HMRC's new direct recovery powers 'undermine' Magna Carta

HM Revenue and Customs (HMRC) have been given new powers to raid bank accounts and cash ISAs in a bid to seize overdue tax payments from employees and businesses.

However, legal experts claim that the new measures ‘undermine’ the rights enshrined in the Magna Carta.

A Taxpayers’ Alliance report suggests HMRC’s new ‘direct recovery’ powers would cut out the legal process altogether.

The measures, unveiled in the Summer Budget 2015, will give HMRC the ability to freeze all but £5,000 of an individual’s or firm’s assets even if the authorities simply believe someone ‘appears’ to owe tax.

A business or individual will be issued a ‘hold notice’ on their funds, but if they fail to object in time, HMRC will serve a ‘deduction notice’ forcing the bank to transfer the requested funds.

Francis Hoare, barrister, Field Court Chambers, argues that this treats individual property as the property of the state and flies in the face of everything that’s enshrined in the Magna Carta.

The Magna Carta secured the right of taxpayers to challenge any demand for tax through the courts.

“The proposal itself is objectionable in principle. The greatest legacy of the Magna Carta is the principle that the executive is subject to the law as much as the people, and yet the direct recovery legislation places the Crown in a superior position to individuals and businesses in its rights to enforce debts,” said Mr Hoare.

“It denies access to the courts for the resolution of disputed tax liability before property is frozen, and delays a judicial remedy for an indeterminate period.

“Most dangerously of all, it treats individual property as the property of the state once the state has determined it so.”

Those wishing to fight an HMRC notice of a tax raid must do so within 30 days, but there is no set period within which the tax authority must consider the objection.

HMRC’s questionable record on administrative errors has not gone unnoticed with concerns lingering that some taxpayers could be left unable to pay their bills if funds are seized in error or a case is being dragged out unnecessarily.

Small firms on tight budgets could face a similar scenario too, forcing them into insolvency through no fault of their own.

Jonathan Isaby, chief executive, Taxpayers’ Alliance, said: “HMRC made 5.5 million errors last year, and giving the organisation powers over and above that set out in the principles of Magna Carta is hugely worrying.

“Eight hundred years ago, the principle was set down that individuals would have recourse to the courts when challenged by the Crown or by what would become Parliament.

“Removing that protection is profoundly dangerous and we urge the Government to reconsider this legislation as quickly as possible.”

Last updated: 14th July 2015