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Banks warn Osborne on HMRC tax grab powers

Banks have warned Chancellor George Osborne that HM Revenue & Customs is not competent enough to be trusted with the power to seize unpaid tax directly from bank accounts.

According to the Financial Times, British Bankers’ Association chief executive Anthony Browne has written to Osborne saying the plans risk falling foul of human rights laws.

In the letter, Browne says: “It is clear HMRC’s performance cannot yet be considered as sufficiently competent to wield an unchecked power this strong, at least not without significant reputational damage and potential litigation.

“HMRC would effectively be a judge in its own cause.”

The Government set out plans in the Budget for HMRC to have the power to recover tax directly from debtors’ bank accounts where they owe more than £1,000 and have previously been contacted about paying the tax. In using this power, HMRC will ensure debtors are left with at least £5,000 in their account.

In a consultation paper published in May, HMRC moved to extend the power to Isas.

The BBA says the threshold of £1,000 is too low and could mean a large number of vulnerable taxpayers are at risk, as well as those who have unintentionally built up debt.

The organisation is also calling for greater independent oversight and “due process” because it claims HMRC’s systems and processes for avoiding mistakes are not robust enough. It cites a report from the Adjudicator’s Office this year saying 90 per cent of complaints to HMRC had been partially or fully upheld.

The BBA has urged Osborne to obtain further legal advice on whether the proposals contravened the Human Rights Act and whether they are “necessary or proportionate”.

The intervention reflects fear among banks they could face criticism from account holders who feel money has been unfairly removed from their accounts.

The Treasury select committee warned the Government in May that allowing HMRC to recover debts from people’s bank accounts would be “wholly unacceptable” without prior independent oversight.

Last month, Money Marketing revealed that new powers which will see HMRC seize £7bn in disputed tax through “accelerated payment notices” could trigger a wave of misselling complaints against advisers.

HMRC has been given the power to issue demands to pay tax within 90 days to anyone who has used a tax avoidance scheme into which it has an open inquiry.

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