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KEY POINTS
- HMRC consultation does not propose a statutory charter.
- CIOT research explains how a charter could provide statutory remedies.
- A charter which is 'merely aspirational' will not help.
- Taxation campaign for a charter that offers enforceable rights.
First, let me correct the one big mistake in my article last week (Charter 08) reporting on the Wyman Debate.
The motion was of course WON by a large majority. It's just that in the room it felt like HMRC and HM Treasury were the ones trying to make their case and failing to do so.
So where I left off last week was with the clear conclusion that the powers given to HMRC had shifted the balance too far in their favour (as the motion contended), and that taxpayers were too reliant on HMRC exercising those powers in accordance with their (unenforceable) guidance.
The view from the floor, in particular, during the debate was that (since the powers were in the Finance Act 2008) the only real way to remedy the situation was to fight for a Taxpayers' Charter which had some statutory force.
Cracking the code
That, of course, is precisely what HMRC are not prepared to offer. Their consultation document on a charter (HM Revenue & Customs and the Taxpayer), at para 1.7, says this:
'The new Charter will not be set in legislation. The wording of an accessible and useful charter is not intended to be that of legislation, but a guide to the law. The use of statutory wording in a charter will compromise the intention of creating a simple statement of the basic rights of taxpayers/customers in their relationship with HMRC'.
Although published well before the consultative document, the CIOT's paper A taxpayers' charter for the United Kingdom highlights the false dichotomy between a fully statutory code on the one hand and no statutory basis on the other.
In rejecting both of these approaches, the paper argues for a code of conduct which has statutory backing, of which there are many examples in UK legislation:
'Many of these codes of conduct originate in a provision of primary legislation. This provision:
- requires the relevant Minister or administrative agency to issue the code;
- may require a consultative committee to be established to consider the draft code, or specify those bodies to be consulted before a code is promulgated;
- states what Parliamentary procedure is needed before the code is adopted, from lodging the code in the library of Parliament, to a full debate in the chambers;
- states what are the legal consequences of a breach of the code.'
Role reversal
One of the main roles of a charter, according to HMRC's consultation, is to give users 'headlines' about their rights and responsibilities. This is carefully expressed so as to exclude the possibility of giving new rights.
It focuses on 'bringing together matters that are set out in law' which taxpayers may not previously have understood, despite the 'considerable efforts to provide information for customers in a useable and understandable format'.
As such it acts as a 'single focal point where taxpayers can go to obtain information'.
The only way in which this is envisaged as affecting HMRC staff is in making 'clear and transparent to staff what is expected in working with customers', and that 'everyone is working from the same, shared, information'.
There is, therefore, nothing in the consultation document about the consequences of breaching the Charter, since it is not considered to have any independent force.
This is very different from the model envisaged by the CIOT. Their paper looks at various ways of giving teeth to a charter, and specifically concludes that silence in the legislation on the consequences of breach is 'not a helpful approach to take with respect to the Taxpayers' Charter'.
Instead, they propose that tribunals, courts, adjudicators, etc. should be able to 'take such account of the breach of the Charter as is appropriate in the circumstances'. This, as they say, allows for a more nuanced approach.
One of the most interesting features of the CIOT draft Charter is that it does not actually propose totally new rights, and to that extent it does (as the consultation document suggests) bring together matters already set out in law. However, it goes much further than taxes' management provisions.
For example, it proposes a right to be treated 'fairly and justly, according to the law and without arbitrary interference to you or your property'.
That may seem like a new right, but it is primarily based on EU and international human rights provisions, such as Article 1 to the First Protocol of the European Convention on Human Rights, the right to peaceful enjoyment of possessions.
While it might be possible to found a defence against, for example, the collection of a tax liability which was strictly due but clearly unreasonable on the basis of the Human Rights Act, the Charter would make this right clearer and far easier to enforce.
Values and standards
The other two headings which the consultation document propose amount to little more than 'warm words'. HMRC could use the Charter to set out 'broad principles' rather than the specific rights and responsibilities, such as treating customers courteously and being fair and professional.
There is a welcome, though more tentative, suggestion that this might also cover having regard to the costs of both HMRC and taxpayers when dealing with them.
The other heading is more specific, suggesting that a charter could set out service standards which HMRC expected to meet when dealing with taxpayers.
However, the only sanctions suggested by the consultation document are the rights to involve the Adjudicator or the Ombudsman.
Again, there is nothing here which would allow (for example) failure to meet the standards set out in the Charter as a contributory factor for having an investigation closed down by the Commissioners or First Tier Tribunal.
The pointlessness of this approach is summed up by the CIOT very succinctly:
'One point is clear: a woolly, aspirational document relating only to service delivery will do little to improve relations between HMRC, taxpayers and tax advisers'.
Campaign
This just won't do. While plaudits have rightly been bestowed on the process of consultation on powers, the outcome is a system in which taxpayers are over-reliant on HMRC exercising their powers responsibly.
It is true that in most cases they will, just as it is true that in most cases the powers will be irrelevant because taxpayers and their agents will report their income and pay their tax anyway.
The problems will arise from a combination of non-compliant taxpayers and unreasonable HMRC officers, and we need a balance of powers and safeguards which can cope with that volatile mixture.
As the Wyman Debate made clear, now that the changes to powers have been numbered and weighed in the balance, the review of powers, deterrents and safeguards has dealt too much with powers and deterrents and not enough with safeguards.
While it would have been good to improve the safeguards — a safeguard for every power, as Francesca Lagerberg put it — perhaps now the time has come to divide the overarching safeguards off and put them into a separate charter.
The detailed CIOT research (which I have only had space to cover very lightly in this article) shows how that can be done by embedding the requirement for, and promulgation of, a charter in the legislation, together with a statutory remedy for a breach of it, but with the wording of the charter itself being extra-statutory.
There is nothing novel about this as an approach in UK law; in fact it is a very typical response to a problem such as this. It also may not require the establishment of many totally new rights for taxpayers, merely the enumeration and elaboration of rights which are already there, though not necessarily in tax legislation.
So Taxation is joining the Tax Faculty and CIOT (and others) in calling for a Taxpayers' Charter which, while not itself laid out in statute, gives rights that are enforceable in tribunals and courts as well as by the Adjudicator and Ombudsman.
If you are not yet convinced, we will be publishing a series of articles over the coming weeks looking at various aspects of the new HMRC powers and the safeguards, which such a charter would provide.
We will also be providing you with opportunities to make your voice heard and join with other tax practitioners to persuade HMRC and the Government that the writing is on the wall, and that we need a different charter from the one which the current consultation envisages.
