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KEY POINTS
- The charter is to be explicitly recognised in statute.
- What will the impact be on using it in appeal proceedings?
- The Australian charter may be a model for the content.
- What name will it be given?
There’s no pleasing some people.
All this time Taxation has been campaigning for a Taxpayers Charter that is introduced by an enabling statutory provision, but when the PBR announces that is exactly what is going to happen, we don’t crack open the champagne and drink a toast.
Bah, humbug!
I wouldn’t blame HMRC if they felt that they hadn’t received enough praise for their change of view on the charter.
But the reason I didn’t comment in detail on it immediately is that I am still not quite sure what to make of the latest proposals, which can be found in one of the supplementary documents issued with the PBR, A new charter for HMRC and its customers.
This gives details of the responses received to the earlier consultation, and sets out HMRC’s reaction to them.
Listening to reason
It is clear that HMRC deserve credit for having been prepared to modify their initial refusal to even consider a statutory basis for the charter.
They deal with this right at the beginning of the detailed analysis, saying that ‘Initially we saw no need for the new charter to be set in legislation and took the view that a legislative approach might make the charter less accessible and less flexible’.
The question in the initial consultation therefore stated categorically that the charter would not be set in legislation.
However, all the representative bodies, as well as some individuals, simply ignored this supposed precondition, and said that they were opposed to the idea of having a charter with no legislative backing at all.
HMRC have therefore changed their mind, but it is hard to be sure whether they intend making the minimum possible concession – little more than window-dressing – or whether some real change in the status of the charter is intended.
The paragraph in the PBR supplementary document that sets out the new proposal reads as follows.
‘…the Government has decided to include a clause in next year’s Finance Bill to explicitly recognise the existence of the charter. This will ensure that the charter is both credible and durable, without reducing the document’s accessibility or flexibility.’
To try and understand this, it is necessary to take into account the varying views expressed in the responses to the consultation, which are set out prior to this reaction from HMRC. In summary, the different views expressed were:
- the majority said a ‘short provision’ requiring HMRC to have a charter would be sufficient;
- legislation would mean the charter was permanent, and if there was no statutory provision the courts would determine the status of the charter;
- the lack of legislation had weakened earlier charters, and was needed to restore trust in HMRC;
- ‘three respondents’ thought that key rights and responsibilities should be set out in legislation;
- ‘about a quarter’, mostly individuals, did not think there was any need for legislative backing; and
- ‘a number’ of the responses looked at how HMRC could be held to account for failure to meet the charter obligations, with ‘a few’ suggesting that rights of appeal should be set out.
Toothless law?
In the light of this list, the reference to a clause ‘recognising the existence’ of the charter seems worryingly weak, and the reference to the perceived problem of judges interpreting the status of the charter may be even worse. It seems that HMRC may be contemplating a clause which simply requires them to have a charter, without setting out whether, or how, it should be taken into account by tribunals or by the Ombudsman.
However, the combination of the charter with the wording of the provisions in the sets of powers now being given to HMRC may still mean that this is sufficient.
Take, for example, the information power in FA 2008, Sch 36 para 1, which allows an HMRC officer to ask a taxpayer for any information or document which is ‘reasonably required’ to check their tax position. Paragraph 29 sets out the right of appeal against such a notice.
The grounds for the appeal have to be given, and in most cases it is likely that they will revolve around the issue of whether the information or document is ‘reasonably required’.
Let’s also assume that the new charter will provide, as many similar charters around the world do, that the taxpayer has the right to be treated as honest and truthful until it is shown that he or she is not.
What then happens when an inspector, who has not ‘broken’ the accounting records in any way, asks for an explanation of all the sums credited to the private bank account going back six years?
Without the charter, and interpreting the legislation as it stands, it could be argued that the inspector’s request is reasonable. It would not, after all, necessarily imply that, if the taxpayer could not remember the source of the credit, it was undeclared takings – although most readers might well expect that to be the inspector’s next move.
The inspector would claim merely that an analysis of this type would help him or her to confirm that the source of the entries which the taxpayer could remember was not taxable. A taxpayer might therefore find it hard to resist the claim without the aid of the charter.
With a statutory requirement to maintain a charter, and a provision in the charter which sets out the taxpayer’s right to be presumed honest, there is a much clearer argument that the inspector’s request is unreasonable.
That is not, of course, to equate the assumed charter principle with legislation. It is not, and there may well be situations where a request which breached the principle would still be considered reasonable in all the circumstances; but the existence of a written principle in a charter which owes its existence to statute would make a stronger case than one which is not.
Judicial discretion
This assumes, of course, that the clause requiring the existence of the charter does not at the same time limit the way it is interpreted. Look back at the list of responses and you will see that one reason for putting in a statutory provision is that otherwise the courts might come to their own conclusions about what the status of the charter is.
Now perhaps I really am being paranoid here, but does that mean the clause introducing the charter will actually exclude the possibility of judicial discretion and interpretation? Will it, for example, say that the charter is being introduced but that it is not to be taken into account when interpreting statutory provisions?
The one factor which makes me take this possibility seriously is the complete lack of reference in the rest of the document to the possibility of the charter being used in appeals. It seems to be seen much more as a public relations document rather than as something which gives taxpayers any better protection than the existing law.
Content of a charter
After the discussion of what might be in a charter, the HMRC reaction refers approvingly to the Australian version as one which might form the model of one which would be a ‘high level principles document… of general application’.
It would incorporate three main strands:
- a reference to rights and responsibilities;
- a statement of principles and organisational values; and
- standards of service.
If the Australian model is adopted, that seems to offer some important rights, albeit expressed in general terms. Going back to my example above, here is the first sentence in what the Australian charter says about a presumption of honesty:
‘We presume you tell us the truth and that the information you provide is complete and accurate unless we have reason to think otherwise.’
There are, admittedly, some qualifications to this afterwards about the need to make checks under self assessment, and the slightly Alice in Wonderland statement that ‘if we check your information it does not mean that we think you are dishonest’.
However, these general principles seem to me to be exactly the sort of counterbalance which is needed to the significant increase in specific powers given to HMRC by recent legislation.
What’s in a name?
I have referred throughout to the Taxpayers Charter, as did the original consultation document. That, however, is not what it is likely to be called, despite that fact that many countries around the world use that title.
The responses to consultation made it clear that most respondents wanted to see only one charter to cover all the activities of HMRC, and of course HMRC will always say that in that case not all of their ‘customers’ are taxpayers.
My response, along with many in the profession, would be that at least a substantial majority of the people it deals with are taxpayers, whereas none meet the normal definition of a customer as someone who buys goods or services from you.
One suspects that, given the choice, HMRC would call it A charter for HMRC and its customers, which is one of three out of the five names they specifically mention to include the word ‘customer’.
Another one is the spectacularly point-missing ‘HMRC’s charter’, which is precisely what it is not. There were apparently over 50 different titles suggested within the consultation process.
Let’s hope that arguing about the name doesn’t stop us from ensuring that we get the right content and the right statutory framework.
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