Friday, October 29, 2010



Over the last few years HMRC have been reviewing their Extra-Statutory Concessions (ESCs) with a view to either withdrawing the concession or recommending the government to enact it. ESCs are published concessions under which HMRC state that they will not enforce the precise wording of a particular legal provision in specific circumstances. These concessions were introduced under the old Inland Revenue’s power of “care and management” of the tax system. I remember being told by the Revenue many years ago that they aimed to create fairness in areas where it would be too difficult to phrase the scope of the concession in statutory language.

HMRC have been advising the government to enact those ESCs that they feel it right to keep because of something said by Lord Hoffman in 2005 in the case of Regina (on the application of Wilkinson) v CIR. Lord Hoffman said that the Revenue’s power of care and management gives them a wide managerial discretion which enables them “to formulate policy in the interstices of the tax legislation, dealing pragmatically with minor or transitory anomalies, cases of hardship at the margins or cases in which a statutory rule is difficult to formulate or its enactment would take up a disproportionate amount of Parliamentary time”. Counsel for Mr Wilkinson claimed that some of HMRC’s published concessions went beyond mere management of the efficient collection of the revenue. Lord Hoffman’s response was, “I express no view on whether she is right about this, but if she is, it means that the Commissioners may have exceeded their powers under section 1 of TMA. It does not justify construing the power so widely as to enable the Commissioners to concede, by extra-statutory concession, 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 between men and women”.

As Lord Hoffman specifically stated that the Revenue did have power to make concessions in the circumstances set out earlier, it is highly questionable whether the judgement required HMRC to dispense with existing ESCs and to forbear from creating new ones. The HMRC response smacks of using the judgement as an excuse to stop trying to help taxpayers by promulgating ESCs where the law did not deal with cases in the interstices or created anomalies or a method of achieving fairness would be difficult to enact.

However, that is not the point of this article. On 27 August, HMRC published a technical note on the proposed new Regional Employer National Insurance Contributions Holiday for new businesses other than in the East and South-East of the country. The government want this to operate from 6 September but it needs legislation and the government do not expect this to be enacted until next year.

This note tells us that until Parliament enacts the legislation (assuming that it chooses to do so) “businesses eligible for the Holiday will, as a result of the exercise of HMRC Commissioners’ collection and management powers, be able to receive the benefit of the Holiday from 6 September 2010”.

Curiouser and curiouser …? The “collection and management” power is in the Customs and Revenue Commissioners Act 2005, which replaced the TMA “care and management” power that applied at the time of the Wilkinson decision (given a month after the enactment of CRCA 2005). Granting by concession a completely new relief that Parliament has not even been asked to enact – or to put it another way, declining to collect N.I. that Parliament has told HMRC to collect – seems to me to fall squarely into Lord Hoffman’s prohibited category of conceding a relief which Parliament could have granted but did not grant.

Do HMRC’s 2005 powers go wider than their 1970 ones? They do not appear to me to do so. If they do, it must follow that there never has been a need to enact or scrap a single ESC, as the new HMRC powers were in place before the Wilkinson judgement. So what is going on? Are HMRC contemptuous of the House of Lords and are simply ignoring Lord Hoffman? Is George Osborne – or more likely David Gauke – contemptuous of the House of Lords? Or am I right in thinking that there was never a need to do anything about ESCs and Lord Hoffman simply provided a convenient excuse to withdraw from taxpayers reliefs enacted in those bygone days when the Revenue believed that the tax system ought, by and large, to operate fairly, but which are an inconvenience today when the tax system seems to be largely designed to make taxes easy for HMRC to collect with fairness having become largely an irrelevancy?



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