Oppose backdated rules, ministers urged

The UK’s fiscal health is at serious risk from backdated alterations of tax laws, the Chartered Institute of Taxation (CIOT) has warned the Government.

The professional body has urged ministers to adopt a general principle of opposition to retrospective changes in the tax rules, claiming that the use of such alterations damages confidence in the country’s tax system, with the risk of consequent harm to the economy.

The fundamental principle of the system is that taxpayers should be taxed on the wording of the legislation in place at the time of their actions, said the CIOT. To do otherwise is to damage the fundamental principle of certainty, something that should be at a cornerstone of any tax system.

The organisation called on the Government should make a clear statement of when, if at all, it sees backdating as appropriate, and to make the statement part of a new protocol on announcing legislative changes taking immediate effect outside fiscal events.
 
CIOT said it was not opposed to retrospective action in all circumstances, but that it ‘should be used with extreme care and justified at length.’ Use of backdating by the Government should always have to be justified in Parliament, added the body.

Its president, Vincent Oratore, remarked, ‘In recent years we have seen increasing use of retrospective action in the tax system. Thankfully, this is still relatively rare, but we think it is important for the Government to state clearly when, if at all, it will see retrospective action as valid.

‘It must be very sparingly used: retrospection is damaging to confidence in the tax system as it undermines the principles of stability and certainty. Frequent retrospection would reduce the attractiveness of the UK to potential inbound investors,’ said Mr Oratore.

Issue: 4283 / Categories: News , Chartered Institute of Taxation , CIOT , Vincent Oratore