HMRC’s Draconian New Powers – The London Economic

HMRC’s Draconian New Powers

By Joshua Danton Boyd

Ever since the recession hit, tax avoidance has increasingly come to the fore. Whether touted by the Government as a way to balance the books or calls from citizens to tackle the big offenders, pressure has mounted on HMRC to solve the problem once and for all.

Of course, when there’s a lot of attention on a problem and a quick fix is called for, things can get a bit out of hand. It becomes easy to call for greater powers to get things done. In the end, it’s ended up as similar to – though not as dangerous or serious as – the increase in Government powers to combat terrorism.

You could of course argue that better enabling HMRC to go after people like Amazon, who despite having increasing revenue have kept their profits and therefore their tax low, and Vodafone would be a good thing. And why not? They’re massive corporations who should be paying more tax especially when normal people are feeling the burden of cuts. The problem is, it’s not the big hitters who are really feeling the heat. And it’s certainly not HMRC bosses themselves.

Massive tax bills are being settled for much lower than they by HMRC, while it seems your average citizen, freelancer and small business are taking the brunt of new measures.

The number of the country’s self-employed has been growing during the recession due to a lack of permanent jobs. While this is a great sign of initiative, it can also be desperation from those out of work. The latter group are unlikely to be making much money, but they do help mask high unemployment figures.

Unfortunately for them, during the 2012/2013 period, investigations into self-employed people’s tax affairs doubled compared to the previous year. That was a rise from 119,000 investigations to 237,215. The number of self-employed only rose by 30,000 in the same period.

Investigations, whether they turn out bad behaviour or not, will be time-consuming – and therefore costly – to the self employed who need every minute in the day to make their work financially viable. These distractions so that HMRC can increase their figures are unlikely to bring in huge sums of money. They’re more likely to be counter-productive to the economy as they hamper freelancer, contractors and entrepreneurs.

Of course, a distraction is not always the end of the world. Plenty of people will survive them, but HMRC have gone further. They have had proposals of their receive Royal Assent which will enable them to raid your bank account with zero external checks.

This means that if HMRC suspect your or your business of wrongdoing they can simply take what they think they are owed from you. That’s before they go through any kind of tribunal or an official decision is made. If the tax man turns out to be wrong they’ll return the cash with interest. Unfortunately many would not survive such a heavy disruption to their cashflow.

There will be some checks in place, such as a minimum of four warning letters must be sent and HMRC having to leave at least £5,000 in their targets bank account. Despite that, the Forum for Private Business has warned that these safeguards are not enough. They believe small businesses will still be disproportionately affected.

Along with increasingly winding up companies, using more bailiffs and Selling taxpayer data, it seems HMRC are willing to go to any length to increase their revenue. Their plans are only likely to increase resentment and put people off from branching out on their own. With the UK’s economy still not at full strength, we should be encouraging those who try to find their own ways of making money.

It will be interesting to see how effective HMRC’s new tactics will be, but there’s an uneasy feeling that comes with a Government body able to take people’s money just because they say so.

Joshua Danton Boyd is a copywriter for the online accountants Crunch. He spends a lot of his time covering freelancing, accounting and the activities of HMRC.

 

 

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