HMRC bypassing the courts to collect tax and tax credit debt would be contrary to the rule of law and would inflict disproportionate financial and human cost on vulnerable taxpayers.
Introduction
The Low Incomes Tax Reform Group (LITRG) has published its comments in response to the Government’s consultation on Direct Recovery of Debt. These include:
In support
LITRG has no sympathy with those who can well afford to pay their tax debts in full and on time but who wilfully refuse to do so. The Group supports HMRC’s existing power to satisfy a debt by taking money from a debtor’s bank account, under the supervision of a judge. This is proportionate and balanced by a robust and crucial safeguard – the independent oversight of the courts.
Strongly critical
However, the power now sought by HMRC proposes to oust the jurisdiction of the court, and in its place offers ‘safeguards’ which are really little more than internal checks. HMRC have complained that courts move slowly and are costly, but the department should not be allowed to help itself in preference to other creditors.
Concern for vulnerable taxpayers
In LITRG’s view, it is deeply disturbing that recipients of tax credit overpayments, a group already vulnerable to administrative error, are to be included in the list of debts in respect of which the proposals may be applied. Errors, which are bound to occur in many such cases, could force choices upon these debtors about whether to heat their homes or go hungry, particularly where any remaining funds in the bank account are already earmarked, for example, to pay a carer of a disabled debtor or to pay other pressing creditors.
Telling those who ‘can’t pay’ and those who ‘won’t pay’ apart
LITRG is unclear how HMRC will distinguish between the ‘can’t pay’ and ‘won’t pay’ groups. The alleged debtors will range from those who would pay but have short-term financial problems and those with long-term financial problems who may never be able to pay, to those who flatly refuse to pay, or deliberately avoid contact with HMRC. The latter are HMRC’s legitimate targets, and any misdirection of the power could result in vulnerable taxpayers being wrongly targeted, causing extra stress and financial damage to them as a consequence.
Lack of clear safeguards to protect debtors against mistakes by banks
It is also unclear what safeguards will protect the debtor against mistakes by banks or deposit takers called upon by HMRC under the proposed power, and what compensation would be payable for such errors.
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