You may not have seen it in the press, but HMRC is seeking the power to seize funds directly from your bank account if it thinks that you have underpaid your tax. It says that if you can prove to its satisfaction that their estimate of your tax is incorrect it will refund you.
I am not a tax dodger, nor am I wealthy. I’m just a businessman. Yet over the years I have had several run ins with HMRC over their assessment of taxes owing. In all cases they have been out by orders of magnitude, or downright wrong. The process of persuading them often requires going to court, and can take a year. Had HMRC had the cash up front I would possibly not have been able to afford to fight them to correct their errors.
For those of you who have not been put through the wringer by them, one example may suffice. I have a company that is operating, but not yet selling products as it is still building its plant. It is registered for VAT, and files VAT returns promptly, usually receiving a rebate. It has no employees and, with no sales, its corporation tax is zero (no sales means no profits for HMRC to tax). Two years ago the HMRC on-line corporation tax filing system had a spat with my computer, the net result being that I got told that I had filed the necessary form (a CT600) and HMRC thought I hadn’t. Some time later I got a demand for a corporation tax deficiency of over £5,500, plus another £400 in fines.
When I got hold of them, no easy task, my first question was how they had assessed by liability, as £5,500 tax implies over £20,000 of taxable profit and thus a turnover of well over £25,000. They are the same HMRC that gets my VAT return, and thus knows that the company turnover is £0. The benighted individual at the end of the line said that they simply “make a determination” although she could not explain how they got the number that they did.
After about one year’s correspondence, hours of wasted time and much hassle they threatened me with court action. At that point I wrote back saying “Bring it on” enclosing yet another paper copy of my CT600 and an estimate of my costs, plus the assurance that I would be seeking both the costs and was contemplating starting an action for maladministration. Almost by return I got a letter accepting that the sum outstanding was wrong, but still seeking a £200 fine. I am arguing that one as well. However the point it that with their new powers they would have had my £5500 from the outset, and indeed would have imposed a fine without a trial.
As I recall, in 1215 Magna Carta established the right to trial and the idea has been with us for eight centuries. It flies in the face of the rule of law, history, common sense and decency for any government agency to abrogate to itself powers that are in breach of this. So I wrote to my MR, (Damian Hinds, Conservative), pointing out that as a libertarian (which all Tories claim) he must be opposed to this on principle and seeking an assurance that he would oppose it. Unfortunately the reply that I got was full of blandishments about “Safeguards” and the need to clamp down on tax evasion. What utter bollocks. Some of the most blatant tax avoiders are in fact major donors to political parties. HMRC’s failure to pin anything on Bernie Eccleston is more a testament to a system that is impenetrably complex and an administration that is inept. Raiding my bank account is hardly going to keep the NHS going for a millisecond (believe me, I did the maths).
If the government is having trouble collecting tax it is in part due to a tax system that is out of control and few understand. The solution to that is to simplify it, which would also reduce the cost of administration and save many like me from wasting hours and cash that would otherwise have been spent in trying to make the economy grow.
And it won’t work anyway. Anyone with half an ounce of sense will simply have a bank account that never has much in it, and transfer funds to other places where HMRC can’t steal it.
What is really sad is that a new MP, in his first Parliament, thinks his job is to justify the outrageous aspirations of the executive rather than ensuring that the executive works for the benefit of the people who actually pay for it (and everything else). I am becoming increasingly convinced that the entire political system is unfit for purpose.
Taxation without representation caused a spot of bother when the executive tried it in America…