Friday, December 23, 2005


The Chancellor and the Paymaster-General, Dawn Primarolo, are constantly telling us that the tax system needs to be fair. Admittedly they normally do this in the context that when a taxpayer reads the law, thinks “that looks a bit odd”, but resolve to comply with it as a good citizen is obliged to do, they believe such conduct to be outrageous. The Brown/Primarolo approach to law seems to be, “It doesn’t matter what the law says; you should ignore that and instead comply with what we meant to say. After all we are bulldozing so much tax legislation through Parliament so rapidly that, even if MP’s wanted to think about it, - and, come on, it’s tax we’re talking about so most don’t – it is impossible for them to do so. Of course such a procedure is bound to result in us getting things wrong. Taxpayers need to realise that if we don’t allow MP’s time to make corrections it is up to taxpayers to themselves think what corrections MP’s would have made, given more time, and apply to themselves the law that would have resulted from such corrections”.

So do HMRC wish you a very fair Christmas? I don’t have a clue! I thought however it might be useful to look at some recent tax cases to try to discern what the Dawn Primarolo/HMRC definition of fairness might be.

Thompson v C & E Commrs

VAT on a car is recoverable if it is not available for private use. It is impossible to insure a car for business use without the insurer throwing in private use for free. Suppose you buy a car solely for business purposes and use it solely for business purposes. Can you recover the VAT? “Of course not”, say HMRC, “you cannot conclusively prove that it is not “available” for business use – don’t expect us to accept that proposition simply because you tell us so and can demonstrate it has never been used for anything other than business”. The High Court agreed – but in an earlier case HMRC had cross-examined the proprietor along the lines of “If your daughter was taken seriously ill and needed to be rushed to hospital are you seriously saying that if the business car was sitting outside and you had the keys to it you wouldn’t use the car but would waste 10 minutes getting your own car out of the garage”.

Answer. “Of course not”. Result is then its available for private use.

Fair? You decide!

Haven Healthcare v York

Haven lost before the appeal Commissioners at a hearing on 30 July. It had 30 days in which to appeal to the High Court. It thought the 30 days started from when it got a formal written decision from the Commissioners, which was on 2 August. It appealed on 30 August, one day late if the time limit was 30 days after 30 July and 2 days within the limit if it ran from 2 August. The Commissioners thought the relevant date was 30 July but were willing to turn a blind eye to the one day late.

Fair? Commonsense? No, say HMRC. They applied to the High Court (successfully) to have the appeal struck out because it was one day late.

Fair? You decide!

P M v UK

“A hearing took place on 11 July 2002. The applicant was unrepresented. On the morning of the hearing, counsel for the Revenue presented him with a large file of the authorities on which the Revenue sought to rely”.

That sounds to me like, “Oh, you don’t have a lawyer. Great! We can win by pretending to be helpful and overwhelming you with masses of paper that you obviously will have no time to read, but the Commissioners will regard us as having been reasonable in giving you the papers in advance”.

Fair? You decide!

Personally I don’t regard any of the above as being fair. But then I don’t regard expecting taxpayers to guess what the law meant to say, instead of following what it actually says, as fair either. So my definition of fairness must be very different to HMRC’s. Indeed, I think that when it comes to tax certainly is much more important than fairness. I believe that when a person enters into a transaction he should be entitled to do so in the knowledge of what the tax consequences should be. I accept that I am being a little naïve in the sense that I think that, having spent getting on for 40 years specialising in tax, as it is hard for me to apply some of the legislation, a taxpayer on his own probably has virtually no chance of understanding the tax law. Nevertheless, with appropriate advice, he should be entitled to know where he stands, not have to enter into a transaction in the hope that his guess of what Ministers intended the legislation to say is right.

What is your concept of fairness?

While you are thinking about it, I hope you have a Happy Christmas. I obviously can’t wish you a fair one as I don’t know what you believe fairness to mean.


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