HMRC powers - the rational arguments that these go too far

Earlier this week I attended the 2008 Hardman memorial lecture presented for the ICAEW Tax Faculty by International Tax Barrister Jonathan Schwarz. His theme was 'Rights and powers: protecting the legitimate interests of taxpayers.' And his subtitle was "Taxpayer Rights in a Constitutional Democracy"

I have attended numerous seminars, meetings and discussions on related subjects - that is, the new HMRC powers as set out in part 2 of Schedule 36 FA 2008. I have also made a passing reference to these in a previous post on this blog: The end of the old paper bag jobs?

I thought I understood the arguments raised by those in the profession who fear that the powers go too far and could be misused. Equally I had some sympathy with HMRC's position, which was well defended during the ICAEW Wyman Symposium earlier this year. I would summarise this simply as: HMRC argues that it needs these powers to ensure that dedicated tax evaders do not escape on technicalities.

Jonathan's hard hitting views included a well argued observation as to the police state nature of the powers and the prospective consequences of the absence of effective safeguards.

A number of points specifically stuck in my mind:

• the new powers are the tax equivalent of the police's right to 'stop and search';
• as the powers are already on the statute book we need to focus on adding specific statutory safeguards;
• the unfettered power for HMRC officials to enter private homes should however be removed from the statute book;
• the proposed taxpayer's charter will, by definition be inadequate even if given simplistic statutory backing;
• taxpayer rights cannot be effectively addressed by an aspirational document (ie: the proposed charter). They need to be properly endorsed by parliament in the same was as were HMRC powers;

Whilst listening to Jonathan I realised that I had previously allowed myself to be misled by the HMRC arguments. I firmly believed that in reality no one within HMRC would have the time or inclination to abuse the new powers to the detriment of innocent taxpayers.

After the lecture Jonathan took questions from the floor. The last one was more of an observation by Anne Redstone. But, for me, it summed up the fears that I have not previously shared. She recalled a friend from her days at a girl's Convent school. The friend had asked her mother if she could go on the pill. Her mother wasn't happy and likened the idea to acquiring a beautiful ball gown, even though the school didn't have an annual prom. "The thing is, she told her daughter, once you have it you will want to use it."

The fear that so many commentators and practitioners have is that HMRC's powers will be misused. Many of us do not doubt the honest intentions of those at the top of HMRC who have championed the introduction of the new powers. We do not doubt the sincerity of their motives and we may even trust most of them. But it will be less senior officials who get to play with these new toys.

And, lest anyone should doubt how such powers can be used in ways not intentioned, we do not need to look very far for a worrying example. How about the use of the Prevention of Terrorism Act to freeze Icelandic assets?