Press Office
The Pre Budget Report
Tue 2nd Mar 10 - 9:45
Shout99 has in the last month published an article on ‘The Pre Budget Report'
The Pre Budget Report brought a low-key but welcome announcement that HMRC would be retaining its 'equitable liability' powers to drop inquitable tax demands.
HMRC and its forerunners have long had the power not to pursue tax in cases where it would be ‘unconscionable' (excessive and unfair) for them to do so. This is the ‘equitable liability' practice and applies in cases where, although an amount is technically due (typically because a taxpayer has missed the deadline for appealing against an HMRC estimate of their tax liability because of ignorance or misunderstanding about procedures), the taxpayer can demonstrate that the true amount of tax which should be payable is less. Often it is the most vulnerable taxpayers who have benefited from HMRC's exercise of discretion in these cases.
A review in 2008 listed the practice among a number of concessions scheduled to be abolished from April 2010. This followed a court ruling in 2005 that HMRC had no power to alter tax demands unless there was specific legislative power.
However, following strong representations from the Chartered Institute of Taxation and others, the Government have announced that they will be legislating at the earliest opportunity to retain the practice.
Andrew Hubbard of the CIOT said: "This is very good news indeed. The most vulnerable in society need protection when things have gone badly wrong, even when they themselves may have caused the problems by their own action - or more often inaction - and the equitable liability practice was an important safety valve of last resort. So I am delighted that a decision has been taken to introduce legislation to put this on a proper, permanent footing.
"It is clear that the Government were caught by surprise by the strength of the reaction to their proposal to abolish this practice. To their great credit they immediately agreed to sit down with us and other tax professionals and listen to our concerns.
"We presented a careful analysis of the legal background to the practice and suggested ways in which the practice could be given legislative effect, and we coupled this with a number of real examples of cases where equitable liability had been used to prevent what would otherwise have been a wholly inequitable result."
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