Budget Notes

BN98 HMRC REVIEW OF POWERS, DETERRENTS AND SAFEGUARDS: PAYMENTS, REPAYMENTS AND DEBT

Who is likely to be affected?

1. Individuals and businesses who wish to pay tax and duties etc by credit card.

2. Those who have not met their obligations to pay what they owe on time.

General description of the measures

3. The measure will make it easier for taxpayers to pay what they owe on time, and for HM Revenue & Customs (HMRC) to tackle those who seek to avoid their obligations by paying late or not at all. There are three separate changes to the current law:

•    new legislation to enable HMRC to introduce a credit card payment service;

•    HMRC will be able to set the repayments it must make to individuals and businesses against the payments it is owed by them; and,

•    HMRC's debt enforcement powers to collect unpaid sums by taking control of goods in England & Wales, or by taking action through the civil courts will be modernised and aligned.

Operative dates

4. It is intended that HMRC will be in a position to accept payments by credit card from Autumn 2008.

5. The ability to set repayments against debt will have effect on and after the date that Finance Bill 2008 receives Royal Assent.

6. The changes to HMRC's powers to enforce payment through the courts will have effect on and after the date that Finance Bill 2008 receives Royal Assent. In England & Wales the power to take control of goods will come into effect in line with the appointed day for Schedule 12 to the Tribunals, Courts and Enforcement Act 2007.

Current law and proposed revisions

7. Legislation supports a range of payment methods, but HMRC cannot accept payment by credit cards except in certain limited circumstances such as at ports and airports. Legislation will be introduced in Finance Bill 2008 to allow individuals and businesses to pay tax, duties etc by credit card. Taxpayers who choose to pay in this way will be charged the transaction fee that HMRC will itself be charged. Legislation will be needed because passing on this fee would otherwise be outside the functions of the Commissioners for HM Revenue & Customs.

8. Under common law, or by request, HMRC may already set-off repayments payable to taxpayers against debts they owe to HMRC. This measure will give a specific power to HMRC to make set-off across the different taxes, duties etc it administers, at its discretion.

9. HMRC's powers to enforce the payment of civil debt, where reminders and other actions have not been successful, were inherited from the former Inland Revenue and HM Customs & Excise. These powers differ across regimes, which can be confusing for taxpayers and lead to unnecessary costs to the Exchequer. This package of changes will modernise and align the enforcement powers in England & Wales and Scotland so that HMRC may recover debts in a single action. It will also mean an end to the current practice where taxpayers may face two sets of costs and fees.

10. This measure was the subject of initial consultation in June 2007. Responses to that consultation together with draft legislation for further consultation were published on 10 January 2008 - Payments, Repayments and Debt: Responses to Consultation and Proposals. A summary of responses to that consultation and a Final Impact Assessment, including an explanation of any resulting changes, will be published shortly.

Further advice

11. If you have any questions about this change, please send an email to powers.review-of-hmrc@hmrc.gsi.gov.uk or contact Maria Richards on 020 7147 3223. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk