Mike Down of Baker Tilly has written ten reasons for HMRC to think again about their plans for direct access to taxpayers' bank accounts, for his colleague George Bull's Weekly Tax Brief email:
1. How much can we rely on the amount of tax to be taken from the account to be the correct amount, and should we trust HMRC unconditionally as tax tribunals have found it untrustworthy in the past over aspects of tax administration?
2. The money in someone’s account might not be theirs: it could be a joint account with a spouse, other family member or even someone unrelated.
3. A person’s name on an account may be simply as nominee for someone else, or because he/she is acting as a trustee or executor. The first named person in these circumstances is often misunderstood by HMRC which leads to unfounded accusations that interest has been missed off a tax return.
4. How will these proposals work in respect of fixed rate accounts which tie up money for a period of time with a “penalty” loss of interest for early withdrawal? Or alternatively cash ISAs, or situations where there is a sweep facility between different bank accounts or an offset mortgage? And what if a withdrawal by HMRC results in the debtor incurring account charges because the balance drops below the threshold for free banking?
5. In practical terms, how would HMRC actually identify the person’s main bank account? Details are supplied by banks but only at certain points in time. By the time HMRC gets round to taking the money, the balance may be less than expected.
6. Self-employed people may use accounts to save for a business investment such as a new property or new equipment.
7. Self-employed people may need the money in their account to pay wages – is HMRC really suggesting that staff should not be paid if the taxman gets in first and simply takes the money? HMRC says it will take wages into consideration, but this may not be enough to reassure affected staff.
8. Individuals worried by a possible deduction of money by HMRC may simply revert to cash transactions which do not get reported for tax purposes resulting in losses to the Treasury.
9. What if HMRC issues estimated assessments or determinations and fails to speedily agree postponement applications?
10. What if HMRC simply gets it wrong by identifying someone with a similar name or the like?
They are very good questions. HMRC's consultation can be found here.