Back in March, Chancellor George Osborne proposed that HM Revenue and Customs (HMRC) be allowed to recover unpaid tax directly from the bank accounts of individuals.
At first, details were sketchy, but things have become clearer over the past two months:
- The proposed powers would enable HMRC to seize money directly from the bank accounts, building society accounts and ISAs of individuals owing more than £1,000 in tax or tax credits.
- HMRC would only be able take action where the individual had the financial capabilities to pay and had been contacted numerous times. Further, they would not be allowed to empty an individuals' accounts - instead leaving a minimum of £5000.
- Funds to be seized would also be frozen for 14 days before being taken, to allow time for payment.
The 2014 Budget explained that the measures would ‘modernise and strengthen HMRC’s debt collection powers’ and ‘bring the UK in line with many other tax authorities which already have the power to recover debts directly from an individual’s account, such as France and the US’.
The proposals are currently going through the consultation process and if approved will take effect in 2015-16.
The latest developments in relation to HMRC’s powers may be of interest to Take That band members Gary Barlow, Howard Donald and Mark Owen who are all facing large tax bills after it was ruled that a partnership they invested in along with around 1,000 wealthy investors was a tax avoidance scheme. It should be noted however, that in terms of the law, they have not done anything wrong – at least in a criminal sense.
Tax avoidance is legal, with people allowed to avoid paying tax where possible, but the various tax reliefs available can be easily abused.
According to HMRC: ‘Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter – but not the spirit – of the law’.
The UK’s tax avoidance problem is forcing the Government to take action, the aim being to ensure everyone pays their fair share of tax - hence the recent proposals in the Budget.
To avoid landing in a similar situation to Mr Barlow, it’s wise to be diligent if you are looking to reduce your tax bill. To this end, HMRC have helpfully published ‘warning signs’ for those thinking about joining a tax avoidance scheme:
- it sounds too good to be true and cannot have been intended when Parliament made the relevant tax law (for example, some schemes promise to get rid of your tax liability for little or no real cost, and without you having to do much more than pay the promoter and sign some papers)
- the tax benefits or returns are out of proportion to any real economic activity, expense or investment risk
- the scheme involves arrangements which seem very complex given what you want to do
- the scheme involves artificial or contrived arrangements
- the scheme involves money going around in a circle back to where it started
- the scheme promoter either provides any funding needed to make the scheme work or arranges for it to be made available by another party
- offshore companies or trusts are involved for no sound commercial reason
- a tax haven or banking secrecy country is involved
- the scheme contains exit arrangements designed to side-step tax consequences
- there are secrecy or confidentiality agreements
- upfront fees are payable or the arrangement is on a no win/no fee basis
- the scheme has been allocated a Scheme Reference Number (SRN) by HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) regime
If you have any questions in relation to the new powers being given to HMRC or wish to discuss ways to minimise the amount of tax you pay, our tax lawyers can help.
Contact Our Tax Lawyers in London
With offices in Camden and Fleet Street, Lewis Nedas can help you will all aspects of tax law across London and the UK. To speak to one of our specialist tax solicitors, please call 020 7387 2032. Alternatively, please complete our online enquiry form.
