City lawyers have accused the government of ‘hugely damaging’ reforms of tax legislation that ignore the importance of the rule of law.
The City of London Law Society revenue law committee has called for the creation of an independent body with the power to veto tax legislation.
In a response to the Office of Tax Simplification’s competitiveness review, the committee says HM Revenue & Customs officials may have understated difficulties when briefing ministers.
At other times, policy has ‘clearly been driven from the political level without due considerations, with HMRC left to pick up the pieces’.
The committee response adds: ‘Whilst to some extent inevitable in a democracy, these phenomena are hugely damaging to the UK tax regime’s reputation for stability, and the creation of a constitutional check to limit the scope for them to occur would in our view be of real benefit.’
The committee noted that policymakers had made ‘great strides’ in improving the administration of corporation tax, but elsewhere too much legislation is being ‘produced in haste and then repented over at leisure’.
The response added: ‘The sense of policy confusion, especially when contributed to by frequent significant change after announcement, is very damaging to the UK as it undermines the objectives of delivering predictability and certainty.’
The committee, which is chaired by Travers Smith partner Simon Yates, called for a more realistic and open dialogue between ministers and officials about whether proposals are ready to be implemented.
Communication is a central theme of the response: the committee argued that for businesses that do not qualify for a customer relationship manager, interaction with HMRC is ‘problematic’, with what appears to be a ‘deliberate’ policy of not giving out direct line numbers or individual email addresses.
The response says a ‘disturbing pattern’ is emerging where legislation is introduced with ‘minimal or ineffective’ consultation.
Concerns are raised that tax policymakers are ‘insufficiently conscious’ of the importance of the rule of law and over-reliant on guidance. The current government, it adds, has legislated retrospectively against certain types of stamp duty land tax avoidance schemes even though they had been known to HMRC for some time.
‘We do not consider that this is acceptable. Businesses must know that the law in place when transactions take place will be the law that applies to them.
‘This principle is either absolute or it is nothing – once it has been broken once, further breaches are only questions of degree,’ the committee says.