HMRC’s powers to tackle tax avoidance and evasion undermine the rule of law and hinders taxpayers’ access to justice, found the House of Lords Economic Affairs Committee.
In its latest report, the Committee has called for the oversight of HMRC and its powers to be reviewed, arguing that there needs to be a careful balance struck between clamping down and treating taxpayers fairly.
The findings revealed that HMRC’s approach does not discriminate effectively between deliberate and contrived tax avoidance by sophisticated, high-income individuals, and uninformed or naive decisions by unrepresented taxpayers. The Committee suggested that clearer distinctions are needed in the approach and rhetoric towards tax avoidance.
“Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect,” commented Lord Forsyth of Drumlean, Chairman of the House of Lords Economic Affairs Committee.
“Since 2012, perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice.”
Lord Forsyth highlighted that some of HMRC’s powers disproportionately affect unrepresented and lower income taxpayers.
“We need to work together to build new principles for the tax system, taking a tough approach to tax avoidance while treating taxpayers fairly. We recommend a new review of HMRC powers, and an independent review to consider new oversight arrangements for HMRC,” he concluded.
The report also recommends that consideration should be given to widening the remit of the Adjudicator's Office, and to oblige HMRC to follow its recommendations. The Committee has also recommended that parliament considers how it can improve the scrutiny of the powers being given to HMRC and how it uses those powers.
