Recent powers provided to HMRC undermine the rule of law and hinder taxpayers’ access to justice, a report claims.
The Economic Affairs Committee has this month published its report on ’HMRC Powers: Treating Taxpayers Fairly’. It is the second report from the Finance Bill Sub-Committee’s inquiry into the draft Finance Bill 2018.
In recent years HMRC has been granted greater powers to tackle tax avoidance and evasion, but the committee has called for the oversight of HMRC and its powers to be reviewed.
The report recommends that consideration should be given to widening the remit of the Adjudicator’s Office, and to oblige HMRC to follow its recommendations.
The committee has also recommended that parliament considers how it can improve the scrutiny of the powers being given to HMRC and how it uses those powers.
Lord Forsyth of Drumlean, chairman of the House of Lords Economic Affairs Committee, said a careful balance must be struck between clamping down and treating taxpayers fairly, but evidence has convinced the committee the balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.
He added: “Since 2012, perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice.
"Some of these powers disproportionately affect unrepresented and lower income taxpayers. We took some disturbing evidence on the government’s approach to the loan charge. This is devastating the lives of middle and lower income individuals, from the private and public sector (including the National Health Service) who used disguised remuneration schemes, in many cases being required to do so by their employers. The charge is retrospective in its effect, claiming tax from years which should be closed to enquiry. We have included some of the personal accounts submitted to us as written evidence as an appendix to our report.
"Clauses 79 and 80 of this year’s Finance Bill would introduce another disproportionate power. Extending HMRC’s time limits for assessing offshore matters to 12 years would place an unreasonable burden on a disproportionate number of taxpayers, who would be required to retain records for two or three times longer than currently.”
Other report findings and recommendations include:
• The government should withdraw its proposal, for which consultation closed in October, to remove oversight of the tax tribunal from HMRC access to information about taxpayers from third parties;
• The government should legislate to give the First-tier Tribunal (Tax) the power to conduct judicial reviews;
• The treasury should assess whether HMRC is adequately resourced to fulfil its Charter obligations in the next spending review.