Small and medium sized firms in the country have criticised Revenue & Customs (HMRC) on its plans to recover outstanding tax straight from the account of the debtor.
The plan, the Direct Recovery of Debt (DRD) initiative, was unveiled in this year’s Budget (2014). The terms of the scheme would see HMRC have the authority to collect tax and recover overpaid tax credits.
Affecting both individual taxpayers and business, DRD would only become effective in the event that any outstanding balance exceeds £1,000 and that the taxpayer has been contacted at least four times about the debt.
HMRC must also ensure that a minimum amount of £5,000 remains in the target account.
Estimates suggest that the scheme will affect about 17,000 debtors each year, and 85% of them are likely to be self-assessed or self-employed.
The plan has been open to a public consultation since shortly after the announcement, with the deadline for protestations closing on July 29.
The Forum of Private Business (FPB) has also taken the opportunity to try and change the government’s mind. The FPB’s head of policy, Alexander Jackman, said:
“Our members are unequivocal in their condemnation of tax avoidance and the tax evasion practices that have received significant coverage in the media, in particular the practices of large corporates.
“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.”
Proposals from the FPB suggest lifting the £5,000 safety net, while many small business owners are finding the value of outsourcing their accounts for the first time and allowing trained professionals to take control of their tax affairs.
A number of politicians have also waded into the debate. With a campaign in the Commons gaining momentum to prevent the plan from being passed into law, one Liberal Democrat has suggested it will also be in violation of the Magna Carta.
Referencing the earliest statute of defined laws in Britain, John Thurso, MP for Caithness, Sutherland and Easter Ross, told a select committee last month:
“We are talking about the ability of one organ of the state to have the unique right to go against the Magna Carta charter and go in and seize – without judicial process or review – a bank account.”
Responding to criticism of the plan, however, HMRC has said the plan will see the playing field be levelled out. It has also highlighted similar plans in place in the U.S. and Ireland.