Taxpayers will be able to pay their tax bills by credit card for the first time under draft legislation published yesterday.

Experts raised concerns that the move, which comes as part of a long-running review into the powers of HM Revenue & Customs, might exacerbate the difficulties of individuals who are in debt.

James Ketchell, of the Consumer Credit Counselling Service, said: “On the one hand it is a modern way to pay, but for the many who are overindebted, it might be a temptation too far to use credit to pay their tax bill and then forget about it. HMRC needs to think long and hard about whether it is a suitable payment option.”

A spokesman from the Revenue said: “We will be circumspect about how we offer this service. We will not be encouraging anyone to put debts on their credit cards.”

Taxpayers who choose to pay by credit card will also be forced to pay a surcharge to cover merchants’ handling fees. A spokesman from HMRC said: “We believe that those who choose to pay in this way should bear the cost of this fee, as opposed to this cost falling on all taxpayers.”

Mike Warburton, of Grant Thornton, the accountant, said: “Paying by credit card should be fine as long as people’s credit card details don’t get into the wrong hands.” HMRC also proposes to claw back overpaid tax credits and child benefit by setting them off against tax owed to individuals. An HMRC spokesman said: “We will not set tax credit, or child benefit awards against tax that is owed. However, where an award has been made and an overpayment subsequently arises, it might make sense to allow any tax repayment to be set against the sum owed. It will depend on the facts of the individual cases.”

Robin Williamson, of the Low Income Tax Reform Group, criticised the plan. He said: “This drives a coach and horses through the principle of independent taxation, something which has been hard-fought for for decades and which was finally achieved in the 1990s.” Under current tax legislation, every person is regarded separately for tax purposes, but some tax credits are paid out to couples.

Mr Warburton said: “It means you are not comparing like with like. It’s muddying the water between two systems. In truth, tax credits have never been anything to do with tax – they are simply benefits.”

HMRC also said it will compile a Taxpayers’ Charter of rights and responsibilities in a single document.

Dave Hartnett, acting chairman of HMRC, said: “Making sure that taxpayers’ rights are properly protected whilst providing HMRC with the powers needed to ensure that today’s tax system is properly administered are key HMRC commitments.”

Tax experts were dismayed that HMRC failed to scrap plans first proposed last year to dip into taxpayers bank accounts if they failed to meet tax bills. The plans are still under review.

But the Revenue has backed down on its proposals to allow tax inspectors to visit peoples’ homes without prior arrangement. The consultation paper said: “HMRC would have no right to see the records at the taxpayer’s home and there would be protection for the taxpayer against repeated requests to see the same records.”

HMRC has also proposed to levy a penalty on third parties who provide deliberately inaccurate information. For example, a beneficiary of an estate who lies to a person responsible for completing an inheritance tax return about its value could be penalised. Those who handle goods on which no excise duty has been paid could also be fined.

Rewriting the rules

— Paying by credit card: Taxpayers will be able to settle their tax bills using a credit card, but will have to pay a surcharge to cover the cost of the merchant’s handling fee

— Clawing back tax credits: Individuals who have been overpaid tax credits may not receive repayments owed by the Revenue if they have overpaid income tax. This will instead be used to offset the extra tax credit payments

— Taxpayers charter: HMRC along with interested parties will draw up a Taxpayers’ Charter

— Bank accounts: Taxman can access money in people’s bank accounts if they have not paid

— Third-party penalties: Levied on third parties who provided deliberately inaccurate information

— Penalties for handling goods with unpaid excise duty