Appearing before the House of Lords economic affairs finance bill sub-committee were Victoria Todd CTA, head of the Low Income Tax Reform Group (LITRG) team, Graham Webber, director of tax at tax advisory firm WTT Consulting, and Keith Gordon, barrister at Temple Tax Chambers.

When asked by Lord Forsyth of Drumlean whether taxpayer's rights were being protected under the current legislation, Gordon said that he thought HMRC was using its powers ‘in a way which is unfair to taxpayers’. He said that ‘I am not sure I am happy with the way their powers are being used. I think the powers they have are sufficient, but they are being used very much in a bullying approach.'

Webber said that he largely agreed with Gordon’s comments, particularly in the case of tax avoidance. ‘Avoidance does get a lot of attention. HMRC has been given 100 new avoidance powers in the last ten years. HMRC has these powers, every year it gets given new powers, and every year it wants to roll out these powers.

‘Very often there are no checks and balances. HMRC leaps from a small error by a taxpayer to the taxpayer being an evader or potential evader…That is going to be a problem until we have a workable definition of what evasion is and what avoidance is.’

Todd said ‘There needs to be not just safeguards, but accessible safeguards for the unrepresented taxpayers who LITRG represents. I think recently, with the proposals in relation to the extension of time limits for offshore matters and also HMRC civil information powers, that balance has shifted more in favour of HMRC.

‘We have certainly seen some instances of existing powers, particular in relation to penalties, where HMRC have ignored the burden of proof…and assumed the person is existing deliberately or carelessly.’

The subject of the disclosure of tax avoidance schemes (DOTAS), in which employees may have been enrolled in tax-reducing schemes by their employer, was also discussed. Baroness Kramer brought up the example of a council worker who had been instructed to retire and return to work as an outsourced contractor and had subsequently been investigated by HMRC. Gordon said ‘The problem is that the legislation goes for the person who is least able to defend themselves. The legislation is attacking the worker and not anyone else in the chain.’

HMRC takes a long time to investigate and take a long time to go to a tribunal. In similar matters which I’ve got on my client base, HMRC seems to be deliberately slowing down the tribunal proceedings with all sorts of procedural objections. It just looks as if they are trying to find ways of delaying resolution of cases like this.’

Lord Leigh raised the question of Making Tax Digital (MTD) and asked the witnesses what safeguards were needed for taxpayers who were ‘digitally excluded’ such as not being particularly proficient with computers.

Todd said that although LITRG was broadly in favour of digitisation of tax it was ‘strongly against any mandatory digital tax. If a system is good and has benefits you would expect people to naturally want to use it, like the self-assessment filing online. We do not think they need to mandate.

‘In terms of safeguards, people who cannot access things digitally should get a similar level of service. What we have found in terms of MTD is that we do not know what form any exemption will take. Whatever exemptions are in place they need to made clear to people. We would like to see them do far more, not just for people who are digitally excluded but those people who need help with digital. ‘

Gordon said that he felt that MTD has been introduced ‘for HMRC’s convenience’. ‘Whilst they try to publicise the additional advantages, I am extremely dubious about that. I think forcing people to put records online…forcing someone to do it electronically is going to risk the introduction of error.’

In defence, an HMRC spokesperson told Accountancy: 'All of HMRC’s powers are given to us by parliament and are subject to appropriate checks and balances. We use the powers we have in the interests of the vast majority of individuals and businesses who play by the rules.'

Report by James Bunney