Institute attacks ad-hoc approach to tax law

However, in a display of some considerable front, the Chartered Institute of
Taxation has put it in writing – HMRC rules by diktat.

The institute last week issued a paper, entitled Taxed by law, Untaxed by
, in which it argued that the way tax law is now created is built
on anomolies, complexity and was getting worse.

The review is prompted, it said, ‘by the increasing use of notices and other
statements having the force of law, extra-statutory concessions, statements of
practice, revenue interpretations, frequently asked questions and answers,
guidance notes and other material to deal with ambiguities and anomalies in the
primary and secondary legislation’.

The CIoT wanted to see more legislation being introduced, and less guidance
from HMRC, which operates, it suggested, by diktat.

‘Taxpayers are subject to the fiat of the tax authority, which may be altered
without notice or reason, may be unenforceable, and is probably subject to a
general caveat such as that it may not be applied in cases of tax avoidance,’
the paper said.

UK tax law, the CIoT said, was becoming increasingly complex and consultation
does not always take place on changes. The government does not give enough time
to thinking about how rules will work in practice, and general legislation is
increasingly interpreted through guidance and statutory instruments.

Why is it a problem? ‘Taxpayers crave certainty; if the law contains
anomalies and difficulties, commercial transactions become more difficult to
undertake,’ the report said.

Could the UK adopt a pre-transaction ruling process, where tax plans are
vetted by the authorities before they go ahead? CIoT asked.

‘The UK does not have a rulings culture. Such a procedure might be considered
as a means of clarifying the operation of complex rules in particular
circumstances. But it is unsatisfactory as a means of making law and places
burdens on the tax authorities. It needs to be recog-nised that it is a route
that we may have to follow if tax law increases its uncertainties.’

The position was unsatisfactory, it concluded, and getting worse. It
suggested a new principle. ‘No tax rule change or interpretation that lays down
how the law operates should take place without legislative scrutiny or prior
consultation or, preferably, both.’

Related reading