In its submission to Department for Exiting the European Union (DExEU) ahead of the committee stage of the European Union (Withdrawal) Bill, CIOT argues that the uncertainty arises because the bill does not give full effect, at least initially, to the general principles of EU law. This is an issue because of the impact these principles have had on decided cases about, or applicable to, UK tax issues.

They include the principle of ‘abuse of rights’ which currently operates to protect HMRC from egregious tax avoidance in the sphere of VAT. CIOT’s submission states: ‘On the face of it the bill would seem to (presumably inadvertently) retrospectively remove this protection.’

CIOT says the intention is to provide legal continuity during Brexit by copying over the entire body of EU law onto the UK’s post-exit statute book. However, the way the bill is drafted the general principles of EU law will not be incorporated into UK law, despite the fact that the UK courts have given effect to these principles for a number of years.

Jeremy Woolf, chair of the CIOT’s EU and human rights sub-committee, said: ‘By not giving full effect, at least initially, to the general principles of EU law, the government are altering individuals’ rights – and the right of government departments and other bodies to bring cases too - without any consideration of the desirability of the changes.

‘This is likely to cause considerable uncertainty about whether previously decided cases remain good law. These problems are increased by the failure to make it clear what should or should not be considered a general principle of EU law.

‘It is particularly surprising that the ability to rely on the general principles of EU law is being removed retrospectively unless proceedings have been commenced before Brexit day. This is inconsistent with the general principle that changes to the law should just be prospective.’

 CIOT also argues in its submission that there are a number of provisions which go beyond incorporating EU law as it stands at exit day (as defined in the bill) into UK law and which result in the position of taxpayers after exit day being different from, and potentially worse than, their position immediately before exit day.

CIOT states: ‘The neutering effect on general principles of EU law in the way currently envisaged by the bill could have considerable impact on taxpayers going forward, both in respect of events pre-exit day and post exit day. The bill currently goes beyond the general aim of seeking to achieve a functioning statute book on exit day. It would be effecting a major change to the established legal framework, which is something that, at paragraph 14 of the explanatory notes, is said to not be the aim of the bill.’

CIOT’s submission on the European (Withdrawal Bill) is here.

Report by Pat Sweet