The government proposes that alongside the general anti-abuse rule (GAAR) that will come in the next year, there will be an advisory panel on its application, made up of a mixture of HMRC and non-HMRC people. How useful it is will depend on who is on it. But first, we must be clear about what it is supposed to do.
The panel will look at written submissions from HMRC and the taxpayer, and write a response that says whether use of the GAAR may be appropriate, and (one hopes) why. It will not decide whether the GAAR in fact applies, nor will its view bind either party. It will not perform any kind of judicial function. It will also publish reports on its work, and will contribute to the development of guidance.
We clearly need tax experts on the panel. The schemes that the panel considers will be very complex, and there is not likely to be any useful role for lay people without technical expertise. We must also have people who do not have the HMRC mindset. The group of panellists that considers a given case must include private sector practitioners. But should we have HMRC people on the panel at all?
Yes, we should. An HMRC representative would not be both advocate for HMRC and judge, because there will be no judicial function to perform. If HMRC was not represented, tax officials would rapidly lose confidence in the panel, because some of the private sector members would be suspected, rightly or wrongly, of having a financial interest in the tax avoidance business. And the public would lose confidence in the GAAR, for the same reason.
We can expect the HMRC members to be among the more hawkish officials, but the private sector members should be able to stand up to them. And the taxpayer may learn something useful from hawkish comments. Perhaps he or she will see a weakness in the avoidance scheme, and will settle quickly rather than go through the courts.
We must, however, be able to see how the panel works. The government is wrong to limit it to publishing summaries of its work. All individual decisions should be published, suitably anonymised, along with the comments of the panel, attributed to ‘HMRC’ or to ‘a private sector member’. Moreover, we must all watch like hawks, lest the advisory panel’s contributions to the published guidance get written primarily by HMRC officials.
Richard Baron, Head of Taxation, Institute of Directors
