Tough New Tactics from HRMC
Getting people to pay HMRC the money they owe has always proved to be tricky. In 2016 it spent £24m on private sector debt collectors but in 2017 the figure soared to £39m. HMRC now has a new, more aggressive tool at its disposal, known as an Attachment of Earnings Order. These are being used alongside the feared Accelerated Payment Notices (APNs).
APNs are issued to people that HMRC believe owe them money. They are an upfront demand for immediate payment without the need to actually prove through the courts that the money is owed. Reliable data sources illustrate that use of APNs has more than quadrupled since January 2017.
It’s clear that the tax office isn’t troubled by making individuals bankrupt or forcing companies to cease trading in order to get hold of disputed funds. APNs have given HMRC the power to create an environment best described as tax now, ask questions later. Taxpayers are routinely remortgaging their homes or selling all their assets to pay these tax bills that often HMRC has not proved in court.
An Attachment of Earnings is a new method that HMRC will be using to retrieve money. It is designed to retrieve unpaid maintenance payments, county court judgements, or benefit overpayments. Both the individual concerned and their employer will receive a document from the courts, detailing what is owed and how much the employer will need to deduct from the salary each month in order to repay that money.
The Court will assess the individuals financial situation to deduce what they need to live on (this is referred to as the protected earnings rate) and then deduct the owed money from whatever is left. Data obtained by a national accountancy firm reveals that 428 people had money ‘recovered’ directly from their earnings by the taxman in 2017/18.
This new ploy ensures that HMRC gets the money it is owed conveniently and without the hassle of repossessing the debtors goods and selling them through auctions. This is always a lengthy process and sees those goods sold for far less than they are really worth. The Attachment of Earnings has the additional advantage of being completely non confrontational as there is no interaction with the debtors. It’s a tried and tested method that the Student Loan Company has been using for some time, collecting about 9% of graduates earnings every month, provided their earnings remain above a specific threshold.
Despite the ongoing disputes about unpaid tax whether from reluctant individuals or expert evaders that are giant multinational companies, HMRC have published an analysis of income tax paid in the UK by salary band, region and gender. In total 2016-17 saw £174 billion paid in income tax, which is the latest year for which figures are available. Of that amount, almost a third of it (£52.6bn) was paid by the 381,000 taxpayers who earn more than £150,000 per year. The tax paid by those overwhelming male individuals was more than all the income tax paid by the first 20 million taxpayers.
Unsurprisingly, London has 4.2m income tax payers but just the 87,000 earning over £200,000 paid nearly half of the £43.8billion that was raised. It is awkward to admit it, but if we really do lose all these high earners to Brexit, the hit to the Treasury will be significant. After all, these bankers, lawyers and accountants paid more income tax in 2016-17 that the entire sum raised from every taxpayer in Scotland and Wales combined.
Thinking about your next tax bill? Tax planning advice should only be taken from a professional experienced and impartial advisor. Call us now for the peace of mind that efficient and lawful tax planning brings.