Budget 2014: HMRC can now take money directly from your bank account
Buried deep in the Budget document, there's a pretty significant HMRC power grab.
If officials decide you owe them money, they now have the ability to take it directly out your bank account. No insolvency proceedings, asset freezes or debt collection agencies. Just the government taking out whatever it thinks it's owed.
There are restrictions. The power can only be used once you've received a couple of letters and a phone call from enforcement. It only applies to people who owe over £1,000. HMRC must leave at least £5,000 in your account.
Once they get the money they put it on hold for 14 days and you've got a chance to get in touch and set up a payment plan. If you don't, or you still refuse to pay up, they go ahead and keep it.
All's fair in tax dodging, you might think – and indeed that will be the sentiment that George Osborne hopes will override concerns about the policy.
But the plot thickens.
A couple of points above the bank account section, there is another power HMRC has taken for itself: it now gets to take money from you in expectation of a future legal victory.
This is how it works: your tax adviser recommends you use a tax avoidance scheme. They reckon HMRC might dispute it, but it's worth a punt. You legally have to mention the fact you're using the scheme to HMRC. If they don't like the look of it, they challenge you. Usually (80% of the time) they win. The internal decision, unsurprisingly, goes their way, and most subsequent legal challenges to it fail.
Up until now, you could keep the money while the process took place. Now, HMRC takes the money immediately and gives it back to you with interest if you win.
From the Treasury's view, this is just a case of applying the same rules to tax dodgers as they do to normal taxpayers. After all, you don't get to hand your income tax over to officials when you fancy it. It's taken before it gets to you.
But in truth this is a completely different matter. This is a dispute. The new rules mean you are being penalised in expectation of a future government legal victory. Which seems a bit off, constitutionally speaking.
But if you put these two policies together, something quite drastic rears its head.
This is a significant power grab.
The state can now confiscate your money directly from your bank account while it decides if you have broken the law or not.
(Note: The bank acount confiscation power is in Section 1.208 and the future confiscation power is in Section 1.200 and 1.201. You can access the full Budget document here)
