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Lies, damned lies and government propaganda – the withdrawal of equitable liability

15th Jun 2009
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Keith Gordon is outraged at the proposed abolition of equitable liability. He has written an article on the government’s proposals to remove the equitable liability concession, which is based upon the principle that individuals should be required to pay no more than the right amount of tax.

Summary explanation of equitable liability

Equitable liability is a remedy of last resort for taxpayers who have fallen behind with their tax affairs. It applies in cases where a taxpayer is facing the enforcement of a tax assessment and/or determination which has become final and conclusive (for example, because of the lapse of time in which an appeal would have been allowed) but the taxpayer can provide satisfactory evidence to show that the assessment or determination is in fact excessive.

Typically, this will occur in cases where a taxpayer has started an activity that has proved to be profitable and, for whatever reason, has failed to register for tax. In many cases, the difficulties faced by such taxpayers will often be compounded by family and other financial problems leaving the unfortunate taxpayer like the proverbial rabbit in the headlights. When HMRC come knocking, panic will often set in and it is only when the bailiffs come will the taxpayer seek help.

Provided that the taxpayer can demonstrate that the true tax liability is lower than the assessment or determination, HMRC will, by concession, seek only the lower amount, notwithstanding the assessment or determination that entitles them to demand the additional sums.

The profession’s awareness of the practice

As with many non-statutory practices, not every tax adviser is aware of the practice. In 1995, the then Inland Revenue published an article in their tax bulletin in order to fulfil a promise made by the department to make more people aware of the practice. More recently, in March 2009, it was the subject of an article by TaxAid’s Harry Fulton in Taxation. Indeed, it is within the charitable sector (particularly, LITRG and TaxAid) where the profession has had most cause to use the practice because it assists mainly those individuals who do not have access to professional advice.

Proposed withdrawal of equitable liability

In recent weeks, HMRC have announced that they now wish to withdraw the practice. They cite several reasons. None, in my view, is a sufficient justification for the complete abolition of the practice that can prove to be a lifeline (in some cases, I suspect, literally) for individuals.

First, HMRC cite that the practice was originally introduced when the Crown had preferential rights in cases of insolvency. Whilst that is true, it was stated back in 1995 that the former Inland Revenue would equally apply the practice in non-insolvency cases. Therefore, citing the original source of the practice is disingenuous.

Reason 2 is that the introduction of Self Assessment has “eroded the justification for accepting time barred information”. Well, again, one can refer HMRC to the 1995 article. That specifically looked forward to the then imminent introduction of Self Assessment, noting that the régime would change the relevance of equitable liability. Nevertheless, the former Inland Revenue explicitly accepted that, where the conditions were met, they would be “extending their [previous] practice to meet this situation”. Therefore, citing the introduction of Self Assessment is plain dishonest.

Reason 3 is that the Wilkinson decision in the House of Lords prevents HMRC from exercising administrative discretion in many cases. Here, I accept that HMRC have a point. However, this is not insurmountable. Most people at HMRC are aware that there is an annual event known as the Finance Bill. This allows new laws to be passed in accordance with the wishes of Parliament. Where unfairness has come to light, I would suggest that the law be amended so as to allow equitable liability to be retained. Alternatively, HMRC could use its powers in section 160 of last year’s Finance Act which permits previous extra-statutory practices to be legitimised, something that has already happened in some cases precisely in order to get around the Wilkinson problem. In short, by citing Wilkinson, HMRC are just making excuses.

In my view, the idea of withdrawing the practice is outrageous. It will leave exposed the most vulnerable members of our society, with negligible advantage to the Exchequer. At a time when MPs are being criticised for over-decorating their second homes, MPs should consider retaining a measure that could save some taxpayers their only home.

What you can do

If you agree, I would urge you to write to HMRC via this link. I have also started a petition on Number 10’s website and would urge members to sign up to it.

Knowing that a general election is imminent, I also propose to raise the issue with anyone who (draws the short straw and) knocks on my door in the coming months.

In the meantime, I hope that anyone who has used the practice (or might have done had they been aware of it) will prepare a brief summary of the circumstances of each such case, add it as a comment below so that the value of the practice can be clearly demonstrated. With such evidence, it will be hard to see how anyone with an ounce of humanity could let the practice be abolished.

Keith Gordon is a barrister, chartered accountant and tax adviser. He practises from Atlas Chambers (020 7269 7980, where he provides litigation support and advice on tax and general chancery matters to accountants, tax adviser and lawyers. Keith can be contacted by e-mail at [email protected].
Keith was the 2009 winner of Chartered Tax Adviser of the Year at the LexisNexis Taxation awards.


Replies (19)

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By sammerchant
16th Jun 2009 10:10

Does it apply if the assessment is too low?
I have a case at present where the assessment raised in the absence of a SA100 return was too low. The return has since been submitted and I dare say the assessment will be revised to the higher figure.

If the new rules apply, will what is sauce for the goose be sauce for the gander or will HMRC deliberately raise ludicrously high assessments (see Paula's case below)?

I have circulated the petition to all my clients and asked them to consider signing it.

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By AnonymousUser
16th Jun 2009 07:58

Equitable Liability
I fully support Keith's crusade to keep Equitable Liability.

I have recently concluded a case where a subcontractor, through frequent house moves, had not received any tax returns from HMRC during self-assessment. As he had tax deducted under the CIS scheme, he did'nt realise he had to complete returns.

HMRC raised determinations from 1996-97 to 2005-06 which, with interest and penalties, exceeded £10,000. I prepared returns for all these years (plus later ones) showing an approximate break-even, but the local office refused to budge.

The case was referred to Enforcement in Worthing who were very helpful, and I eventually obtained a repayment of around £500. Client was delighted!

For unrepresented taxpayers, this concession is so vital and I agree that every effort is needed to persuade HMRC to retract their abolition proposals.

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By AnonymousUser
15th Jun 2009 18:25

The withdrawal of equitable liability would be a disgrace

You have requested a brief summary of the circumstances in which the application of equitable liability has been of value.

I can recall at least two occasions on which I have successfully requested that equitable liability should be applied. You will probably not be surprised to hear that on each occasion my application was made to the HMRC Enforcement and Insolvency section in Worthing, who were entirely supportive and willing to assist. Indeed, I am certain that on one occasion it was the debt manager responsible for the case at Worthing who suggested that I should make an application on my client's behalf and assured me that it would be treated sympathetically (which it was).

On the first occasion recalled by me the taxpayer had failed to appeal against an estimated assessment for 1991/92 and was refused leave to make a late appeal by the General Commissioners. The estimated assessment was excessive and, after fairly brief and straightforward correspondence with Worthing during the latter half of 1994, equitable liability was applied, the tax liability being reduced to the amount shown by the taxpayer's accounts and related tax computations.

The second case occurred in 2004 and related to a client who had received a Statutory Demand. Most of the liabilities shown thereon arose from determinations made by HMRC in the absence of SA Tax Returns, including that for 1996/97 (the "final" filing deadline for which had already passed on 31 January 2003). I assisted my client with the preparation and submission of all in-date Tax Returns and then corresponded on his behalf in connection with the application of equitable liability for 1996/97. As it happened, my client did not even have any records for that year, but the Enforcement Office were more than willing to apply discretion and common sense, accepting my suggestion that he be assessed on an amount arrived at by averaging the profits for the adjoining years.

In my opinion both the clients to whom I refer were deserving cases, each having extenuating circumstances, which explained their failure to attend to their taxation affairs on a timely basis. Each of them would have been significantly disadvantaged had equitable liability not been applied.

I very much hope that these examples are of interest and benefit.

Kind regards.


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By Paula Sparrow
15th Jun 2009 17:11

@ Clint
There is no right of appeal against a determination - the only way you can get it changed is by submitting the Tax Return, so in my case I can't be certain when that might be.

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By AnonymousUser
15th Jun 2009 16:19

@ Paula
I don't quite understand why it is suggested that equitable liability is a necessary or appropriate route to challenge a determination that has not been raised "to the best of his information and belief" as required by s.28C(1A). Could you not have the entire determination thrown out, even if equitable liability is withdrawn?

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By carnmores
15th Jun 2009 15:55

there are no circumstances
in which this should be removed

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By Paula Sparrow
15th Jun 2009 11:22

I have a case in point right now
One of my clients has been in intensive care in hospital since last summer. Her 2008 Tax Return was prepared in plenty of time to meet the filing deadline, but unfortunately, not before my client was too ill to sign the form. There is no Power of Attorney in place, so I do not see how the form can be signed and submitted legally. The tax I have calculated as due has been paid on time, and the Revenue are aware of the circumstances - they were advised in November that there is a problem with signing the form.

However, last week we received a determination notice for £60,000 in tax. The client's income is wholly derived from rental income, and her tax liability has consistently been around the £5,000 mark in recent years - so how has the Inspector arrived at £60,000 as a reasonable estimate of the tax due, as required by Section 28C TMA 1970...?

Whilst I would hope that my client will recover, or some sort of Power of Attorney can be set up for her so that the Return can be submitted some time soon, if the Return is not submitted this liability would stand as payable, even though HMRC are fully aware that the tax assessed is unrealistic.

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By nkwayne
15th Jun 2009 11:14

When will tax be collected fairly?
Another example of the government trying to collect tax in the most unfair ways imaginable. You have to admire their ability to dredge through the sewers and come up (or perhaps down) with these ideas.

I had not come across this before, but it is all too familiar as a doctrine now. Tax should no longer be based on collecting a fair proportion of income, instead lets use the available regulations to collect more money without raising the headline rates.

Reading this article it strikes me that the approach here simply is not based on the idea that a tax payer should pay a contribution according to his earnings. Yes there should be penalties and interest for non- or under- declarations, but if a determination or assessment can be shown to be excessive to the actual amounts due it beggars belief that anyone in their right minds should defend the notion that that assessment or determination should stand instead of the "real" liability.

In the world of VAT, though, HMRC tried to collect amounts of VAT which actually exceeded the Value Added by non MOT garages arranging MOTS for their customers (which fortunately was finally shot to pieces by a series of tribunals in 2007 and 2008) so I can't say I am surprised by this latest attempt to take more than is actually due to the exchequer.

It is surely time to stand up, as a profession, to these bullies and get them to pitch regulations which collect tax fairly, and to actively resist those which do not?

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By Anonymous
15th Jun 2009 10:23

China and UK
Sounds like UK is increasing becoming like China under Mao and China is increasingly becoming the Great Britain "UK" once was....

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By Anonymous
18th Jun 2009 07:37

Thank you for the support
Keith M Gordon (Atlas Chambers) writes to say:
Thank you for all the helpful examples posted - this should help to ensure that HMRC (and the Government) think again before abolishing the practice. I am also pleased that so many of you have signed the e-petition (though we have some way to go so please encourage others to do likewise).

In respect of AP's example on tax credits, I fear that citing equitable liability was the key to getting a common sense solution. The tax credits rules provide that a single-person's claim by a member of a couple is invalid and there is no statutory provision that deems the correct type of claim to have been made, meaning that claimants can lose out on £1000s simply by ticking the right box.

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By Sherlock
17th Jun 2009 22:06

Register a protest
I have already made an official protest about this issue to the appropriate HMRC official, and encourage other susbscribers to do the same.

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By Anonymous
17th Jun 2009 19:37

Equitable liability and tax credits
The remedy was introduced before tax credits and it is not clear whether equitable liability extends to tax credits awards. However, it was used in such a case I dealt with.

The applicant had incorrectly claimed as a single person instead of including her husband on the tax credits claim (this was a genuine error due to a very complex situation with her husband). If the applicant had included her husband on the claim the award would have been only slightly lower. The Revenue was seeking to recover all of the award rather than the difference between what was claimed and what should have been claimed.

The applicant had dealt with the matter herself initially without success (admittedly her appeals were poorly presented). I picked up the case a few years down the line. It spanned 3 tax years and the Revenue was seeking to recover just under £10,000 (not much less than my client's annual salary with children to support). Common sense would suggest that the Revenue should seek to recover the difference between what should have been claimed and what was claimed. I am not an expert in the tax credit field and I could be wrong, but after my client had already exhausted, without success, the formal route of appeal and review, I could find no remedy. I wrote to HM Revenue referring to equitable liability and common sense prevailed. The client repaid a few hundred pounds. Perhaps the kind officer at the Tax Credits Office who reviewed my letter would have seen sense if I had not quoted equitable liability, but perhaps not.

If there was an alternative remedy in these circumstances and I had missed it and used equitable liability incorrectly then I have made a mistake and the above is no significance. If not, then I can think of no better example of why this remedy should be retained.

Generally, if the Revenue view the remedy as surplus to requirements then they should not object to keeping it in the unlikely event that it will be needed. I accept that this is not as straightforward after Wilkinson.

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By AnonymousUser
17th Jun 2009 16:56

Plenty of powers
HMRC can use its usual discovery and enquiry powers if someone accepted a determination that turned out to be too low. If it is too inept to do anything about it for years after the event then that is HMRC's problem & whilst arguably in the long run we all as taxpayers might lose out from some tax not being collected, that is nothing like as draconian as the situation for someone facing a determination of several thousands of pounds they through ignorance, change of address or serious life problems failed to act promptly enough to displace.

I would be interested to know if any lawyers think that article 1 of protocol 1 of the ECHR would help a taxpayer in this situation - particularly one where the amounts involved were very significantly adrift, or whether the reference to taxes in that article totally rules it out.

It reads:


Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

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By k.gordon
18th Jun 2009 15:04

Update - nothing to get excited about, though.
Keith M Gordon (Atlas Chambers) writes to say:
HMRC have written to me following the publication of my article inviting me to discuss their proposals.

However, when clarifying details with them, it emerges that they are not considering any change in their plans and will not discuss the possible retention of the rule.

Their letter repeats their reasons for withdrawing the equitable liability practice despite my carefully-worded article which tries to show how those reasons are inadequate grounds for retaining something that is essential in a civilised country.

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By Dave Watkinson
18th Jun 2009 22:34

Equitable Liability
I have signed your e-petition, but do you really think that GB gives a damn. His main preoccupation at present is to safeguard the exit payments and future pensions for himself and all his other cronies, labour & conservative, who will give up, voluntarily or otherwise, their "seats" at the next election

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By Robjoy
19th Jun 2009 09:51

This isn't complicated, no matter what they say
Typically, this proposal has been buried from public notice, and wrapped in spurious justifications to make it all sound complicated, beyond the comprehension of the man in the street. But it isn't complicated. HMRC want to be able to demand more tax from someone that they should properly pay, because they have failed to adhere to every letter of the regulations, no matter what the circumstances - even including their inability to sign a tax return because they've been unconscious!

That is an outrage. The main outrage is not allowing a determination to be challenged. Is there no limit? Can they just pluck a figure out the air, add a couple of zeroes, even by mistake, and no-one can argue? Absurd. No calculation should be immune to challenge.

It feeds the image of HMRC as an unreasonable and inadequately controlled dictatorship, which just serves to tempt the foolish and unscrupulous to do reduce the amounts of tax they pay by any means. It isn't a leap of the imagination, surely, to suggest that a tax collecting authority that had to justify its calculations, respond constructively to challenge and behave with decent ordinary justice would get more cooperation from the public and fewer real cases of evasion?

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By [email protected]
19th Jun 2009 12:12

Equitable liability
About twenty years ago, when I took over my practice from another practitioner, there were a few years' estimated assessments under appeal. After due process, the appeals were confirmed. The collector chased for payments but could not find the tax payer. Then one day the tax payer came to see me with notice to start enforcement procedure. My client explained that he had been out of the country for the years of assessments. I spoke to a local inspector who told the only option my client had. I found out that the tax liability had to be "in the interest of justice & equitable". The enforcement office cancel the liability after seeing the evidence. A taxi driver cannot earn any income in this country while he is out of the country.

I only had to use this concession two or three times in over twenty years. I find it nothing short of being immoral that there are proposals to remove this concession.

Abdul Sattar

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09th Jul 2009 08:25

Equitable liability is safe in our hands. It will never go away.
Post a reply 16 posts • Page 2 of 2 • 1, 2
Re: Equitable Liability Settlement
by equilia on Wed Mar 18, 2009 12:39 pm

Equitable Liability Simple or not
Orchard View,
Telephone (01392) 833 054
Dear Sirs,

I wrote the following letter to the Times and it did not see the significance of its content.

Not Just, not Fair, nor Equitable!

When Mr. Pitt introduced graduated tax in 1799, his intention was to build on the maxims “taxation should always be just and equitable”. This allowed the tax and non tax payer the mandatory right of appeal when he considered he was being taxed on excessive, unfair assessments or changes.
The tax payer under Section 32 TMA 1970, has always had that stutory right of appeal to an independent body against “excessive tax assessments”. Until the 18th January, 2009 that mandatory right was preserved under Section 32. It protected the payer being taxed upon what were in effect Revenue “errors or mistakes”.
This and Section 33 TMA 1970 offered relief from the Revenue’s “unjust enrichment” and gave the right to “equitable liability” from those “Excessive Assessments”.
Now the Revenue wishes to deprive (or make extremely difficult) that fundamental right.
Section 32 intentionally had no time limits in which to appeal; as Parliament has always believed (intended) that the Revenue should “never profit intentionally” from “its own errors or mistakes” at the expense of the conscious and knowledgeable tax payer.
Spun under the guise of simplification and modernization (ease to use): in Statutory Instrument No. 56, 2009, the Revenue has surreptitiously forced through a deceived Parliament; the removal of the right to a fair trial; and hidden as “merely a change over”, to the new Tribunals System of Appeals; by adding procedural and timed pitfalls. The Revenue has engineered up the risks of appeal and tax review which will multiply tax payers costs 10 fold. Tax payers should be aware of the swing of the Tax pendulum to complete unfairness, now even worse, at the Revenue’s discretion.
These sordid changes to “Our Laws” must be repealed to comply with the Pitt’s above maxims of

Read Section 32 before revision and after.


Posts: 6
Joined: Wed Mar 18, 2009 9:01 am

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15th Jul 2009 15:55

Equitable liability started in 1970 see section 32 TMA 1970
It was designed to permit natural justice for all those who were assessed excessively by the Revenue on Labour Governments' Orders!

Absolutely "No time limits"

It was always Parliament's intention that the Revenue should never seek to "unjustly enrich" itself based upon its own mistakes.

The Revenue has been in a "closet sense" of denial for years. It is so obvious.

HANSARD 1803–2005 → 1980s → 1980 → July 1980 → 22 July 1980 → Commons Sitting
INLAND REVENUE (OFFICIAL ERROR RULE)HC Deb 22 July 1980 vol 989 cc461-8 461
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooke.]

Comment Hannigan. God Bless Teddy Taylor (Sir Teddy) and his sense of fair play. It (E.L.) did not exist in 1980 and it does not exist in Gordon Brown's Administration. God help us all from Labour's excessive abuses in 2009.

Back to the past.

12.57 am (22th July, 1980).

§ Mr. Teddy Taylor (Southend, East) I am grateful to my hon. and learned Friend the Minister of State, Treasury for staying up to this late hour to listen to my case and to answer the debate. This is a time of the year when Treasury Ministers carry an intolerable load, with proceedings on the Finance Bill, and I am therefore all the more grateful for my hon. and learned Friend's presence.

The issue that I wish to raise is the operation of Treasury policy in so far as it limits what is referred to as the official error rule and, in particular, as it affects my constituent, Mr. Wilson, of 440 Woodgrange Drive, Southend.

In the first report of the Select Committee on the Parliamentary Commissioner concern was expressed that the Inland Revenue had no power to waive arrears of tax. The Committee took the view that that was wrong in cases when taxpayers were presented with a substantial bill that arose purely because the Inland Revenue had made a mistake.

In response to that report, the Government issued a White Paper in July 1971 and accepted the need for something to be done, but proposed that the injustices that had been referred to by the Select Committee and the Parliamentary Commissioner should be resolved only where there was hardship. A scale was drawn up providing that if the taxpayer's income was £1,500 or less and a mistake by the Inland Revenue resulted in the individual being presented with a substantial tax bill, all the liability should be carried by the Revenue.

[Comment Hannigan: This sound like selective robbery to me(I was an articled Clerk earning £96.00 a year)].

It was further proposed that if the income was between £ 1,500 and £ 3,000 one-half of the bill should be borne by the Inland Revenue, but that if the income of the person concerned was more than £ 3,000, no remission should be allowed.

462 It is interesting—and it gives an idea of the extent of the problem—that between 1970 and 1977 a total of £ 7.4 million of taxation was remitted, involving 55,000 taxpayers. The average remission was more than £100 per affected taxpayer.

The scale has, of course, been revised several times. The latest revision provides that if the income of the taxpayer is below £ 4,000 a year, full remission is made in cases of official error. If the income is below
£ 6,000, the remission is 75 per cent., at between £ 6,000 and £ 8,000, remission totals 50 per cent. and on an income of £ 8,000- £ 10,000, remission is 25 per cent., but if an individual's total income is more than
£ 10,000, no remission is allowed, irrespective of the nature of the official error.

The latest report of the Select Committee, issued as recently as 21 February 1980, thoroughly reviewed the whole procedure. In evidence before the Committee the Parliamentary Commissioner expressed the view that the rigid cut-off points were unjust and created rough justice. In page 10 the Commissioner stated that: In my view anyone who has blamelessly conducted his affairs on the assumption that his tax account is in order must inevitably suffer on being informed that it is not; and it is no answer, in my view, to tell him that he is so wealthy that no injustice has been done to him or that he has anyway had the benefit of the unpaid tax. For, almost certainly, he would not have taken the benefit if he had realised that the money was not his to keep and, if he had spent it, he would not have done so—sometimes irrevocably—had he known it was repayable. That was a strong view, basically saying that the rigid cut-off points were unfair.

It is unfair to have arbitrary limits of that sort. The total income of a person is no true guide to his wealth or his available resources. It does not take account of a taxpayer's obligations, his debts, his family obligations, his children or of the elderly relatives that he might support. My hon. and learned Friend the Minister is a fair man. I think that he will agree that the total income is not a true and fair guide to a person's available resources or wealth.

In considering the matter the Committee made two specific recommendations. First, it felt that the lower limit was unfair and should be raised; secondly, it recommended that in cases 463 above £ 10,000 a year at least a token remission of 10 per cent. should be made. That was a limited proposal, but it was fair and reasonable. There is no doubt that if a taxpayer is suddenly presented with a bill, through no fault of his, it involves at least inconvenience, and possibly hardship.

How does that affect my constituent? Mr. Wilson is a responsible and meticulous person. I have no wish, and it would be wrong, to parade his private affairs—or the private affairs of any constituent—in public. Suffice it to say that through an unfortunate error in the issuing of coding notices he was presented with a bill for
£ 977 in respect of the year 1978-79, and was advised that it was likely that a bill for a similar amount would fall to be paid in respect of 1979-80. At no time was there any suggestion that the liability arose from a mistake on his part. I have a letter from Mr. Williams, the Inspector of Taxes, London Provincial 5 district, dated 16 April, in which he states: I am afraid that I can find no proper explanation as to the issue of the incorrect code … this would appear to be a bona fide coding error….

Naturally, I appreciate that it was a very costly mistake from your constitutent's point of view and I would ask you to extend my sincere apologies to Mr. Wilson for the error on the part of the Revenue. There is no doubt about the facts. The Revenue made an unfortunate error, and admitted it courteously. In fairness to Mr. Williams, I should point out that it was not his office that made the mistake. His office gave me a courteous and speedy reply to my inquiry.

In dealing with the complex affairs of taxpayers in Britain, with so many people involved, inevitably mistakes will arise. In those circumstances it is only reasonable that some provision should be made to compensate those presented with substantial bills, through no fault of their own. In my constituent's case the amount involved is about £ 2,000. If his income had been £ 4,000 or under, this total liability would have been carried by the Revenue. If his income had been £ 7,500, he would have had to find only half the money. But because his total income was above £ 10,000, he is entitled to nothing except a sincere apology. I believe that this is not fair and that my constituent is entitled to some remission for the inconvenience which has been caused 464 to him as a direct result of an unfortunate error by the Inland Revenue.

In cases such as this I do not think that it is fair to say that a person can afford it. At the end of every tax year every taxpayer, irrespective of his income, faces the same questions, the same opportunities and the same problems. A taxpayer may decide, because there has been a surplus in the year, to buy a larger house, or perhaps a British Leyland car, following the advice of some of my right hon. Friends, or perhaps a flat for an elderly relative.

If, having made the purchase, for example, of a British Leyland car, he suddenly finds himself faced with an unexpected demand from the Inland Revenue for £ 1,000 or £ 2,000, he cannot suddenly sell the car at no loss to himself; he cannot suddenly undo the good that he might have done with the cash; he cannot suddenly take the money out of a business in which he may have invested it.

In these circumstances, I suggest that there is an obligation on the Treasury and on the Inland Revenue to make some gesture towards a taxpayer who is suddenly and unexpectedly presented with a very substantial tax demand of this sort. I hope that the Minister will do something to remedy the injustice done to my constituent and will at least give some indication that the Government are prepared to make some small move towards a fairer solution to problems of this sort.

[Comment Hannigan what a star T.T. was].

§ 1.8 am

§ The Minister of State, Treasury (Mr. Peter Rees) My hon. Friend the Member for Southend, East (Mr. Taylor) has deployed a formidable case with his customary eloquence, courtesy and lucidity. He has drawn a general moral from the case of his constituent, Mr. Wilson. Although I judged from his speech that he does not wish me to go in great detail into Mr. Wilson's case, it is right that I should perhaps deal very briefly with the facts.

Mr. Wilson, as I am informed, for the year 1978-79 had a salary from employment which was over £ 10,000 a year and a pension from his previous employer which was somewhat less. Due to a mistake—my hon. Friend is absolutely right in saying that it was a mistake on the part of the Inland Revenue and not on 465 the part of Mr. Wilson—all his allowances were given against his pension but a single person's allowance was also given against his salary.

The error was discovered towards the end of the next finacial year. There is a certain significance that should be attached to that, and we must draw a general moral from that at a later stage. The Inland Revenue felt it necessary to raise an additional assessment on Mr. Wilson to recover the sum of somewhat over £ 900. Since the error was perpetuated, it is, I regret to say, true that a further sum may have to be collected for the current tax year.

I should like to associate myself with the apologies that the inspector rendered to Mr. Wilson. As I said, no blame whatever attaches to Mr. Wilson. There is no hint of suspicion that he improperly concealed the facts or anything of that kind. But, of course, my hon. Friend presses me and he suggests—I understand the vigour with which he defends his constituent's case—that apologies in this kind of case are not adequate.

My hon. Friend has taken the House back over the history of these matters. The Revenue has always recognised that it has a power to waive or remit tax where there is absolute hardship. This is a power that it has under its general responsibility for the management and control of the tax system. But, as my hon. Friend has pointed out, in 1971, as a consequence of the first report of the Select Committee on the Parliamentary Commissioner for Administration, a White Paper was laid in which the then Administration—the Chancellor of the Exchequer was my noble Friend Lord Barber—proposed a series of remissions related to an income scale which my hon. Friend has set out.

That scale has been improved or increased over the years. As recently as November last year this Adminstration considered it proper, bearing in mind the changed circumstances over the previous eight years, to alter the scale. However, as my hon. Friend has correctly pointed out, there is a cut-off point at £ 10,000. Sadly, Mr. Wilson lies uncomfortably on the wrong side of that point. Under the existing practice Mr. Wilson would not be considered for a remission.

466 The error in Mr. Wilson's case was discovered within one year of the year to which it related. My hon. Friend has studied these matters and, if I may reciprocate the compliment, is a fair-minded person. He will appreciate that the Inland Revenue machine is dealing with over 20 million taxpayers. The situation is particularly difficult in the case of PAYE, which is, as it were, a provisional collection of tax under schedule E during the course of the year. It is inevitable that some reconsideration of the facts may be necessary at the conclusion of the tax year. The Revenue has always adhered to the principle that if the error on its part has been discovered in the year subsequent to the year to which it relates, regrettably, no remission is due. I am sure that my hon. Friend will recognise the administrative difficulties of quantifying the liability with absolute precision in or very shortly after the end of the year of asssesment. On that ground, too, I regret that Mr. Wilson would not, under existing practice, be entitled to remission.

My hon. Friend makes the valid point that in any event those scales are a little unyielding. That very point was made in the recent report of the Select Committee on the Parliamentary Commissioner for Adminstration. The Committee made one or two recommendations to which we shall pay the closest possible attention. I am not in a position tonight to say what conclusions we have reached. The Committee again operates by reference to a scale. It suggests that, although there should be a token remission of 10 per cent. for taxpayers whose income is in excess of £ 10,000 it should apply only up to a limit of £ 15,000. I do not want to go into the details of Mr. Wilson's case, which may be indelicate, but I suggest that had we adopted in whole that recommendation, it would still, regrettably, not have afforded Mr. Wilson relief.

At the end of the day the Select Committee recognised the limitations of the existing system of relief. In paragraph 25 it concluded: We accept Sir William Pile's views"— Sir William Pile was then the chairman of the Board of Inland Revenue, who gave evidence— that any system of this kind involves an element of rough justice, and that smooth justice would be more complicated and therefore more expensive to administer. We have 467 accordingly limited our recommendations to changes which we believe could be implemented without undue difficulty, which will make more satisfactory remedies available to the taxpayer and which will reduce unavoidable unfairness to a minimum. Although the Committee recognised the limitations of the existing system of relief and proposed certain relaxations, to which consideration is being given, it did not suggest fundamental alteration, which is what my hon. Friend, with his usual pertinacity, is advocating. He is suggesting that we should consider the matter from a different principle. He suggests that if there is an error, without qualification, there should be a remission. I accept that there can be relative hardship for people with considerable income. My hon. Friend has instanced practical cases. I do not dissent from that at all. Equally, my hon. Friend, who has had considerable experience in administration, will recognise that in the interests of practical administration, because we are dealing with many cases, we must try to reduce the system of remission to fairly easily applicable rules. The Inland Revenue has proceeded on that basis up to this time.

I cannot tell my hon. Friend that I have the perfect solution, which has so far eluded not only the Inland Revenue and previous Treasury Ministers but the Select Committee which considered these matters. However, we shall certainly see how far we can respond to the specific recommendations of the Select Committee. I should like to see—without any commitment—whether we can approach the matter on a broader basis altogether, but that would open up a very wide area.

I hope that my hon. Friend will feel that, though regrettably under the existing rules we are unable to do anything 468 for Mr. Wilson—however we respond, it will be practically impossible to make it retrospectively effective, because it would probably mean reopening an enormous range of cases—he has generated a debate of some importance in which a real problem has received sympathetic consideration. There is a possibility—I put it no higher—that we shall be able to respond in the same spirit as that in which he has developed the debate.

§ Mr. Teddy Taylor My hon. and learned Friend has explained why he cannot help my constituent. To ensure that some good comes out of my constituent's unfortunate experience, in the review which he is to hold will my hon. and learned Friend consider the possibility of some percentage remission, however small, being made to all levels of income, bearing in mind that everyone suffers inconvenience and hardship from such situations, no matter what their income may be? I appreciate that he cannot give any commitment on specific matters, but I hope that he will look at this matter of principle which is involved.

§ Mr. Rees Certainly. I appreciate the understanding and moderate way in which my hon. Friend has pressed his case. I shall certainly take account of that point. I hope that at the end of the day my hon. Friend will feel that he has generated a small but important debate on a problem which deserves close consideration. Regrettably, we have felt unable to do anything for Mr. Wilson in this instance, but I hope that he will have the satisfaction of feeling that he has stimulated the reconsideration of an important matter.

§ Question put and agreed to.

§ Adjourned accordingly at seventeen minutes past One o'clock.

Hansard 22 July, 1980 is evidece and Mr Wilson was not robbed, but suffered inconvenience. If Mr Wilson had paid too much tax and a time lapse had passed, he or his executors would be able to submit a late appeal under Section 32 TMA (1970). And recoup his over payment. It would seem manifestly absurd if the Revenue could profit from their mistakes at the t/p expense. Parliament understood this and hence its states in Section 32 TMA (1970) [taken from the General Commissioners web site] [The overarching principle in a (fair and just) (Alias Equitable Liability) taxtion administration is the Administrator i.e. the Fisc being "enriched unjustly" - on the basis of its own errors and mistakes. And what is more; should it? Answer: In my view is that it would be amoral for the Taxation administrator to "unjustly enrich" its self. This must be the tax payers' protection policy laid down in Section 32 TMA 1970. This is not only relief from "double assessment" Reason:If Parliament ment only "double assessment" it would have drated "Double Assessment", wait for it ONLY AND It did not].


32 Double assessment

[Comment Hannigan]:

[This is legally and logically incontinent as any normative interpretation (of the rest of the section would ) understand immediately and see that it does not mean double assessment "only". For if it did mean "only" the section would have been drafted as such]. [And it was not]. [Dear Reader, what follows is the rest of the Section]. [I have nighlighted in "CAPITALS" - the relevant].

32(1) If on a claim made to the Board it appears to their satisfaction that a person has been
assessed to tax more than once for the same cause and for the same chargeable period,


32(2) An appeal on a claim under this section shall lie to any of the bodies of Commissioners
having jurisdiction to hear an appeal against the assessment, or the later of the assessments, to
which the claim relates.

History – S. 32(1) amended by FA 1985, Sch. 27, Pt. X, with effect from 19 March 1985 to remove references to development land tax.
Cross references – FA 1995, Sch. 21, para. 3(2): modification of s. 32, as respects each partner for 1996–97, in case of partnership whose trade etc. was set up and commenced before 6 April 1994.

TCA 2002, s. 20(2): revisions of decisions on working tax credit and child tax credit following vacation of an assessment, or determination or settlement of appeal.

Extra-statutory concessions – B41: repayments of tax will be made outside the statutory six-year time limit where an overpayment of tax has arisen because of an error by the Revenue or another government department, and where there is no dispute or doubt as to the facts.


It is an example of how all Labour Governments "over tax unfairly". There is an inbuilt mean streak in all Labour Governments' and particlarly by "Bungler Brown" the man who broke the economy, almost broke the Bank of England with QE and stole our pensions, whilst keeping his own "Solid Gold Pension Pot".

It is no surprise that this Labour Government is trying to scuttle the economy; before it sinks its Ship of State.

Soon there will be 3.2 million unemployed.

The idea of behaving like the Sherif of Nottingham; by withdrawing "Equitable Lliability (Section 32)" it seeks to continue to rob the poor to feed the the Fisc and feed his political colleagues "Gold Pensions" in his outgoing cruel, totally incompetent, overspending and social engineering administration.

He and his then Political Adviser should hang the heads in shame.

They shold go now! Well before their incompetence and bungling ruin this great Country of ours.

Our Nation cannot afford the Public Sector Gold (inflation protected) Pensions. It is so obvious but the Bunglers (B,B&Bs ) could not see it. Another fine "Balls up" or "cock[***] up".

"Bungler Brown" bottled on the most obvious decision to help the whole economy; in reforming the greed of the growing staTe sector and with his prolific spend, spend spending. He has ruined the economy; to save the Labour Party's desire of Power retention.

And it won't work. "Labour is not working; nor ever has".

Dont panic yet! Dave CAMMERON will ride to our rescue and reform the bloated State Sector Pension System to make it fair for all and save the economy.

Equitable Liability is safe in our hands! not "B&B's".

Dave will restore Equitable Liability and help the poor.

Good on you Keith! Keep it up! As we say in Ireland,

"God bless you, Sir - and thank you very much."

Joe Hannigan

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