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House of Lords' report on HMRC powers

House of Lords' report on HMRC powers

Posted on 27 February 2019

The Economic Affairs Committee of the House of Lords has released a report in which it concluded “that recent powers provided to HMRC undermine the rule of law and hinders taxpayers' access to justice.” The difficulty for HMRC is that despite reduced resources, its officers are expected to collect more and more tax with fewer and fewer staff.  "Pressured" staff may therefore reportedly take to a "more aggressive approach to tax collection". 

The Report also considers a number of areas in which HMRC has sought to extend its powers.  For example, HMRC proposed that it should be able to request information from third parties without seeking prior agreement with the taxpayer or the tax tribunal (as is required at present) and with no right of appeal. Currently, there is also no right of appeal once Accelerated Payment Notices or Follower Notices are issued.  The reason for HMRC requiring such power is reportedly to avoid the administrative delays involved when dealing with tribunals.

The Committee advised there should be legislation passed to give the tax tribunal the ability to conduct tax-based judicial reviews. This suggestion has been championed for years, as judicial review is often the taxpayers' only chance for solution, but is not pursued due to the high costs involved.  Generally, appeals in the tax tribunal can proceed without incurring adverse costs (i.e. win or lose, the taxpayer only pays its own fees), whereas in the High Court an unsuccessful taxpayer would pay its own fees and potentially those of HMRC also. Some have endorsed the Committee’s suggestion that it is now "time for Parliament to rethink how it holds HMRC and the Treasury to account for the fair treatment of taxpayers". The Report concludes that the “balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect”. Fundamentally, HMRC undertakes an important role, but the taxpayers' legal rights must remain intact. 

It will be interesting to see whether 2019 will bring any developments.

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