Taxation – Damn the poor but help middle classes

Do you have a complaint about how the Inland Revenue has handled yourobert Maas. tax affairs? The Revenue adjudicator can provide redress – for some; only the middle classes need apply!

Now that we have a Labour government, is it not about time that a system were also set up to help the working classes? You thought the adjudicator was already supposed to help them? So did I, but I have now been put right about this by the adjudicator’s office.

An accountant for whom I do a fair amount of work asked me for help on one of his clients. The Revenue was threatening penalty proceedings. The accountant thought his client had a reasonable excuse but the Revenue did not seem prepared to even consider it. I duly argued the case before the General Commissioners who held there was a reasonable excuse – probably not as a result of my oratory, to be fair, but rather because the client was such a good witness and had so clearly acted reasonably and honestly throughout.

Some fees take years to clear

The penalty was significantly less than my fees but the client felt very hard done by and wanted to ‘clear his name’. I have agreed to charge only half the fee I would normally bill. The client, however, will have difficulty in paying even that. I suspect it may take two or three years to clear the fees.

I suggested that the client ask the Revenue adjudicator to look at the case and seek compensation for the professional fees he had to incur.

Neither I nor the accountant has had a history as multiple complainants to the adjudicator. Before advising the client to complain, I showed the papers to an ex-tax inspector. Her view was that it was a clear case for compensation.

The adjudicator has agreed to look at the case but has said that she has adopted a policy not to recommend compensation for professional fees unless and until those fees have actually been paid by the client. Here is the dilemma. The client cannot afford to pay the fees at the present time. He is accordingly not deserving of compensation: he is too poor!

I find that outrageous.

So why has the adjudicator adopted this ‘help the middle classes but damn the poor’ approach? Her first letter said that she is worried that if she suggests compensation for part of the fees I might waive some of the rest. That is indeed a justifiable fear.

I think that the client has been badly let down. I feel it important that any aggrieved taxpayer should have access to professional help and might well conclude that, in the circumstances, it is unreasonable for him to have to struggle to pay my costs.

But I cannot see what that should have to do with either the adjudicator or the Revenue. If I decide to exercise generosity towards a taxpayer, why should the Revenue, which I have no wish to help financially, take the benefit?

Her second letter adopts a different approach. The Revenue should re-imburse cost ‘only where such costs have been incurred’. I would not dissent from that. But in this case, the costs were clearly incurred, albeit not yet paid.

That is the rub. The adjudicator believes it is important that, when she sets out her findings, ‘at that stage she is persuaded of the reasonableness of the fees’. As she is not the adjudicator for the accountancy profession, I am puzzled why that should concern her.

Reasonable fees are paid fees

Nevertheless, she can ask me how I arrived at my figure if she wants, but she is not apparently prepared to do so. She has decided that whether a fee is reasonable or not should depend on the taxpayer’s willingness to pay it. Sorry, her real test is ability to pay or, as her office puts it, ‘the ultimate test is the payment of these fees.’

The adjudicator has called for the files. She will rule on my client’s complaint. If she agrees that he has been hard done by she will tell him so – which will be some comfort to him, but not a lot, as he has had to incur what to him is a very heavy liability to me to clear his name. By no stretch of the imagination could that be called justice.

Was it wrong for my client to have wanted to uphold his reputation when to do so was beyond his means? Why should he have to pay the full price for having such a wish?

Robert Maas is a partner with Blackstone Franks.

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