In a few weeks time the Finance Bill will grant HMRC new powers to be able to access individual's salaries and deduct up to £2K per annum, in order to recover underpaid tax.
Until now HMRC had to obtain taxpayers' consent, or a court order, before it could do this.
As Roy Maugham, a tax partner at UHY Hacker Young, points out other creditors can't deduct money from people's salaries in this manner, why should HMRC be granted such powers?
"After mortgage payments, food and energy bills, a lot of taxpayers have little left over every month. What's going to stop HMRC making deductions from taxpayers' salaries that leave them unable to pay utility bills or service other creditors? Other creditors can't just deduct money from people's salaries on a whim.
When you think of the administrative errors that led to millions in tax credits being paid incorrectly, you have to wonder whether there ought to be stronger safeguards before HMRC is granted unfettered access to taxpayers' paycheques."
Power corrupts.
Tax does have to be taxing.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
Click the link to read about: Tax Investigation for Dummies
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It was inevitable, after all HMRC, via the TPI (Third party information database) have access to all our bank accounts, how much shares we have, how much interest is accruing, whether newsagaents obtain Camelot commissions, how much stamp duty people pay on their houses. The laughable thing was that some staff working on the TPI database would misread the figures, furnished via the banks, and someone could end up with £6,000,000 worth of Share Interest whereas they would only have £60 worth. Many an enquiry would be opened as a consequence.
ReplyDeleteWould recent databases contain all necessary information?
ReplyDeleteSomeone on a moderate salary might transfer 100k into his account but it could be above board if he had been saving for decades. I can't imagine banks bother to transfer 30year old payment records when they update their computer systems.
"Would recent databases contain all necessary information?"
ReplyDeleteProbably not, no. However, information like this is used as an indicator that a risk may exist. It is possible that an enquiry may be opened in the scenario you describe (though even then it is likely that more risks than the £100k would be required), but it would just be that - an enquiry to ascertain what's going on. They're never going to raise assessments purely on the strength of the information on such a database. There would always be further fact-finding (including asking the taxpayer!) first.
"There would always be further fact-finding (including asking the taxpayer!) first."
ReplyDeleteHa! they are more likely to fine first and 'hold the funds' during the investigation.
So that people couldn't be warned and move the money elsewhere. At least that will be their justification. In reality they will just take forever to investigate and people will struggle to get the funds back that they have taken.
This shouldn't be allowed.
What a great way to drive more working people out of the country?
ReplyDeleteFantastic!
"Ha! they are more likely to fine first and 'hold the funds' during the investigation."
ReplyDeleteErm, nope. They can't do that. Certainly not with direct tax, anyway. I'm pretty sure VAT inspections don't work like that either, but I may be wrong. Perhaps someone who knows more can shed some light?
"What a great way to drive more working people out of the country?
"Fantastic!"
I feel rather depressed for you if you think that there are so many tax evaders in the country that this initiative is going to drive enough people out of the country to materially affect the working population!
I also think you fail to give our locally-grown tax evaders enough credit for their courage. HMRC's powers are pretty toothless relative to many other countries' tax authorities. The Italians have uniforms, the Russians have automatic firearms. I think, though I'm not sure, the American IRS (with their oh-so-efficient call centres) are often armed, but in any case they are definately generally more feared than HMRC because they have powers to shut your business down overnight.
In a VAT inspection, an Officer visits your business goes through all your books and if they identify an error you then get an assessment (which accrues interest till paid).
ReplyDeleteYou then get 30 days to appeal the assessment and even if the appeal is dismissed you can apply for local reconsoderation and HMRC have 45 days to make a decision.
Even if you disagree with that you can still apply to a VAT Tribunal for it to be looked at - if you do that then the debt will be suspended.
If you do none of the above then you will get a nice call from me as a VAT Debt Pursuit Officer !.
Thanks for that, Anon. When the VAT inspection officer goes through the books, I presume they'll first discuss any problems they find with the trader, rather than issuing the assessment first and asking questions later (after any appeal)?
ReplyDeleteHere is a link to the official guidance
ReplyDeletehttp://www.hmrc.gov.uk/dealingwith/appeals/indirecttax.htm