Thursday, January 05, 2006



Catching up on my reading over the holiday period I noticed an HMRC press release of 3 November in which they say that they have changed their mind on the interpretation of section 209(4) of the Income and Corporation Taxes Act 1988 and now accept that the reference in it to “assets” does not include cash. HMRC are of course perfectly entitled to change their mind on the interpretation of legislation, even after it has been on the statute book for many years.

What caught my eye is that the press release goes on to say “ The reference in TA 1988 s 339(1)(a) to TA 1988 s 209(4) was made as a consequence of the incorrect view taken by the Inland Revenue. HMRC now accepts that reference is inappropriate.”

Section 339(1)(a) says that “a qualifying donation is a payment of a sum of money made by a company to a charity other than a payment which, by reason of any provision of the Taxes Act …except section 209(4) is regarded as a distribution”. The reference to a sum of money was inserted by the Finance Act 1990.

I am under the impression (or perhaps misapprehension ??) that tax law is made by Parliament. I appreciate that over the last few years Tony Blair seems to have been largely contemptuous of Parliament and that the new intake of MPs seems to have been quite happy to put up with this.

Nevertheless the rallying cry of the founding fathers of the USA, “no taxation without representation” was based on the belief that in the UK Parliament imposes taxation, combined with a determination that the same should apply in America and that non elected representatives should not be entitled to impose taxation on Americans. If that correctly reflects the UK position, then the reference in section 339(1)(a) to section 209(4) having been made “as a consequence of the incorrect view taken by the Inland Revenue” is incorrect. It was surely made because the then Chancellor of the Exchequer, John Major, persuaded Parliament at the time that it was the right thing to do. As Mr Major is still an MP it is surely incumbent on him to tell Parliament on what basis he asked them to make this change and for those MPs who were members of the House in 1990 and are still members to similarly explain the basis on which they thought that it was the most appropriate change to make.

English law courts strive to give a meaning to the words used by Parliament. It is accordingly anybody’s guess how they will interpret section 339(1)(a) if called upon to do so.

Whatever Mr Major meant, it seems to me constitutionally outrageous for HMRC to say that they now accept that the change Mr Major, and the MPs who supported him in 1990, made to section 339 “is inappropriate”. Surely it should not be up to HMRC to decide whether or not what Parliament chooses to do is inappropriate. It should be up to Parliament to apologise to the electorate and say that they are very sorry that they enacted inappropriate legislation in 1990 but this was done on the basis of inappropriate advice by the Inland Revenue, which either seemed to them correct at the time or which they could not be bothered to question, whichever the case may be.

Robert W Maas


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