I started to specialise in tax in 1965, just after the introduction of corporation tax and capital gains tax. In 1965, we also had income tax, national insurance, stamp duties, customs and excise duties, estate duty (since replaced by IHT) and that was it. My 1965/66 Yellow Book (at that time called Butterworths Income Tax Handbook, albeit that it also covered corporation tax and CGT) ran to 759 pages and was 1.25 inches thick. My seven volume 2022/23 Tolley’s Yellow and Orange Handbooks demonstrate how much the volume of tax legislation has grown during my career. That is a bit misleading. In 1965, the book contained only the legislation. Today they contain selected HMRC publications too, but the main growth has been in the volume of legislation.
The elderly tend to get nostalgic. The administration of the tax system in 1965 was very different. The Inland Revenue operated through local offices which were semi-autonomous, the district inspector having the ultimate decision-making power but with the ability to refer potential criminal investigations to a specialist division. Each case was handled by a single named inspector with whom accountants built up relationships. There were, however, major inefficiencies. The introduction of self-assessment in the early 1990s was a welcome improvement but, sadly, opened the way to the centralised digitally-driven system that we have today.
I am myself digitally-challenged, but fortunately by the time that tax compliance became computer-driven, I had progressed to the stage where I was no longer handling casework directly but was mainly selling advice, so did not have to get to grips with the digital world. That is not to say that the digital world passed me by entirely. HMSO used to publish a Tax Cases series which I think ceased in around 2014. Sadly, because these were far more useful than BAILII because a case was not included until the decision on the final appeal but, when published, it brought together the judgments of the High Court, the Court of Appeal and the House of Lords on the case, which made it far easier to follow than having to start with a Supreme Court decision and search elsewhere for the FTT hearing which set out the facts. But I digress. The point that I wanted to make was that the decisions in volume one rarely exceeded a few pages – doubtless because the judge had to write his decision by hand – whereas today even a simple judgment seems to run to 20 or 30 pages, with more complex ones approaching 100 pages of, I suspect, dictated verbiage.
Legislation was also much shorter. The Finance Act 1960, which was aimed largely at countering tax avoidance but also contained major administrative reforms, managed to do all that in 79 sections and six schedules. Contrast that with the 136 sections and 34 schedules of the 417-page FA 2021, which largely merely tinkered with the tax system, although it did also contain the 43 sections and seven schedules that Parliament needed to introduce the plastic packaging tax, a fairly niche impost. 417 pages for a single Act; yet in 1965 the whole of the extant legislation from 1803 onwards on income tax, corporation tax and CGT took up a mere 759 pages.
Of course, the tax law rewrite increased the volume of the legislation in an attempt to make it more intelligible. Whether that was worthwhile is questionable. And, of course, Parliament called a halt to the rewrite before it reached the Taxes Management Act, the stamp duties, and IHT, arguably all in greater need of a rewrite than corporation tax. But that does not justify the length of subsequent Finance Acts. The 417 pages of FA 2021 is, of course, a pittance compared with FA 2016 (649 pages), FA 2014 (646 pages) and F(No. 2)A 2017 (665 pages – too many to bind in a single volume).
And as the volume of legislation has mushroomed, its quality has nose-dived. Take a look at the Hansard debates in the 1960s and 1970s. The Finance Bill Committee was genuinely seeking to improve the quality of the legislation. Amendments were moved by both opposition and government backbenchers. It is years since an amendment by a government backbencher (other than new clauses) has been selected for debate. Indeed, in the last few years there have been hardly any substantive amendment debated at all. In the 1960s and 1970s, one would not expect a Finance Act to contain corrections to the legislation enacted the previous year, or the year before that. Today, it is commonplace.
HMRC has also changed radically. No longer the friendly and knowledgeable inspector of taxes. No longer the local office where Joe Taxpayer could drop in and be helped by friendly HMRC staff. Most HMRC staff seem to be trained to carry out a single, largely repetitive task. Hardly any HMRC staff seem familiar with – or even aware of the existence of – the legislation or of decided cases. They rely wholly on HMRC’s manuals. I have lost count of the number of times a case has been quoted to me which, when I looked at it, seemed irrelevant, but when I looked at the manual I found it referred to there in relation to a completely different point.
And how helpful is HMRC to taxpayers today? They are directed to the HMRC website or an HMRC publication. And most publications have been dumbed down. Some years ago, someone in HMRC seems to have decided that no one has the patience to read more than two sides of A4, so its previous detailed, informative publications were scrapped.
And does anyone think that the You-Gov search engine on the HMRC website is fit for purpose? Even HMRC staff prefer to use Google to navigate the HMRC website. Nevertheless, HMRC expects taxpayers to constantly check its website, although how it expects anyone can find anything they are looking for is a mystery. That is not to say that there is not a lot of useful information on the site. I often stumbled across something new and useful when I was looking for something else. It is simply a shame that the useful information is hidden away unless one perseveres through a number of abortive avenues to find what you are looking for.
The other significant change is the growth in the imposition of penalties, in the level of penalties and in the use of automatic penalties which HMRC has no (or very limited) discretion to reduce and no inclination to do so. I am not one of those who thinks that HMRC enquiries raise more in penalties than in tax, but I do think that HMRC has become too reliant on the imposition of penalties as a stick to encourage compliance. I also think that penalties have become far harsher. I cannot recollect having seen a penalty for fraud in the 1960s to 1980s, other than where there was obvious fraud. It is frightening how often today HMRC is seeking penalties for deliberate non-compliance which is (in the vast majority of cases) the equivalence of fraud. Similarly, penalties for negligence were fairly limited, whereas today HMRC seems to label virtually everything as failure to take reasonable care and to pay only lip service to the concept that taxpayers – as opposed of course to HMRC staff – can make an error innocently, i.e. can make a mistake.
For all that, I have enjoyed my career in tax – although as I said earlier I have been lucky enough to have been shielded in recent years from the frustrations of having to try to cope with the HMRC systems. I would not deter a young person from a career in tax. I fear that my generation may be the last to be able to have a good understanding of the entire tax system. I was used to tax legislation when VAT was introduced in 1972, and when SDLT was introduced in 2003. It is easier to add to one’s knowledge than to face the daunting task of understanding the whole of the wide range of taxes that we have today. I would, however, stress that while tax can be fun and satisfying, it demands lifelong learning because it changes virtually daily with new court or tribunal decisions or HMRC guidance. I would also urge the newcomer to become familiar with the Taxes Management Act provisions, not merely the substantive legislation.
I would also urge him or her to read a couple of tax case decisions every week. You can learn a lot from FTT decisions – although some of the results are questionable so you need to be able to weigh up yourself the judge’s logic before relying on the decision. I would also urge the would be tax specialist to develop an ability in lateral thinking. While AI looks set to largely displace tax compliance, I am sceptical whether it will ever replace tax planning, which requires creativity. Whilst no longer part of the tax world, I see it having a long and happy future.
I started to specialise in tax in 1965, just after the introduction of corporation tax and capital gains tax. In 1965, we also had income tax, national insurance, stamp duties, customs and excise duties, estate duty (since replaced by IHT) and that was it. My 1965/66 Yellow Book (at that time called Butterworths Income Tax Handbook, albeit that it also covered corporation tax and CGT) ran to 759 pages and was 1.25 inches thick. My seven volume 2022/23 Tolley’s Yellow and Orange Handbooks demonstrate how much the volume of tax legislation has grown during my career. That is a bit misleading. In 1965, the book contained only the legislation. Today they contain selected HMRC publications too, but the main growth has been in the volume of legislation.
The elderly tend to get nostalgic. The administration of the tax system in 1965 was very different. The Inland Revenue operated through local offices which were semi-autonomous, the district inspector having the ultimate decision-making power but with the ability to refer potential criminal investigations to a specialist division. Each case was handled by a single named inspector with whom accountants built up relationships. There were, however, major inefficiencies. The introduction of self-assessment in the early 1990s was a welcome improvement but, sadly, opened the way to the centralised digitally-driven system that we have today.
I am myself digitally-challenged, but fortunately by the time that tax compliance became computer-driven, I had progressed to the stage where I was no longer handling casework directly but was mainly selling advice, so did not have to get to grips with the digital world. That is not to say that the digital world passed me by entirely. HMSO used to publish a Tax Cases series which I think ceased in around 2014. Sadly, because these were far more useful than BAILII because a case was not included until the decision on the final appeal but, when published, it brought together the judgments of the High Court, the Court of Appeal and the House of Lords on the case, which made it far easier to follow than having to start with a Supreme Court decision and search elsewhere for the FTT hearing which set out the facts. But I digress. The point that I wanted to make was that the decisions in volume one rarely exceeded a few pages – doubtless because the judge had to write his decision by hand – whereas today even a simple judgment seems to run to 20 or 30 pages, with more complex ones approaching 100 pages of, I suspect, dictated verbiage.
Legislation was also much shorter. The Finance Act 1960, which was aimed largely at countering tax avoidance but also contained major administrative reforms, managed to do all that in 79 sections and six schedules. Contrast that with the 136 sections and 34 schedules of the 417-page FA 2021, which largely merely tinkered with the tax system, although it did also contain the 43 sections and seven schedules that Parliament needed to introduce the plastic packaging tax, a fairly niche impost. 417 pages for a single Act; yet in 1965 the whole of the extant legislation from 1803 onwards on income tax, corporation tax and CGT took up a mere 759 pages.
Of course, the tax law rewrite increased the volume of the legislation in an attempt to make it more intelligible. Whether that was worthwhile is questionable. And, of course, Parliament called a halt to the rewrite before it reached the Taxes Management Act, the stamp duties, and IHT, arguably all in greater need of a rewrite than corporation tax. But that does not justify the length of subsequent Finance Acts. The 417 pages of FA 2021 is, of course, a pittance compared with FA 2016 (649 pages), FA 2014 (646 pages) and F(No. 2)A 2017 (665 pages – too many to bind in a single volume).
And as the volume of legislation has mushroomed, its quality has nose-dived. Take a look at the Hansard debates in the 1960s and 1970s. The Finance Bill Committee was genuinely seeking to improve the quality of the legislation. Amendments were moved by both opposition and government backbenchers. It is years since an amendment by a government backbencher (other than new clauses) has been selected for debate. Indeed, in the last few years there have been hardly any substantive amendment debated at all. In the 1960s and 1970s, one would not expect a Finance Act to contain corrections to the legislation enacted the previous year, or the year before that. Today, it is commonplace.
HMRC has also changed radically. No longer the friendly and knowledgeable inspector of taxes. No longer the local office where Joe Taxpayer could drop in and be helped by friendly HMRC staff. Most HMRC staff seem to be trained to carry out a single, largely repetitive task. Hardly any HMRC staff seem familiar with – or even aware of the existence of – the legislation or of decided cases. They rely wholly on HMRC’s manuals. I have lost count of the number of times a case has been quoted to me which, when I looked at it, seemed irrelevant, but when I looked at the manual I found it referred to there in relation to a completely different point.
And how helpful is HMRC to taxpayers today? They are directed to the HMRC website or an HMRC publication. And most publications have been dumbed down. Some years ago, someone in HMRC seems to have decided that no one has the patience to read more than two sides of A4, so its previous detailed, informative publications were scrapped.
And does anyone think that the You-Gov search engine on the HMRC website is fit for purpose? Even HMRC staff prefer to use Google to navigate the HMRC website. Nevertheless, HMRC expects taxpayers to constantly check its website, although how it expects anyone can find anything they are looking for is a mystery. That is not to say that there is not a lot of useful information on the site. I often stumbled across something new and useful when I was looking for something else. It is simply a shame that the useful information is hidden away unless one perseveres through a number of abortive avenues to find what you are looking for.
The other significant change is the growth in the imposition of penalties, in the level of penalties and in the use of automatic penalties which HMRC has no (or very limited) discretion to reduce and no inclination to do so. I am not one of those who thinks that HMRC enquiries raise more in penalties than in tax, but I do think that HMRC has become too reliant on the imposition of penalties as a stick to encourage compliance. I also think that penalties have become far harsher. I cannot recollect having seen a penalty for fraud in the 1960s to 1980s, other than where there was obvious fraud. It is frightening how often today HMRC is seeking penalties for deliberate non-compliance which is (in the vast majority of cases) the equivalence of fraud. Similarly, penalties for negligence were fairly limited, whereas today HMRC seems to label virtually everything as failure to take reasonable care and to pay only lip service to the concept that taxpayers – as opposed of course to HMRC staff – can make an error innocently, i.e. can make a mistake.
For all that, I have enjoyed my career in tax – although as I said earlier I have been lucky enough to have been shielded in recent years from the frustrations of having to try to cope with the HMRC systems. I would not deter a young person from a career in tax. I fear that my generation may be the last to be able to have a good understanding of the entire tax system. I was used to tax legislation when VAT was introduced in 1972, and when SDLT was introduced in 2003. It is easier to add to one’s knowledge than to face the daunting task of understanding the whole of the wide range of taxes that we have today. I would, however, stress that while tax can be fun and satisfying, it demands lifelong learning because it changes virtually daily with new court or tribunal decisions or HMRC guidance. I would also urge the newcomer to become familiar with the Taxes Management Act provisions, not merely the substantive legislation.
I would also urge him or her to read a couple of tax case decisions every week. You can learn a lot from FTT decisions – although some of the results are questionable so you need to be able to weigh up yourself the judge’s logic before relying on the decision. I would also urge the would be tax specialist to develop an ability in lateral thinking. While AI looks set to largely displace tax compliance, I am sceptical whether it will ever replace tax planning, which requires creativity. Whilst no longer part of the tax world, I see it having a long and happy future.
