Wait your turn—HMRC powers could clash with insolvency law

Wait your turn—HMRC powers could clash with insolvency law

Frances Coulson of Moon Beever looks at the implications of HMRCs proposed new powers to access bank accounts to retrieve tax debts

Original news:
HMRC given powers to ‘raid’ bank accounts, LNB News 23/03/2014 7

The Sunday Times, 23 March 2014: Under a set of measures announced in the recent budget, HMRC will have the power to raid the bank accounts of those believed to owe £1,000 or more in tax or tax-credit debts. The government plans to recoup £365m through the direct recovery of debts over the next five years. Critics claim the change means HMRC could take priority over other creditors.

What was announced in the Budget that has caused such hysteria?
Two areas of the Budget look at accelerating payments to HMRC.

Direct access to recoup funds from a taxpayer’s bank account
This is a consultation. Reports suggest there would be a minimum debt level but there would also have to be a minimum level of funds left in the bank account after tax is taken—HMRC say perhaps £5,000. Funds would only be taken after several requests to pay. It depends what the tax is—if declared tax on a return submitted by the tax payer it is bypassing the need to seek judgment and a third party debt order on what is in effect an admitted debt warranted by the taxpayer as due, but is unpaid. Is this really much different to HMRC being able to send in the bailiff on a VAT debt without a court judgment and court issued warrant?

If it is a debt assessed by HMRC and disputed by the taxpayer, then it is either capable of correction by filing of the appro

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About the author:
Eleanor qualified in 1998 into the insolvency team at ASB law. She became a partner in 2005, and went on to head up the Recovery & Insolvency team. Whilst traditionally specialising mainly in contentious corporate insolvency matters, in recent years she has moved into the non contentious arena, in particular specialising in company administrations.