Irwin Mitchell Comments On Headline Measures

The Chancellor George Osborne has today announced a number of initiatives designed to tackle tax avoidance in the UK.

Some of the headline measures include an increase in HMRC budget for non-compliance, a block on transfers of profits within groups and increased tax credit debt recovery rates.

This will see the government modernise and strengthen HMRC’s debt collection powers to recover financial assets from the bank accounts of debtors who owe over £1,000 of tax or tax credit debts, have the financial means to pay, and have been contacted multiple times by HMRC to pay.

According to HMRC, this brings the UK in line with many other tax authorities which already have the power to recover debts directly from an individual’s accounts.

Commenting on the Chancellor’s debt recovery initiative, Phil Berwick, partner* at law firm Irwin Mitchell said:

“The measures introduced in the Budget will increase the pressure on taxpayers. Granting HMRC direct access to a taxpayer’s bank account means that the taxman can jump to the front of the queue, and enable it to take priority over other creditors the taxpayer may have.”

George Osborne also announced changes to an existing policy designed to counter arrangements to avoid tax by ‘enveloping’ high value residential property in the UK.

Phil Berwick added: “The announcement of additional bands is a natural extension of the rules introduced last year. Taxpayers who thought they were “safe” because of the relatively low value of their property will have to think again. Many will, I suspect, pay the charge, at least in the short-term. The delay in the introduction of the new bands will at least give taxpayers time to consider their options.”

The Chancellor also said that taxpayers signed-up to disclosed tax avoidance schemes that are challenged by HMRC will be required to pay their taxes upfront.

Phil added: “The 43,000 taxpayers who are expected to receive accelerated payment notices will be in for a shock.  They will have to find, collectively, and in many cases, individually, a large amount of money in a relatively short period of time.

“HMRC are pre-empting the outcome of litigation. HMRC’s position is that they don’t like taxpayers using avoidance schemes and the individual must pay the disputed tax before the Tribunal has reached a decision, or even considered the effectiveness of the arrangement. That is hardly justice. Legal challenges to HMRC’s position can be expected.”

*non-lawyer