Whilst the taxpaying public retreat to warmer climes for a well deserved break to lick their wounds following the Summer Budget 2015 the Government are working hard to give those well rested travellers a frosty welcome home.
This is particularly so if you've been on holiday despite a tax debt hanging over you. Finance Act 2015 gave HM Revenue & Customs the power to recover tax debts of over £1,000 directly from a taxpayer's bank account. The provisions were effective immediately but their use delayed due to associated legislation detailing what and how HMRC will demand information being under consultation until 2 September 2015 (The Enforcement by Deduction from Accounts (Information) Regulations 2015).
What taxes are affected?
Well, everything. Including tax credits! The rules are outlined in Finance Act 2015 (Schedule 8) and detail that the debt must:
- Be over £1,000; and
- Relate to an "established debt" or a debt arising from an Accelerated Payment Notice (APN). An APN basically gives HMRC the power to demand funds despite a pending court case to dispute a tax issue; and
- A debt that the taxpayer is aware of.
HMRC have indicated that they will consider you aware if you have received a face to face visit and are not identified as vulnerable.
You're also protected if you don't have enough money to pay, but don't worry about telling them as HMRC will simply demand the information from your banks and decide themselves.
Surely they can't do this without telling me?
Correct. There is a little back and forth between your bank and HMRC in which your bank has very tight timescales to provide information on your accounts and how much is in them, including any accounts you hold jointly with another.
Where HMRC decide to apply the legislation they will first issue a "hold notice" to your banking institution and, once they have informed HMRC they have held the funds, HMRC will inform you, the taxpayer, of the funds held and that they intend to take those funds. You'll have 30 days to appeal a notice.
Can they take all of my money?
Ordinarily, no. HMRC will decide a "specified amount" which you should expect to be enough to continue to meet your day to day obligations. This amount is protected from HMRC's mitts.
The specified amount must be a minimum of £5,000 across all accounts owned by a taxpayer that HMRC must leave untouched.
Should I be concerned?
If you abide by the rules and fall into arrears just occasionally, you probably have little to worry about at the time of writing although HMRC are highly likely to try to expand their powers in future.
If you engage in aggressive tax planning or are a persistent offender with debt substantially in arrears you are likely to experience issues with Direct Recovery of Debts.
Here at Parkers Accountants and Chartered Tax Advisers we've not seen any instances as yet and don't expect to do so until the legislation over information and hold notices is finalised. You can expect that legislation to be dealt with in short order once Parliament resumes on 7 September.
Note to Scottish Taxpayers
Please note that if you are resident in Scotland for tax purposes (which will become more important over the coming years!) then you are not liable to the legislation covered in this article.
If you'd like more information or have some tax debt that you've not dealt with, now is the time! Get in touch with Parkers Accountants and Chartered Tax Advisers to see how we can help.