HMRC’s plan to raid your bank account – yet more financial repression

I got a letter from a reader a few weeks ago. He was grumpy about some of our marketing. I can see that. But I also thought he was wrong about the bits that he particularly disliked.

His main bugbear in the literature? He thinks the idea that feckless politicians have foolishly run up gigantic debts and are now planning underhand tricks to recoup the money from the pockets of middle-class investors is “clearly a travesty”.

I guess he isn’t spending much time reading the newspapers. This week provided us with yet another example of the financial repression we have been talking about for some time now – the news that HMRC is seeking powers that will allow it to take money directly out of your bank account or Isa to cover tax that it believes you owe, in a manner that, as one commentator puts it, “undermines centuries of established laws and liberties”.

You might think this isn’t a big deal – after all, everyone should pay the tax they owe (all part of living in a civilised society, etc) and HMRC says it’d only take money from people it had contacted “on average nine times” already. It would also give 14 days notice and leave at least £5,000 in all accounts to make sure no immediate financial hardship was suffered.

We don’t think that’s enough.

For starters, as MPs pointed out last week, given that HMRC wants to decide for itself who owes what with no independent oversight, “this policy is highly dependent on HMRC’s ability to accurately determine which taxpayers owe money and what amounts they owe”.

And that’s not an ability it’s demonstrated much in the past. In 2011, 1.4 million people received demands for a average of just over £1,400 as a direct result of previous HMRC errors.

Another thing to note is that this is merely an extension of powers HMRC has already awarded itself.

A letter to The Times this week from John Wright points out that “HMRC already collects money it thinks it might be owed by using the tax code system”. HMRC stated that Wright owed £808 in a “potential underpayment” of tax. As a result, it adjusted his tax code to deduct £67 every month from his pension.

The fact that in correspondence it acknowledges that the sums might be wrong has “not stopped it from continuing to take the money” every month. If it could already take money from Wright’s bank account, you can bet the chance of being wrong wouldn’t stop them doing that either.

Too many people don’t pay their taxes, and the black and grey markets are far too big in the UK (one reason why those of us who do pay our taxes pay more than we feel we should), but that is no reason to make bad laws.

If HMRC needs to take money from bank accounts, it should only be able to do so when it has applied for and received a legal warrant to do so – just as it does today when it wants to seize an individual’s goods to cover unpaid tax.

Daniel Hannan writes in his excellent book How We Invented Freedom and Why It Matters that one of the great joys of British democracy has long been the way in which the state has served the people rather than the other way around.

This kind of thing – the idea that HMRC can take your money or property without going via a legal system that gives you right of reply – is not only financially repressive, but gives a nasty hint as to how that is changing.

  • GFL

    We are living in dangerous times; technology has made it extremely easy for the state to poke their nose into every aspect of our lives.

    With technology getting even more advanced, we really need to have a conversation about what the government’s role is.

  • Merryn

    More on taking money out of ISAs. Who decides which assets are sold? Who compensates for investment losses if HMRC turn out to be wrong?

  • Boris MacDonut

    It’s why I remain a great advocate of cash.
    The ne powes do not come with no right to appeal. It is just bringing matters in line with the Min of Justice Tribunals system, where tax is payable on the decison of the First-tier Tribunal. The taxpayer can still take it further and be repaid with interest should they succeed.
    The reason for this was too many , mainly very large companies, used the old tax commissioners system to delay bills. The ponderopusly slow appeals system taking sometinme 10 years to yield a result. Now the Government benefits from some cashflow and the taxpayer has his mind concentrated on whether he genuinely has a case to plead.

  • CityFarmer

    It’s actually very concerning Boris. Peoples lives could be ruined totally unecessarily. As I understand it HMRC win about 75% of the time. So 25% of the time they are wrong. And if they have forced someone to sell there house, liquidate there ISA, etc to pay a bill they should never have paid then getting the money back with interest years later is hardly going to be any comfort. You have to look at the balance of harm here, ‘a bit of extra cashflow’ is doubtless handy for HMRC, however it’s lack would be no great hardship, being forced to sell your house to meet a huge tax demand that subsequently proved to me erroneous years later would be devastating to the individual involved.

    Will HMRC pay the estate agents fees, the moving costs, the legal costs, will HMRC make up any forgone capital appreciation in the house you no longer had whilst your money sat in a HMRC account? Will HMRC compensate people for the stress and hardship suffered? No, I very much doubt it.

    What the Gary Barlow case proves it that the existing powers are more than sufficient.

  • mr clyde

    Standby incoming…What ever happened to the concept of personal responsibility? Every year literally hundreds of thousands of people fail to submit their returns on time or not at all because they can’t be bothered. I suspect that the majority of the very small number of people who may fall foul of this tax power will have significant personal culpability for their plight. Judging by the number of people I see staring vacuously into their smart phones for hours on end, most could file a return on the bus – it really is that simple.

  • Boris MacDonut

    City Farmer. It is actually over 80% that HMRC wins. And rather more by value. So you think that 80% should be allowed to delay paying to protect the minority among the 20% who may be a bit compromised by paying.