HMRC is keen to restrict our rights of appeal. Nichola Ross Martin looks at the problem and what we can do about it.

In the process of aligning its own rights and powers, following the merger between the two departments of the Inland Revenue and HM Customs, HM Revenue and Customs (HMRC) is slowly and steadily cutting down rights which we might quite reasonably expect as individuals.

The department has been busy during the last three years ticking off the boxes in its own redesign project. When it comes to new powers HMRC appears to be getting exactly what it wants; in fact almost the entire contents of its wish list are all being put into statute. These also include detailing the actual percentage penalties HMRC can levy – “that’s 30% mate, as approved by parliament,” to the virtually unfettered right to visit your premises wherever “it thinks” it needs to.

Now, HMRC needed a revamp, and the brief was to make it radical after all. It is one thing though giving HMRC greater powers than the police, but the rights of the taxpayer should not be neglected. The 2008 Finance Bill is about to receive Royal Assent and then HMRC’s new powers kick in. These fundamental reforms affect all taxpayers and benefits claimants, but the striking things is that every new power does not automatically have a corresponding safeguard.

We are told that HMRC’s powers are aligned across the taxes “for clarity” and to make things easier for customers(!), but our rights are not being correspondingly updated.

So we have:

• No automatic right of appeal against every new power,
  
• no right to the independent scrutiny of a tribunal and
  
• no automatic right to compensation if it all goes wrong.

Unless we do something fast, our rights will be reliant on the old fashioned notion of a “gentleman’s agreement.”

I cannot emphasise enough the extent of the problem, our fundamental and basic rights as citizens within the tax system of this "fair and sceptred isle" depend on HMRC following its own non-statutory guidance. Guidance that is not embedded in the law, guidance that is not recongnisable or enforceable by any court in the land, and guidance that is not set by an independent body or subject to sanction by parliament.

I have just come back from the ICAEW and I can tell you that its tax faculty is more than “concerned”, as its current chair, Paul Aplin puts it, he is “Worried, very worried.”

"Carry On Chartering"
What is proposed by HMRC to meet our demands is of course a new “Taxpayers Charter”. But “Jim”, this is not a safeguard, not as we know it.

HMRC says that the is about “taxpayer responsibilities” and here I share another ICAEW concern, few at HMRC or HM Treasury seem to be sure what is meant by the term “safeguard.” What have “responsibilities” remotely got to do with safeguards, and how can my "responsibilities" possibly affect me if I am a victim of an abuse of Revenue powers?

The proposed new charter is not the equivalent to a bill of rights, and as such it is about as much use to you, me and our clients as a mobile without a signal. Some of you might remember what happened to the last taxpayer’s charter. It vanished, without warning, without the scrutiny of parliament. What did the courts say, what did anyone do, what could anyone do? Well nothing. I rest my case. We need rights, proper rights, rights that are set into law.

No right of appeal
An automatic right of appeal against every new power is a "must", because when the system fails, as it will inevitably do - we are human and HMRC's officers do get carried away too (does not “absolute power corrupt?,) we will need to protect the victim(s). The potential problem of not having safeguards are not unknown, and it can be extremely dangerous when those who set out the original legislation are not around to sort it out when needed at a later date. A point made by Francesca Lagerberg, Chair of the ICAEW Tax Technical Committee during the recent No one realised when the settlement legislation was framed in the 1920s that it would result in one man having to go all the way to the House of Lords to clarify the law - Jones v Garnett (Arctic Systems), some eighty years later.

I agree we should not leave things to chance. Being dragged through the courts for five years because HMRC "got it wrong" would be anyone's worst nightmare. We can legislate for safeguards if we want to and we can start doing it now.

Coming soon to a business near you
Not withstanding that HMRC’s powers consultation is still ongoing - is set to take us into a new era of late filing penalties. The powers review is not over yet, in the meantime, these powers, with their lack of accompanying rights of appeal are coming soon to a business near you:

HMRC’s power to inspect statutory records
Problems:

• No one knows what it covers – there is no definition of “statutory records” in statute
  
• HMRC may decide what it thinks is a statutory record (you cannot appeal against that decision either)
  
• A statutory record may or may not include personal items such as diaries
  
• Type of “record” might cover any sort of document, storage device, disk, tape, computer, pda etc

It is not too late to change things and the powers review is not yet complete. If you still have any faith left in the consultation process, pen your bit on . Alternatively we should start when the summer break is over.

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