Government seeks to secure debts against homes

The Government wants to start securing people's homes against their tax bill. And that's a bad thing.

Tucked away in the Budget was a proposal that could leave some people fearing house repossession.%VIRTUAL-SkimlinksPromo%
HM Revenue & Customs (HMRC) plan to increase the use of charging orders on people with outstanding tax bills. This'll mean more people will face having their properties used as security against their tax bill.

What's a charging order?
Put simply, it's when a debt is secured against something, usually a property that you own. We're used to giving people advice about dealing with charging orders that come about following a county court judgment (CCJ) but it seems that HMRC is going to be using them more frequently too.

If a charging order is granted it means that a debt is secured against the property and an entry is placed on the Land Registry to confirm this. So if the property is sold, the debt will be repaid out of the money the sale generates.

Who does the tougher HMRC action affect?
Anyone who might owe money to HMRC and struggle to repay it. This'll mostly be those that are self employed, but could apply to anyone who does a self-assessment tax return, which'll now include many people affected by this year's Child Benefit changes.

The move is intended to give HMRC more powers to collect unpaid taxes, so if you've got an outstanding debt to HMRC then you could be hit.

Why we oppose HMRC's use of charging orders?
We've all heard the expression that an Englishman's home is his castle, so it's no surprise that receiving a charging order can be tremendously upsetting. While it's a legitimate tool that can be used when collecting a debt we see it as being an aggressive form of debt collection.

We'd encourage HMRC to explore other methods of debt collection before resorting to taking action that could eventually lead to putting people's homes at risk.

What's good for the goose...
We also worry that this approach by the Government weakens their position when they try to encourage other creditors to show more patience when dealing with people in debt.

The Office of Fair Trading (OFT) criticised RBS Group for their use of charging orders earlier this year, stating they did not give enough consideration for the circumstances of the people involved. We're concerned that it would be hard for the Government to make similar demands in future given their stance on collecting tax debts with charging orders.

Do charging orders lead to people losing their property?
Usually not. A charging order doesn't give any rights to force the sale of a property. The property could only be sold if a further court order was obtained, called an "order for sale". The majority of charging orders do not lead to an order for sale.

Usually creditors will apply for a charging order to get security against a debt and are not particularly interested forcing people to sell their property. If they were to apply for an order for sale there would be a hearing at a county court and they'd have to show strong enough evidence for a district judge to approve it.

If you're worried about debt, a charging order or a CCJ then we'd recommend you get in touch with us for advice. You can do this through our free online advice tool Debt Remedy.

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Government seeks to secure debts against homes

The Chancellor has cut the price of beer. He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

While lower interest rates are intended to boost borrowing for business and keep costs down for mortgage customers, the Chancellor brings another Budget devoid of encouragement for savers. Faced with near 0% interest rates and 3% inflation, there is no help for those who need to save for the future, or those that already live on their savings in retirement.

"Low interest rates are making life ever harder for people reliant on their savings. Their spending power is being reduced and their standard of living eroded on a daily basis," said Simon Rose of Save Our Savers. "The attack on savers is short-sighted and undermines the country's prospects for investment, growth and retirement."

A major headline-grabbing measure to help struggling first-time buyers is the new Help-to-Buy scheme. Made up of two parts, the first commits £1.3bn to shared equity loans that enable first-time buyers to borrow up to 20% of the value of a new build home towards a deposit, providing they can contribute 5% themselves. The loans will be interest free for five years and be repayable on house sale. The scheme will cover all new properties up to £600,000 in value – around 90% of all new homes in the UK.

The second is a Mortgage Guarantee for lenders, intended to help all families who are struggling with deposits. The scheme will make £130bn worth of mortgages available from 2014 and enable lenders to offer loans at higher-to-loan value, which will Mr Osborne said will "dramatically increase" the availability of mortgages. The guarantee will run for three years and apply to bold old and new property. Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented: "We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility. "Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."

Payment of taxes is the "glue that holds the economy together" the Chancellor said as he reaffirmed his commitment to crackdown on evasion and the professional services that advise on it. "With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable," said Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group. "This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation."

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Stating his commitment to helping entrepreneurs get ahead and recognising that the cost of employing people is a huge burden to small firms, the Chancellor announced a surprise move with National Insurance relief of £2,000. Called the Employment Allowance, he said the new measure means than 450,000 small businesses – which account for one third of all companies in the UK - can employ one person earning £22,000 or four people earning the minimum wage, without paying National Insurance.

"The Employment Allowance will certainly be a massive boon for small businesses. Not least because most weren't really expecting it," said Jonathan Elliott, managing director of MakeItCheaper.com. "Put it another way, a £2,000 saving for a typical small business is the equivalent of cutting their annual energy bill in half or putting 1,250 litres of free fuel in its fleet of vehicles." Yet the Government fell short on support for new enterprises, explains John Williams from Kuber: "Noticeably absent from the Chancellor's speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the Government offer more help to start-up companies looking for second round finances, but nothing materialised."

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."
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