Wednesday, April 07, 2010



Sometimes a Court or Tribunal decision raises the question, “Why did HMRC pursue this case”? I have said many times before that the government’s pleas of “fairness” when condemning tax avoidance schemes would carry a lot more weight if they were to recognise that fairness (and its companion reasonableness) is a two-way street. I do not think that it was fair or reasonable for HMRC to pursue the Executors of W M Atkinson before the Tax Tribunal. As a taxpayer I do not want them to take such points. Do you?

Mr Atkinson was a farmer. In 1957 he acquired and farmed Abbotsons Farm. Later he took his son into partnership in the farming business. In 1966 he built a bungalow on the farm land and moved into the bungalow so that his son and daughter-in-law could occupy the farmhouse. In 1980 his daughter-in-law became a partner. In 1994 so did his grandson. Sadly Mr Atkinson’s son died a couple of years later. Throughout Mr Atkinson retained ownership of the land but it was occupied by the partnership under an agricultural tenancy.

In 2002 Mr Atkinson became ill. He later went into hospital and when discharged had to go into a care home, where he died in 2006. During his illness the bungalow remained ready for the eventuality of Mr Atkinson’s return. His daughter-in-law and grandson kept an eye on it and picked up the post two or three times a week. They visited Mr Atkinson in the care home and discussed the farm business with him at least once a week.

“Ah”, said HMRC, on behalf of you and me, “While Mr Atkinson was in the care home he was not occupying the property. Accordingly on his death it cannot qualify for agricultural property relief for IHT as that requires the property to be occupied for the purposes of agriculture”.

I do not know the purpose of agricultural property relief. I suspect that it is to avoid farms having to be broken up on a death. There is a clear public interest in viable agricultural units. If that is the case, parliament cannot possibly have thought that if a farmer dies while living on the farm the relief should apply but if he is taken ill his illness should require the farm to be broken up.

To be fair to HMRC, it is not clear to what extent HMRC are forced to take cases such as this and to what extent they choose to do so in order to try to maximise the tax take, however unfair or unreasonable it may be to do so. In R (on the application of Wilkinson) v HMRC the House of Lords said that HMRC’s power of care and management gives them a wide managerial discretion which “enables the Commissioners to formulate policy in the interstices of the tax legislation, dealing pragmatically with minor or transitory anomalies, cases of hardship at the margin or cases in which a statutory rule is difficult to formulate or its enactment would take up a disproportionate amount of parliamentary time … It does not justify construing the power so widely as to enable the Commissioners to concede … an allowance which Parliament could have granted but did not grant, and on grounds not of pragmatism in the collection of tax but of general equity”.

HMRC’s power of care and management has since transmogrified into a power to “do anything which they think necessary or expedient in connection with the exercise of their functions”, which may give them a wider discretion. I think it probably does give them a discretion to act fairly, but they do not think so and I cannot say the position is clear. Accordingly the law may force them to pursue cases like Atkinson, whether they want to do so or not.

Do you think that they should have a discretion not to pursue cases where it would be unfair to do so? I do. I have put a petition on the 10 Downing Street website asking that they be given such discretion (the easiest way to find it is, and search “HMRC discretion”). If you agree with me please sign it.



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