In search of the will of Parliament

We have heard a lot lately about tax avoidance thwarting the intentions of Parliament. In Commissioners of the Inland Revenue (CIR) v McGuckian, Lord Steyn told us the Ramsey principle was ‘founded on a broad purposive interpretation, giving effect to the intention of Parliament’, while Lord Nolan told us in CIR v Willoughby that ‘tax avoidance within the meaning of S741 is a course of action designed to conflict with or defeat the evident intention of Parliament’.

In the July 1997 Budget Chancellor Gordon Brown said the government will not tolerate tax avoidance and will be relentless in its war against it.

In his pre-Budget statement, he told us he is committed to fairness and that tax avoidance harms those who pay their taxes.

So how do we discern the will of Parliament? In the 1960s it was easy; we read the Finance Bill Committee debates in Hansard. But in recent years, the main parties have adopted the attitude that the real purpose of the committee stage is not to consider the bill line by line and improve it, as Eskine May told us it was many years ago, but to use the bill as a peg on which to debate political points. Any real technical points are met with the response that the minister will ask his civil servants what the legislation means and write to the member privately – as if it is unwise to let the general public know the answer.

Looking for clues in the courts

The judges have devolved a principle that Parliament always intends the legislation to mean what it says unless the court discerns a tax avoidance motive, in which case Parliament intends the legislation to mean what the judge guesses it would have said if it had thought through the implications of what it actually said.

As both the Inland Revenue and Customs & Excise are subject to control by ministers and both have powers of care and management, it seems fair to say they would not spend taxpayers’ money in pursuing a case before the courts if they believed that Parliament had not intended the legislation to apply in those circumstances. We can therefore get some guidance from the tax cases.

We know the 659 MPs gave serious consideration to appointments from a discretionary will trust and decided that if the executors make an appointment within 93 days of the death it is fair to impose an inheritance tax charge but if they make the appointment during the next 21 months it is fair to grant an exemption from inheritance tax (Frankland v CIR). We know it intended that if a company lent money to A and A later repaid it, no tax charge should arise on the loan but if A assigned the debt to B and B repaid it, both the company and A should be charged tax on the amount of the loan, even though the company had not lost anything and A had not received a benefit (Collins v Addies).

Sauce for the goose

There are many more arguments that Revenue departments have put forward successfully as to what Parliament intended tax legislation to mean. A glance at the VAT tribunal reports suggests the Customs’ solicitors department itself has difficulty in discerning the will of Parliament in relation to VAT.

Perhaps that is a rash assumption. Perhaps the Revenue departments know exactly what the 659 MPs intended in enacting tax legislation. After all, the draftsman relies heavily on their advice, because we all know that legislation reflects the intention of Parliament, not that of the Executive.

Perhaps what Parliament intends is that the Revenue and Customs should collect as much tax as possible.

That if the wording might be stretched to impose a tax charge in individual circumstances then a charge should arise. But that if the taxpayer tries to similarly stretch the wording to avoid a tax charge that should be regarded as cheating.

If so, it is unreasonable for the chancellor to talk of ‘fairness’ in tax. If not, it is unreasonable for Parliament to clamp down on tax avoidance without at the same time clamping down on the use of public money to assert tax charges that no-one could conceive Parliament consciously intended. What is sauce for the chancellor’s goose ought surely also to be sauce for the taxpayers’ gander.

Robert Maas is a partner with Blackstone Franks.

Related reading