Controversial wording dropped from new penalty regime clauses.

And I'm not sure he's right to say that a Commissioner's hearing comes to an objective decision.

The manual I note says:

If you fail to counter facts and evidence as they emerge you may find that you have not discharged the onus which has shifted to HMRC.

Two things follow. The objective test is of the conduct of the evidence, not the evidence itself (I think it quite possible to differentiate the two). Second, if the appeal fails what 'HMRC thinks' prevails.

that you have definitly lost it this time Richard!

Sorry Will. This is no such thing.

It's plain denial of the truth. 'HMRC thinks' is the reality of this situation. The comments made by the CIoT President are plain wrong.

I explain why at http://www.taxresearch.org.uk/Blog/2007/05/23/why-are-tax-advisers-so-dumb/

Richard Murphy

'HMRC thinks' is plain English, clear and concise legislation, as Nichola says is desirable. The man on the Clapham omnibus could comprehend it.

But it's not what Nichola wants in this case. In other words, the desire is not for clear and concise legislation in plain English although that is the stated objective.

But that's the trouble with words. They do not carry a single meaning. They never will. Which is why certainty is impossible.

Which is the point I made in my blog. And I stick by it. And frankly the profession makes itself look foolish whilst it asks for something that the same man on the Clapham omnibus knows cannot be supplied.

Tax is grey. Language is grey. Life is grey. All are complex. Why is it that the profession has so much difficulty embracing that reality in the political rhetoric so many within it use?

Richard Murphy

I am pleased to hear that someone had an attack of common sense when considering this phraseology in the Finance Bill.

I pointed out the problems that such wording would cause in my article in Accounting Web on January 26th ( "HMRC to award degrees for bad behaviour").

I am glad that others in more influential quarters have followed suit.

Perhaps they will also canvas their members and find out about their their experiances connected with the current offshore disclosure facility.

My current article gives Accounting Web readers the opportunity to do so and I proposes asking HMRC to comment on these comments in due course.

Richard
The point is that "thinks" is not suitable language for putting into the statute books because it is capable of so many different interpretations.

What taxpayers need is plain english and well drafted clear and concise legislation.

What on earth is dumb about that? If you are going to round on Rob, what not have a go at Francesca while you are at it? I am sure that we can find you some more individuals within the other tax bodies too if you want ; )

Keith Gordon explains this well in a piece of Feedback in this week's Taxation. It is probably true that 'HMRC thinks' would have been interepreted as 'HMRC has reasonable grounds to believe', but the areas concerned should be objective not subjective.

As Keith goes on to say, the current definition of theft refers to someone dishonestly appropriating property belonging to another. it would be entirely wrong to substitute a definition that said you were guilty of theft if a police constable reasonably believed you to have done so.

That does not change the fact that the initial decision will be the subjective one of a police officer, but the ultimate decision will be objective. Similarly, the piece Richard references in his blog from the HMRC manual refers to an evidential burden; whilst at different stages people will come to subjective views about whether the evidential burden has been met or not, ultimately it is an objective test.

Mike Truman
Editor, Taxation magazine

It was some git in the Nazi era who said something like "whenever I hear the word "culture" I reach for my mauser" (that's a pistol to you).

Likewise when I hear someone arguing about the meaning of a word (usually me) I reach for my Oxford English Dictionary (that's the 26 Volume version).

The word "think" might be plain English to Richard Murphy but to the OED it is four and two thirds pages of closely typed contextual explanation. Here are four of the "definitions":

1 To form in the mind; conceive a thought; to have in the mind as a notion, an idea etc.

2 To meditate on, turn over in the mind, ponder, consider.

3 To excercise the mind to form connected ideas of any kind or have or make a train of ideas pass through the mind; to meditate, cogitate.

4 to form or have an idea (a thing, action or circumstance real or imaginary) in one's mind; to imagine, conceive, fancy, picture.

We are all entitled to our thoughts. We cannnot get locked up for them unless we put a thought into action in the wrong way.

Personally I find the idea of HMRC "thinking" a nightmare. What or who is HMRC in this context?

Let us assume it is the Board of HMRC (a collection of individuals all of whom cannot have the same thoughts almost by definition so we are on shifting sand already) even though on the basis of the OED definitions it is impossible for a collective body to have a "thought".

If an HMRC officer is the mouthpiece for the Board (because he/she cannot have his/her own thoughts in this context) then he/she must be equipped by the Board with a thought for every conceivable circumstance that he/she might encounter in considering the given circumstances. That is impossible. But if "The Board" surrenders its right to "think" to a mere employee then it is rising above the law.

As I said some time ago - thank goodness somebody had an attack of common sense.

OK, let's go through the para RM's blog references, on the onus of proof for a late return fixed penalty as it currently is. None of it is about what anyone 'thinks' ,it is about the evidence submitted.

We're talking throughout about an objective test - the Commissioners decide objectively on a balance of probabilities. But say no-one presented any evidence at all - what would the position be? Answer - no penatly would be due. This is because initially HMRC have the onus of proof to show there was a failure in order to justify a penalty. Once they discharge that by showing the return was late, if the taxpayer wants to claim reasonable excuse then - because he is claiming a relief - the onus of proof is on him to show an excuse which is reasonable.

However there is also an EVIDENTIAL burden of proof. If the taxpayer says 'I couldn't submit the return because I was ill for six months', then if that evidence goes unchallenged it is enough to jusfity the claim. The evidential burden has now passed to HMRC - they need to challenge how ill the taxpayer was, the length of the illness etc. The onus of proof is still on the taxpayer, but the evidential burden has passed to HMRC.

None of which is relevant to HMRC thinks. If the test was 'HMRC thinks that the return was late without reasonable excuse', then the courts might well interpret it as meaning 'HMRC have reasonable grounds for believing...'. However, it would mean that if a taxpayer DID have a reasonable excuse, but had not explained it to HMRC at the time the penalty was issued, the penalty would stand. That subjectivity is the reason why HMRC thinks had no place in the penalty legislation and has rightly been withdrawn.

Mike Truman
Editor, Taxation magazine

I am regularly exposed to the professional literature of two professions. One is accountancy. The other medicine (my wife is a GP).

In accountancy you get the sort of prejudiced, poorly reasoned arguments displayed here. As well as comments such as that made by Nichola, which are at best unsubstantiated and at worst simple bigotry. In medicine you have to reason your case, examine the evidence and formulate a view, based on a methodological approach. The result has also to accord with a real world view. If it does not harm might result.

What a shame that accountancy and taxation appears unable to reach hat standard. Mike and Will argue in abstraction. Mike's case in particular is an argument in absurdum which is bound to result in a conclusion unrelated to the real world, by definition.

My argument meanwhile is based on reality. As a matter of fact tribunals are run in the way I suggest. We all know that is true. And as a matter of fact the man on the Clapham omnibus does not require the 26 volume OED Will brag's of possessing to know what 'think' means.

So let's come back to reality. If you want 'simplicity' then 'HMRC thinks' does nicely. If you don't like 'HMRC thinks' then please allow for complexity. I can handle the latter, happily. But as this discussion makes clear, those who argue for simplicity are duplicitous. That is not what they want. They want an absence of rules. That is something quite different.

Second, since those who want certainty can't define 'think'. In that case let's settle for uncertainty.

I summarise my case like this. Neither simplicity or certainty are possible. In that case we have to accept approximations to our desire for both based on what is achievable in reality. In reality no tax penalty is due in the UK unless HMRC thinks it due (although nothing in the new legislation stopped successful appeal against that claim). In that case 'HMRC thinks' is an acceptable approximation to the reality of the basis for charging a penalty suitable for use on legislation. Which was my contention.

But let's also come to the bigger issue. Why don't we discuss something more important, like justice? That would require the ending of the domicile rules, the introduction of truly progressive taxation and a reduction in wealth inequality. Going back to my start point, most in the medical profession would subscribe to such goals as a basis for their work. Why is it that we in accountancy and taxation believe that Revenue bashing is an appropriate alternative? I suggest we suffer a poverty of aspiration to achieve benefit for the world at large and that this latest focus of attention is indicative of that fact. Whilst arguing such issues remains the professions focus of attention its relevance will be low. No wonder doctors remain in high public regard and accountants remain amongst the lowst of the low.

Give HMRC discretion and you will get what you deserve.

Exercises of judgement are with us daily in the tax credits world and with ESC A19. Here HMRC exercise their thinking capabilities in deciding whether it is reasonable for the "man on the Clapham Omnibus" to have understood that the errors made by HMRC made their tax/tax credits position incorrect.

Such Clapham residents clearly should have known that a restriction to recover children's tax credit had been omitted from a coding or have realised which out of the 19 tax credits award notices they received was incorrect. HMRC believe that such residents go home every evening and study the detail of the law and the HMRC website (including the manuals) I would not like to rely on such thought processes.

As Mike intimates, well done to the professional bodies.

Francesca Lagerberg’s article went on to say that people who had been engaged for many years in the tax law rewrite project had ‘expressed disquiet at such imprecise language that smacks of leaving too much power in the hands of HMRC’.

The fact that the Government tabled these amendments to the Bill suggests that it has been persuaded that the phrase ‘HMRC think’ it not appropriate. It is not difficult to imagine a taxpayer coughing up rather than go to appeal in a case where, whatever HMRC might think, there was in fact no offence.

No doubt the amendments will be debated early next month (I am assuming they were not on the agenda for this morning’s sitting). Interesting to see that LibDem members have tabled their own amendments, substituting the words ‘HMRC have reasonable grounds for believing’ …

Andrew Goodall, Editor
Tolley’s Practical Tax / Simon’s Tax Briefing

Mike

I went back to the Bill and reread it when writing some of the more recent comments here.

I don't agree that 'HMRC thinks' is the standrad of proof required for a penalty to be imposed. If I did I'd agree with you. It's a test to allow them to impose a penalty which is however always subject to an appeal process. That appeal process does, of course, relate to the facts. Therefore they could not impose penalties at will, and i think it absurd to suggest that was the intention.

I think the phrase was a plain English description of what happens, and indeed has to be happen.

All I think thta has been proven by those who opposed the use of words is that plain English and simplicity have no place in tax law.

I think we should agree to differ.

Richard

Richard, this is actually about a fairly straightforward issue. Is it enough for HMRC to merely 'think' (albeit with a reasonableness test) that something has happened, or do they have to be able to prove that belief if challenged to do so on the balance of probabilities before the General Commissioners. My argument is not a reductio ad absurdum, it is an explanation of the HMRC manual contents which you referenced at the start of this, because you appear to have misunderstood what they meant.

As for not Revenue bashing, I bash where it is appropriate, but support them where they are right.