Pricewaterhousecoopers has warned that plans outlined in the Budget for new HMRC powers to settle unpaid demands by taking money from people's bank accounts could have grave consequences for businesses and individuals if errors in the process occur, and could undermine the principle of independent taxation.

Simon Wilks, tax partner at PwC, said: “It is absolutely right that people should pay tax that is due, but in our view, any benefits from these proposals are far outweighed by the potentially extremely serious consequences for individuals and businesses if errors are made. Under the current plans there will be no compensation for these serious consequences; errors can and do occur.

“While the tax HMRC expects to raise is a relatively small percentage (0.02%) of the tax they collect, it is likely to be a significant amount to anyone affected and in some cases could have severe knock on consequences on people's borrowing power and credit rating, particularly if it is in error.

“There are practical consequences that haven't yet been fully thought through. In the case of joint accounts HMRC will assume the money is held equally, so they could end up taking money that doesn't belong to the taxpayer and therefore undermining the principle of independent taxation. The proposals could allow HMRC to take money in preference to other creditors which will be a cause for concern for all creditors.

“If HMRC goes ahead with these proposals there need to be strong safeguards in place and a thorough examination of the potential benefits weighed against the personal and commercial cost. In practice we believe workable and properly safeguarded new procedures would in the end look like a streamlined version of their current ability to recover tax with the safeguard of a Court, as any other creditor is required to do. We would encourage further consideration of whether these goals can be better achieved by improving the efficiency and throughput of the current procedures.”