Taxman to get £2,000 clawback on workers' pay
New powers for HM Revenue & Customs will see £2,000 a year from taxpayers' salaries deducted to recover tax debts, in a move that accountants fear could cause taxpayers serious financial hardship and leave other creditors out of pocket.
Advisors at UHY Hacker Young say that currently the Revenue must obtain taxpayers' consent or a court order before it can deduct money owed to it directly from their salaries via PAYE.
But, in a few weeks, once the Finance Bill 2009 is passed, the advisors say HMRC will no longer need a court's permission to take up to £2,000 a year through PAYE when it suspects tax has been underpaid.
Allowing HMRC to deduct a further £2,000 annually could mean 34% more tax is deducted from taxpayers' salaries, the firm said, and taxpayers would have to appeal in order to prevent the deduction.
Giving HMRC "unfettered access to taxpayers' paycheques" would also ensure that any tax credits it overpays in the future could be clawed back very easily, explained Roy Maugham, of the firm's London office.
Many more taxpayers are at risk from the department's unparalleled powers which, if used overzealously or applied wrongly, could bring them to financial ruin, he warned.
"£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."
Mr Maugham added that many would ponder whether "stronger safeguards" should be in place before HMRC can automatically grab taxpayers' salaries, particularly as it "is not always right in its assessment of how much tax it is owed."