What is HMRC power to seize cash? The budget had some very interesting things in it for businesses some good and some worrying. The good news is that building and construction look like it is finally out of the doldrums as house sales increase. At one stage in the recession, around 40% of all insolvency calls for help were from the building and construction industry. I know the government help may cause problems down the line with house prices but at the moment this sector needs all the help it can get. 

Kent got a great boost with the Ebbfleet development project getting the final go ahead for 15,000 homes. This will have a huge impact on local jobs and businesses as well as the bigger players. Much needed confidence is also making itself felt with extensions and refurbishments taking place too. So overall a feel good factor for the building industry it looks like. 

On a more worrying note for insolvent companies and individuals, HMRC has been given new powers to seize funds from bank accounts of those who owe more than a £1,000 in tax arrears. This was not the way it was initially presented in the ‘Commons’ on Wednesday? My understanding was this power was to target those who were hiding away millions in unpaid taxes – how wrong can you be? As more detail is being released it transpires that you only need to owe £1,000 and have £5,000 I the bank account to have it taken.

Putting aside the moral arguments of HMRC acting as the judge and the jury why has such a small amount been allowed? This makes me extremely suspicious that there is more to this than meets the eye. A business may well be in arrears with his PAYE or Corporation tax but what if he is owed a rebate? Will the money still be taken? How will HMRC know what the overall situation is internal? Which department makes the decision? HMRC internal communications are at best erratic within the same building but inter-departmentally they are very poor. This is not a criticism as they are very under-resourced and have endured cut back after cut back, but they are renowned for not getting it quite right. With the best will in the world, you cannot give authority with responsibility so who will be held accountable within HMRC when things go wrong as they inevitably will. 

There is also another point too as to how may that leave other unsecured creditors such as employees who are preferential creditors if the company is insolvent? Would they have the right to appeal? Why would they? Well, how does this decision fit with HMRC not having ‘preference’ over other creditors as stated in the Business Enterprise Act 2002?

Although we genuinely support HMRC, as they do a very difficult job, this decision has disaster written all over it.