27th March 2014
Any person or company with a UK bank account that owes tax in the country could have their account raided by the authorities without a court order. The new rules, set out by Britain’s finance minister George Osborne in his annual budget review, will affect foreign nationals and companies with accounts in the UK that are felt to be owing tax.
Anyone deemed to owe more than £1,000 could have their account raided by the UK tax authority, HM Revenue and Customs (HMRC). At least £5,000 would be left in the account, and the raid would only occur after the debtor had been contacted previously.
It brings the UK system into line with the US and France, which have similar powers of recovery. But Chas Roy-Chowdhury, head of taxation at the ACCA accountancy body, suggests these are not countries that the UK should seek to emulate.
He told the BBC that the changes could have adverse effects for businesses. For example, they could be left unable to pay staff their wages if the business account has been raided.
HMRC says only those who have been contacted at least four times for a payment would be hit by the new powers.
Meanwhile, companies that limit their UK liabilities by borrowing from divisions based in offshore tax havens will also be hit by changes announced by Mr Osborne. The finance minister said he “will block transfers of profits between companies within groups to avoid tax”.
But these reforms have also raised concerns. Eloise Walker, partner at Pinsent Masons law firm, told the Daily Mail: “This draft legislation is drafted extremely broadly, meaning any profit transfer between two companies in a group that incurs any tax advantage at all will potentially be subject to UK tax, even if it has already been taxed overseas.”