The recent proposal to allow HMRC the ability to take unpaid taxes directly out of people’s bank accounts is causing a lot of controversy. Many MPs believe that small businesses and individuals should be concerned due to HMRC’s history of error and miscalculations.
The Treasury insists that the scheme has a number of safeguards in place to ensure that these plans will never leave anyone penniless, and will not affect everyone who misses a payment. HMRC will only be able to extract the money after four ignored requests, meaning that those who slip up once in a blue moon will not have money taken due to a rare late payment. They will also not be able to take money unless there is at least £5,000 remaining in the account after the extraction, and only with debts over £1,00o.
However these safeguarding procedures are not enough for some to trust HMRC. A cross-party group of MPs believe that the scheme is dependent on 100% accuracy by HMRC which isn’t always the case. In the case of HMRC miscalculating the amount of tax owed, or even taking funds from the wrong account, this could be incredibly detrimental to the tax payer, with some MPs even suggesting that a compensation clause should be included, wherein if a mistake occurs, the business or individual would be entitled to their money back with interest. The Revenue has admitted that more than five million people are charged the wrong amount through the Pay as You Earn system because they are allocated the wrong tax code and in 2007, officials lost discs containing the personal data and bank details of 25 million families claiming child benefit. If this level of error was repeated through this initiative, it could seriously affect many families and small businesses throughout the UK.
Opinion over the plans in heavily divided, however. In spite of MPs scepticism, many believe that the plans will actually prevent people from missing payments through the fear of HMRC taking the money straight from their accounts. It is estimated that through giving HMRC these new powers, they will raise £100m per year – money which otherwise would have sat illegally in bank accounts across the UK. The Association of Chartered Certified Accountants have said that the system’s safeguards “look relatively robust” but it still has “concerns over how efficient HMRC could be in maintaining those safeguards”.
To ensure you are not caught out by the new tax recovery measures, contact MCC Accountants today. We understand that running a business can be tough, and often keeping track of your finances can be difficult whilst also juggling day-to-day tasks. At MCC, we can take care of your finances and ensure that everything is in order, including your tax return. To speak to one of our chartered accountants, contact us today on 0161 707 1500 or send us a message through our enquiry form.