The Government's proposal for Direct Recovery of [tax] Debts will allow HMRC a free hand to dip into taxpayer's bank accounts has met with united opposition from all of the tax and accountancy bodies. Simply put, HMRC makes too many mistakes to be trusted, and any power which allows the Government to circumvent the normal legal process of an open court hearing is not something that that a civilised Western society expects. Please sign the petition to stop this measure.
Here is the link: https://submissions.epetitions.direct.gov.uk/petitions/68384
HMRC finds debt collection via the County Court costly, and so it wishes to save money by having the power to make direct recovery of tax debts (which include tax credits) from taxpayer's bank accounts. The mischief is that this Government wishes HMRC to circumvent the normal legal process of the County Court. This gives the taxpayer very limited scope of appealing the action and recovering wrongly deducted money. Tax Aid, a charity confirms that in most of the cases it handles HMRC has made errors.
Why does HMRC get it so wrong?
There are a combination of problems, some are due to poor training, some are due to poor systems and some are due to HMRC's own policy:
- HMRC's systems are by far from accurate, its Debt Management section use different computer systems to the tax offices and so are unable to see what they are collecting and cannot therefore check the calculations.
- The tax credits system even baffles tax professionals, HMRC sends our bundles of paperwork and it is very easy to be over/underpaid and most taxpayers don't understand the calculations in any case.
- HMRC refuses to send taxpayers reconciliations of receipts and so if HMRC misallocates your payments or you accidently enter the wrong reference and your payment is entered into a "pool", you are none the wiser.
- HMRC offices refuse to reply to correspondence to enquire on reconciliations.
- The Adjudicator, reporting on HMRC for 2013/14 found that 90% of complaints made to it about HMRC were upheld.
According to HMRC Ross Martin Tax Consultancy Limited had a "PAYE underpayment" which we knew did not exist. Not one of four letters to our tax office was answered. HMRC Debt Management continued to send out payment demands and even when we wrote back full explanations and sent details of all our payments and the dates cleared. Meanwhile we had an overpayment on corporation tax, this was not the same as the PAYE "underpayment" so we reclaimed it and it was repaid. After more time wasting and letter writing in response to payment demands HMRC "found" the missing PAYE payment, somehow they had allocated back to a previous year and then reallocated another payment to the wrong year and the balance to our corporation tax account. To be frank we still don't fully understand, it seems we might have accidently used the wrong payment reference, but that does not explain why HMRC was allocating to other years, we think we have a possible overpayment in a prior year but HMRC simply won't tell us. Our dashboard which tells us details of PAYE did not explain why HMRC was reallocating payments. This could have been sorted out if HMRC had sent us what we continually requested - a summary of what they thought we had paid: even a ten year old would have been able to "spot the difference" and we could have then identified the actual payment and date. The result was HMRC wasted a lot of all our time over a six month period because the office with the right computer failed to correspond. Under the Direct Recovery of Debt proposals HMRC would have the power to deduct the "underpayment" (which of course did not exist) and we would then have to go to judicial review, i.e. engage a barrister to review whether HMRC has acted fairly...cost to us, in the region of £2,500 to £10,000. Absolute madness.
On another note we already have examples of what happens when HMRC is allowed to circumvent the safeguard of an open court hearing. HMRC may serve a Schedule 36 FA 2008 notice on third parties and this may be agreed by the Tribunal without the taxpayer being allowed to be present at a hearing. There is no right of appeal and so no check on whether HMRC is truthfully presenting its case. Unbelievably the Government finds that this Kafkesque measure is "OK", unsurprisingly we don't agree. We are seeing a growing body of cases where HMRC is using Schedule 36 as routine measure in the openning of an enquiry and cases where we don't consider that the tribunal has properly issued the notice.