Law Society labels HMRC's debt recovery plans 'regressive and draconian'

31 Jul 2014News

Mistakes will 'inevitably' occur in a system where the state has a 'preferential position' and no judicial supervision

Mistakes will 'inevitably' occur in a system where the state has a 'preferential position' and no judicial supervision

Proposals from HMRC to take money direct from taxpayers' bank accounts - without going through the courts - have been branded 'regressive and draconian' by the Law Society.

The Law Society objects to HMRC officers 'effectively acting as claimant and judge at the same time'. The proposed measures would place the state in a 'preferential position' to other creditors who would have to pursue their cases through the courts.

Furthermore, the Law Society argues that the use of power without judicial supervision will lead to hardship where HMRC make mistakes, which the society describes as 'inevitable'.

HMRC is also proposing that a taxpayer is given only 14 days to respond after the monies in their bank accounts are frozen, before the monies are then taken. The Society suggests that this short deadline might easily be missed by a taxpayer. Thirty days would be 'fairer' according to the consultation response; the same period in which HMRC are supposed to respond to enquiries.

The chair of the Law Society's tax law committee, Gary Richards, said: "We agree that tax that is due must be paid, but HMRC's existing powers - if properly used - are sufficient.

"There are already streamlined procedures for recovery of tax due in UK courts. We are concerned that the direct recovery of debt from bank accounts without judicial supervision may not comply with data protection or human rights legislation. It would effectively reintroduce Crown preference - a measure swept away with good reason in 2002."

A full copy of the Law Society's consultation response is available here.

'A creeping extension of executive government power'

Lucy Brennan is a partner at Saffery Champness

"With the consultation on HMRC's proposed powers to levy disputed tax directly from bank accounts now closed, the legal and accountancy communities will be watching closely for an update on the legislation. Despite HMRC outlining a series of purported checks and balances on these unprecedented new powers, the clear and prevailing industry viewpoint is that the vast majority are profoundly uncomfortable with HMRC serving as both judge and jury.

"Both the ICAEW and the Law Society have come out against the new proposals, arguing compellingly that HMRC's current available powers are more than adequate if properly implemented. For its part, the Law Society has labelled the proposed powers as 'regressive and draconian', pointing out the 'already streamlined procedures for recovery of tax due in UK courts.' Direct recovery without judicial supervision, in their view, would likely also violate data protection or human rights legislation.

"Similarly, the ICAEW has responded that the proposed powers are likely unconstitutional, noting that 'if someone owes you money, you cannot just help yourself to it' and that 'permission of the court is required'. There is a distinct lack of separation of powers, they argue, given the 'fundamental principle of justice that nobody should be a judge in their own cause'.

"The Law Society's consultation expresses the concerns that many are raising against these powers. While it could be argued that it could have attacked the proposed powers further, it has provided a very rounded and clear response, ensuring that its fundamental objections are expressed.

"Serious concerns also remain regarding HMRC's standing with respect to other creditors a debtor might have, particularly when a person or company goes bankrupt. As HMRC will not be required to go to court to recover money (while others must), this effectively puts the Revenue in the position of being a preferred creditor, a status which it lost in 2003 (for good reason, many would argue).

"From the collective industry responses to the new proposed weapons in the Revenue's arsenal, one thing is clear. Positioning HMRC as both judge and jury in these matters is a proposition that few find comfortable. To most, it appears to be a creeping extension of executive government power, and a step too far afield of the principles of due process."