HMRC has been accused of attempting to overturn the Magna Carta by trying to gain new powers that will allow it to take money from people’s bank accounts without a court order (see HMRC wants to raid accounts).
There’s been uproar and outrage from MPs and others on this. I share in this angst. Yet I thought it worth pointing out that while we object to the taxman doing it, we have already given banks the power to do something very similar. Under the rules of setting-off, a bank can take money from accounts to pay itself without notice, without permission and without a court order.
Now my point here isn’t that because banks can do it, we should allow HMRC to do it. It’s more that if we are going to protest around the idea that the taxman has this permission, we should also stop banks – which aren’t exactly paragons of virtue with great track records on such things.
For those unfamiliar with the rules of setting-off, it’s quite simple. If you have a debt eg a credit card or loan with the same bank where you also have savings or a current account, even if those accounts aren’t linked, the money can be taken from your savings to repay your debts. And they don’t need to notify you or seek permission in advance.
This can cause cataclysm for people’s finances. Those doing the correct strategy when in trouble (ie, focusing on priority debts) such as putting money aside to pay their mortgage can see it snaffled to pay a credit card (a lesser-priority debt), leaving them in mortgage arrears.
I’ve even heard of a woman being given money by her father to pay for her wedding just a few days before the big day to have it snaffled immediately by the bank.
For full help on your rights if you’re affected, see our Setting-off guide.
Why do we give banks so much power? Why is it a special form of creditor above even HMRC? Gas and electricity companies can’t just dip into your bank account to take your money when you owe them. Why is a bank so special?
In my view – it isn’t, and it’s about time we ended this antiquated law. If banks want to take money from your account, they should require a court order like anybody else does.
I’d welcome your thoughts below.