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HMRC is using its powers unfairly against taxpayers, says UK House of Lords

Thursday, 6 December, 2018

Powers given to HMRC in recent years are undermining the rule of law and hindering taxpayers' access to justice, according to a report by the House of Lords' Economic Affairs Finance Bill Sub-Committee.

Since 2012, the committee said, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. Committee chairman Lord Forsyth noted that 'a careful balance must be struck between clamping down and treating taxpayers fairly'. But the evidence he had heard has convinced the committee that the balance has tipped too far in favour of HMRC and against the 'fundamental protections every taxpayer should expect', says its report.

Especially harsh criticism was directed at the contractor loan charge, now being imposed retrospectively on people who received their income in the form of non-repayable loans in order to avoid tax. Full income tax and national insurance contributions on all such loans become payable next April, and are likely to bankrupt thousands of people.

The committee heard evidence from some of these people, and has decided that HMRC should urgently review all loan charge cases where the only remaining consideration is the person's ability to pay, and establish a dedicated helpline to give those affected by the loan charge advice and support.

It calls for the oversight of HMRC and its powers to be reviewed, and urged immediate action to be taken in certain areas, notably:

  • withdrawal of plans to give HMRC unsupervised access to third-party information about taxpayers;
  • withdrawal of clauses in Finance Bill 2018-19 that would extend the time available to HMRC for assessing offshore non-compliance to 12 years.
  • abolition of penalties associated with the General Anti-Abuse Rule and follower notices.

'The fact that the House of Lords has made recommendations in such clear terms reflects that a lot of practitioners and taxpayers are concerned that the rhetoric from all political parties against avoidance and evasion has left an open field for HMRC to grab powers without proper oversight or accountability, commented tax expert Jason Collins of law firm Pinsent Masons. He particularly criticised the extension of powers 'bit by bit' when if they had been introduced all at the same time they would have been ‘more stark and probably resisted'.

Sources