Taxman to Raid Super Isas

11 September 2014

Experts warn that tax inspectors could raid people’s new super-ISAs to reclaim unpaid tax.

Under proposed new powers to allow HMRC access to people's bank accounts, HMRC could prioritise recovering debt from accounts that appear to be used primarily for savings over those used for day-to-day expenses.

Mike Down, Baker Tilley, said: “ISAs would therefore seem the obvious choice, allowing HMRC to recover debts from an individual’s savings and removing the tax advantages at the same time.”

HMRC has access to information about individuals’ bank accounts and deposits using its own technology. He said: “This information forms part of the billion records held about taxpayers and their financial affairs.”

Ahead of the introduction of the powers HMRC would “no doubt be taking close interest in their list of problem debtors and comparing this to those investing in the new ISA allowances. A simple cross-check of NI numbers would appear to be all that’s needed to facilitate this.”

If HMRC did choose to raid ISAs, Mr Down said it could be complicated in instances when charges apply if people withdraw their cash early.

An HMRC spokesman said: “ISAs offer tax-advantaged saving, so when debtors refuse to pay HMRC what they owe and make the active choice to invest the money in an ISA, they’re twice gaining an unfair advantage over the vast majority who pay what they owe on time: they’re getting the benefit of the money and in a tax-free way.

“Most people pay HMRC what they owe in good time but there are a persistent few who have the means to pay but refuse to do so.

“There will be multiple robust safeguards, but in all circumstances at least £5,000 would be left in the account even after HMRC applied a hold on the debt.”

The plans were criticised by MPs on the Treasury select committee earlier this year, which said they were “very concerning” giving HMRC’s history of mistakes.

As well as ISAs joint accounts could be targeted. The MPs said taxpayers could suffer “serious detriment” if officials could take - by mistake or through an “abuse” of power - money from innocent people.

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