DOES ANY READER KNOW AN MP?

 

 

DOES ANY READER KNOW AN MP?

 

 

In its recent decision in Hoey and others v HMRC [2022] EWCA Civ 656, the Court of Appeal commented (at para 132): “In any event, we do not regard this result as … impeding access to justice …  The attractions of the First-tier Tribunal as a “one stop shop” for all issues concerning the amount taxpayers should be required to pay to HMRC cannot alter the meaning and effect of a legislative scheme that … requires certain issues to be litigated in the tax Tribunal, others to be litigated by way of judicial review in the High Court …, and disputes about the amount to be collected by HMRC dealt with as a matter of enforcement in the civil Courts (the County Court or High Court)”.

 

The underlining of the word “scheme” is mine, not the Court of Appeal’s.  To my mind a scheme is something that is carefully planned.  It is clearly not a word that can be applied to the effect of an accident.  Sadly, I suspect that few MPs read this journal, but if any reader has an MP on his or her contact list, I would be grateful if he can ask that MP to explain the logic that Parliament applied in enacting this “scheme”.  It is something that has long puzzled me and for which I cannot even begin to understand the logic behind it.  I would love to be able to share with readers the parliamentary reasoning that gave rise to this “scheme”.

 

I also can find nothing on the Gov UK website to explain this separation of responsibilities to the average nurse, or binman, or clerical assistant, or the millions of other people who are paid under deduction of PAYE so only need to interact with HMRC when something goes wrong.  If Parliament has a scheme, it surely would cost little to explain it to the electorate.

 

Sorry, I seem to be getting a bit sarcastic.  I am one of those in favour of the First-tier Tribunal (FTT) being a one-stop shop for the resolution of tax disputes.  The Court of Appeal explains (at para 31) that the tax system involves three stages: liability, assessment and methods of recovery.  It defines “liability” as meaning “liability to pay tax”.

 

So how does this affect the average employee who is taxable under PAYE?  Liability derives from a person’s self-assessment tax return.  Most PAYE taxpayers are not required to complete a tax return.  For such people, liability derives from the PAYE tax table unless they ask to be issued with a tax return.  Nowadays, assessment also derives from the tax return as we have a system of self-assessment.  Both liability and assessment fall within the jurisdiction of the FTT.

 

The issue in Hoey was that in 2003, Parliament passed a law (ITEPA 2003, s 684(7A)(b)) that reads, “Nothing in PAYE regulations may be read … as requiring the payer to comply with the regulations in circumstances in which an officer of Revenue & Customs is satisfied that it is unnecessary or not appropriate for the payer to do so”.  In other words, if an HMRC employee decides that it is unnecessary for your employer to deduct tax from your salary, HMRC can come to you for the tax, not your employer.  The Court of Appeal in Hoey said that they can do it retrospectively.  For example, suppose your employer deducts tax under PAYE from your salary but does not pay it to HMRC.  HMRC can come to you three years later and say, “We have decided that it was unnecessary for your employer to apply PAYE, so please pay us the tax”.  You would then in law be required to pay the tax twice!  Personally, I find that an extraordinary law for MPs to enact.

 

I have looked at Hansard.  All this says is that the change gives effect to recommendations of the Tax Law Rewrite Committee and both the Labour Government and the Conservative opposition welcomed it.  I very much doubt that the Tax Law Rewrite Committee actually said that more discretion should be given to HMRC!

 

So suppose that HMRC direct that you should pay tax twice in this way?  What are your rights?  The answer is that you cannot go to the FTT (which is absolutely free and tries hard to be friendly to an unrepresented taxpayer); you have to apply for judicial review.  I have never applied for judicial review.  My understanding is that you need to engage both a Solicitor and a barrister.  I Googled, “Average cost of a judicial review”.  Unfortunately, lawyers seem very coy about costs.  My guess is the cost is a minimum of £30,000 – and if you lose you have to pay HMRC’s costs as well.  So if HMRC require a nurse or a binman to pay tax twice, what is their realistic legal remedy?  The have none!  We are continually being told that we have a fair tax system.  What does “fair” mean if HMRC asks you to pay tax twice and the costs of an appeal against that decision is way beyond your means?  I hope that someone can find an MP who is willing to explain that.

 

So what does your nurse do?  She can wait for HMRC to seek to collect the tax.  This itself has problems because HMRC have two choices (and of course your nurse in theory can apply for judicial review of the one they choose).  They can send the bailiffs round to seize and sell the nurse’s TV and other furniture (but as we have a “fair” system they have to leave her with a bed, a table and one chair).  Alternatively, they can seek judgement for the debt in the County Court.  This need not be an expensive procedure (as the nurse can argue her own case) but is more expensive, and a lot more intimidating, than an appeal to the FTT.

 

I fully accept that this is a great system for HMRC.  It allows them to collect tax from the poorer members of society very easily and irrespective of whether it is actually due in the safe knowledge that the taxpayer has no real option other than to pay up.  I doubt that it is a great system for taxpayers, who are expected to do as they are told by HMRC.  Nevertheless, it is a “scheme” that Parliament has, presumably after due consideration, felt appropriate as the best way to tax the average nurse and binman (I should stress that I do not mean to disparage those two occupations; I regard them as examples of the sort of essential, but poorly paid workers on which society is dependent but which, it appears, our MPs choose to treat with distain).

 

That “presumably after due consideration” is a bit tongue in cheek too.  I get the impression that if HMRC asks for more powers both of the main political parties are happy to comply, no questions asked as to whether they actually need them.  In many cases they don’t!  They certainly do not need powers the exercise of which cannot effectively be challenged before the FTT.

 

 

ROBERT MAAS