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July 28, 2014 5:51 pm
Small business lobby groups have attacked plans to allow HM Revenue & Customs to seize unpaid tax directly from bank accounts, warning some traders could be put out of business.
The Forum of Private Business called for the plan to be scrapped, while the Federation of Small Businesses said it could not support the proposals without further safeguards.
The proposal, put forward by Chancellor George Osborne in the Budget in March, has been criticised by MPs and charities. Under the plan, HMRC would be able to recover debts from bank accounts of taxpayers who owe more than £1,000, without an application to the courts.
The measure applies to businesses and partnerships as well as individuals. It is expected to affect 17,000 taxpayers a year with an average debt of £5,800, and raise £375m over four years.
Alexander Jackman, the FPB’s head of policy, said members already felt “unfairly targeted” by HMRC. “The smaller scope of their operations means many small business owners feel much more vulnerable to investigations than larger firms with more complex tax arrangements,” he said.
HMRC has said at least £5,000 will be left in accounts, but Mr Jackman said that failed to take account of unexpected costs that often faced small businesses.
Graeme Fisher, head of policy at the FSB, said there were “significant risks” with the proposals. The FSB warned that, where HMRC records were not accurate and up-to-date, innocent small businesses could have money deducted from their accounts, which would reduce their cash flow and put their operations at risk.
The federation said HMRC should be allowed to access bank account details only through a warrant or authorisation by an independent authority and that ideally recovery should take place only after a case had been proved in court.
It called for the £5,000 safety net to be at least doubled and said businesses should have more than the proposed 14 days between a notification of recovery and deduction of the money, so they can raise objections.
Lin Homer, HMRC chief executive, defended the proposals before the House of Commons Treasury committee this month, saying taxpayers would have stronger safeguards than in other countries such as Australia, the US and France, where the tax authority has similar powers.
She rejected a proposal by the committee to require independent approval from a court, ombudsman or tribunal before money is taken, saying it would deprive HMRC of any additional powers and give the upper hand to recalcitrant debtors.
HMRC’s consultation closes on Tuesday, with finalised regulations to be published in the autumn. The measure is due to be introduced in 2015-16.
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