18 June 2009
Titles that covered this article include: The Independent on Sunday, 21 June 2009; The Daily Express, 21 June 2009.
New powers which will allow HM Revenue & Customs to deduct £2,000 a year from taxpayers’ salaries to recover tax debts could cause many taxpayers serious financial hardship and leave other creditors out of pocket.
According to our experts the average UK taxpayer has £5,917 in income tax and national insurance deducted from their salary every year.* Allowing HMRC to deduct a further £2,000 annually could mean 34% more tax is deducted from taxpayers’ salaries.
Currently HMRC must obtain taxpayers’ consent or a court order before it can deduct money owed to it directly from taxpayers’ salaries via PAYE.
Roy Maugham, Tax Partner in our London office, comments: “£2,000 is quite a lot of money when you consider that the typical taxpayer already pays just under £6,000 a year through PAYE. This could leave many taxpayers facing considerable financial hardship.”
“After mortgage payments, food and energy bills, a lot of taxpayers have very little left over every month. What’s going to stop HMRC making deductions from taxpayers’ salaries, that leaves them unable to pay utility bills or other creditors?”
“Other creditors can’t just deduct money from people's salaries on a whim – there are robust checks and safeguards. This law will put HMRC at the front of the queue when it comes to collecting debt, while other creditors will have to pursue debtors through the courts.”
He adds: “HMRC is not always right in its assessment of how much tax it is owed. When you think of the administrative errors that led to millions of pounds in tax credits being paid incorrectly, you have to wonder whether there ought to be stronger safeguards before HMRC is granted unfettered access to taxpayers’ paycheques.”
The new power forms part of the Finance Bill 2009, which is due to become law later this summer. At the moment HMRC can only deduct underpaid Income Tax and Capital Gains Tax or overpaid tax credits via PAYE once a court order has been obtained, but once the Finance Bill 2009 becomes law HMRC will be able to recover all taxes through PAYE without seeking the permission of the courts with taxpayers having to go through an appeals process in order to prevent deductions.
As pointed out by our experts, HMRC has previously been unable to recover overpaid tax credits from taxpayers however this legislation will mean that if tax credits are overpaid in future HMRC will be able to claw back the money very easily.
* The median UK salary is £479 per week according to National Statistics (£24,908 per annum)
We produce a range of informative publications focusing on the latest accounting issues. Click to add yourself to our mailing list.
Up to £15 million will be clawed back from academy schools before the end of the current academic year due to government budgeting errors, according to our data.
A quarter of all taxpayers may be paying the wrong amount of tax due to incorrect PAYE codes according to our analysis.
The cost of listing on AIM has risen at its fastest rate in more than five years according to our findings.
A sudden surge in M&A activity on AIM is being driven by private equity backed deals to take companies private, our research reveals.
From 6 April 2012 HMRC will be able to ask employers to pay a financial security where it thinks there is serious risk that the business won’t pay over their PAYE tax deductions or National Insurance contributions (NICs) on time.
The value of loans to businesses in the UK has slumped by 13% since the collapse of Lehman Brothers, the second fastest fall among the G8, according to our findings.
Our international network, UHY, welcomes new member firm in Tunisia, CNBA.
Hot on the heels of an announcement from HMRC that the closure date for the Liechtenstein Disclosure Facility (LDF) has been extended to 5 April 2016 has come speculation that the local banks are pushing for much higher transfers of funds into Liechtenstein and a minimum period for which any account must be kept open.
