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MPs raise concerns over new tax powers in Budget MPs raise concerns over new tax powers in Budget
(35 minutes later)
Plans to allow the tax authority to settle unpaid demands by taking money from people's bank accounts have been criticised by a group of MPs.Plans to allow the tax authority to settle unpaid demands by taking money from people's bank accounts have been criticised by a group of MPs.
The Treasury Committee says it is very concerned because tax officials have a history of making mistakes.The Treasury Committee says it is very concerned because tax officials have a history of making mistakes.
Chancellor George Osborne unveiled the plan at this year's Budget.Chancellor George Osborne unveiled the plan at this year's Budget.
But in a wide-ranging report, the committee did welcome another Budget plan - to allow greater flexibility on how pension savings can be used.But in a wide-ranging report, the committee did welcome another Budget plan - to allow greater flexibility on how pension savings can be used.
In the Budget, Mr Osborne outlined plans for new powers for HM Revenue and Customs (HMRC) to recover tax debts from anyone who owes more than £1,000 in tax or in tax credits.In the Budget, Mr Osborne outlined plans for new powers for HM Revenue and Customs (HMRC) to recover tax debts from anyone who owes more than £1,000 in tax or in tax credits.
This would allow the tax authority to seize the tax owed directly from debtors' bank accounts.This would allow the tax authority to seize the tax owed directly from debtors' bank accounts.
HMRC PerformanceHMRC Performance
But the committee said the plan was problematic owing to HMRC's performance in the past when it has failed to accurately calculate tax bills.But the committee said the plan was problematic owing to HMRC's performance in the past when it has failed to accurately calculate tax bills.
"People should pay the right amount of tax. But HMRC does not always ask for the right amount," Mr Tyrie said. "People should pay the right amount of tax. But HMRC does not always ask for the right amount," said committee chairman Andrew Tyrie.
"Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable.""Some taxpayers may find money taken from their accounts that later should be paid back. That would be unacceptable."
He said the committee also had "deep reservations" about changes to tax policy that would require upfront payment of any disputed tax associated with tax avoidance schemes.He said the committee also had "deep reservations" about changes to tax policy that would require upfront payment of any disputed tax associated with tax avoidance schemes.
"Retrospection should be considered only in wholly exceptional circumstances. The latest measure would have to be justified on those grounds," Mr Tyrie said."Retrospection should be considered only in wholly exceptional circumstances. The latest measure would have to be justified on those grounds," Mr Tyrie said.
"Retrospection puts policy on a slippery path to arbitrary taxation, discouraging investment and innovation and creating the scope for great unfairness.""Retrospection puts policy on a slippery path to arbitrary taxation, discouraging investment and innovation and creating the scope for great unfairness."
HM Revenue and Customs recently explained how the system will work. Committee member Mark Garnier, a Conservative MP, said at the moment HMRC needed a court order to be able to seize money from accounts.
HMRC will only target those who have long-term debts and have received at least four demands for payment and will ensure that at least £5,000 is left in total across all debtor's accounts, including savings accounts, after the unpaid tax is seized The committee is concerned that the current system of checks and balances could be upset.
HMRC will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized "What we worry about is... that essentially HMRC will be acting as judge and jury," Mr Garnier told the BBC.
HMRC recently explained how the system will work.
It will only target those who have long-term debts and have received at least four demands for payment and will ensure that at least £5,000 is left in total across all debtor's accounts, including savings accounts, after the unpaid tax is seized.
HMRC will freeze the amount owed in accounts for 14 days to allow time for a debtor to pay before the money is seized.
PensionsPensions
The committee also called for pensions and savings to be taxed in the same way.The committee also called for pensions and savings to be taxed in the same way.
The most eye-catching measure in Mr Osborne's Budget was a plan that effectively abolishes the requirement for some people to buy an annuity - a retirement income for life.The most eye-catching measure in Mr Osborne's Budget was a plan that effectively abolishes the requirement for some people to buy an annuity - a retirement income for life.
From next year millions of people reaching retirement age will be able to spend their pension pot in any way they want, including cashing in their pension savings in one, taxed, lump sum. Temporary rules are in place in the meantime.From next year millions of people reaching retirement age will be able to spend their pension pot in any way they want, including cashing in their pension savings in one, taxed, lump sum. Temporary rules are in place in the meantime.
The committee said that all of the witnesses it heard from welcomed the "greater flexibility and choice" that the reforms proposed.The committee said that all of the witnesses it heard from welcomed the "greater flexibility and choice" that the reforms proposed.
However, it said the guidance that was being promised ahead of retirement should be clear and at least offer an opportunity of face-to-face help.However, it said the guidance that was being promised ahead of retirement should be clear and at least offer an opportunity of face-to-face help.
The changes are likely to lead to the creation of a variety of new financial products for retirees, and the committee said these must be sold responsibly.The changes are likely to lead to the creation of a variety of new financial products for retirees, and the committee said these must be sold responsibly.
"Following the financial crisis, and the mis-selling scandals, the reputation of the industry is under scrutiny," said Andrew Tyrie, who chairs the committee."Following the financial crisis, and the mis-selling scandals, the reputation of the industry is under scrutiny," said Andrew Tyrie, who chairs the committee.
He added that it would be a "great prize" were the tax treatment of pensions and savings treated in the same way.He added that it would be a "great prize" were the tax treatment of pensions and savings treated in the same way.
The chancellor announced an extension to the amount that could be saved in an tax-free Individual Savings Account (Isa) from 1 July 2014 to up to £15,000 either as cash or shares.The chancellor announced an extension to the amount that could be saved in an tax-free Individual Savings Account (Isa) from 1 July 2014 to up to £15,000 either as cash or shares.