC has never been able to make contact and these people may not be in a position to know that they can or should exercise the right to challenge in the First Tier Tax Tribunal."

Last, the BBA noted that HMRC's "performance cannot yet be considered as sufficiently competent to wield an unchecked power this strong, at least not without significant reputational damage and potential litigation." The letter concludes by stressing that existing civil remedies are better than the proposed new powers.

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