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Firstly, I note that paragraph 2.11 acknowledges the need for HMRC to “get its own house in order”. In particular, I note that paragraph 4.21 recognises the need for HMRC officers who have behaved inappropriately to be accountable. However there is no further discussion of the way that might happen. Instead all the focus is on the tax agent. Therefore this document lacks balance. What we need to understand is how it is proposed that HMRC officers will be accountable and given the focus within the Consultation document on sanctions against errant agents, what sanctions we can expect to see when HMRC goes beyond making a mistake. In view of Annexe E, this might include publishing names.

This document refers repeatedly to “Deliberate Wrongdoing (“DWD”)” by tax agents. When this happens, it is hard to see how it can be described as anything other than fraud. HMRC already has the power to act against fraud. It is not clear why this happens infrequently. One possible explanation is that the incidence of DWD is rare. I believe HMRC should publish some statistics to demonstrate why it believes it actually does need further powers here. It is suggested in the Consultation paper that the burden of proof is onerous for HMRC, see paragraph 5.19 for example. Since we are discussing serious criminal allegations, so it should be. HMRC should be in possession of real evidence of DWD before putting someone’s livelihood, or even liberty, at risk.

For this reason alone, there should be no ex parte Tribunal hearings. We still live in a democracy of sorts and the accused is entitled to have a defence heard. Ex parte hearings generally are incompatible with the basic right to a defence. There are too many instances in which HMRC can apply to a Tribunal ex parte. Whilst one must accept that occasionally the public interest will make this approach necessary, (when there is some evidence that a suspect will destroy evidence), there are several circumstances in which the taxpayer need not be denied the right to be heard, but frequently is. The old provisions of the TMA were an example, where HMRC could have no valid objection to an inter partes hearing but would rely on case law to prevent that from happening. So I call for a move away from, rather than towards, the use of ex parte proceedings which place a heavy burden on HMRC to be absolutely scrupulous and largely remove from the taxpayer any practical means of checking the veracity of what has been said to a Judge.

 It follows that I disagree strongly with paras 10.15 and 10.16.

Paragraph 7.2 says there will be times when criminal investigation is “not an option”. However it says this in the context of HMRC “having established evidence of DWD by a tax agent”. Why is criminal investigation not an option in those circumstances? If there is evidence then criminal proceedings must be an option. If, on the other hand, there is no evidence, or the evidence that exists does not establish DWD, then HMRC should not be permitted to go fishing for evidence that might not exist.

I also wish to observe that paragraph 2.35, whilst a welcome acknowledgment, does not appear to be consistent with paragraph 5.14 of “Protecting Tax Revenues” a Document also launched on 9th December 2009. There it indicates that opposing views of the law contribute to the “tax-gap”. In my view, paragraph 2.35 is the one that is right, but HMRC should clarify its thinking in this potentially controversial area.

In paragraph 10.2 it is asserted that some agents exploit the fact that HMRC will not check all claims when large volumes are submitted. If we accept that assertion at face value (and I accept there will probably always be “bad eggs”), the problem is partly of HMRC’s own making. HMRC devotes almost no resource to checking for overpayments of tax, preferring, instead, to focus on potential underpayments. I cannot recall a single case in which HMRC has checked a tax return and told a taxpayer that he she or it has failed to claim a relief or allowance to which he she or it was entitled. This is partly because HMRC’s management has lost sight of its real raison d’etre. It follows, then, that there will be substantial numbers of taxpayers, sometimes in a class that can be grouped together, who have legitimate claims to a refund and it is absolutely correct that tax agents are able to assist these people to pay the right amount of tax.

At 10.7 a power to selectively check agents is called for. That is the wrong approach. Instead HMRC should check the claims of a few taxpayers and only if there is some evidence to suggest DWD should there be a power to check “into agents”.

Finally in relation to Annexe B, it is ridiculous to ask for all the agent’s files. This puts him or her out of business. What, exactly, did the person who drafted this imagine that the tax agent would have left in his or her office? Besides that there is no suggestion of when these papers would be returned, nor even any guarantee that anyone in HMRC would look at them with any degree of urgency. Of course, this sort of thing would be perfectly normal if we were living in a police state. Any response of this kind must be based on hard evidence of wrongdoing, not mere suspicion in the mind of an inspector, (even if "reasonably held") and must be proportionate, which removing everything of significance from the agent's office for an indefinite period clearly is not.

I must reiterate that my profession encourages HMRC to crack down on DWD. Since little evidence of this happening has been seen, it is entirely possible that there is not very much of it actually going on. What would greatly reassure the huge majority of my profession - law-abiding agents trying to earn an honest buck, sometimes against the odds - would be parrallel proposals to deal with wrongdoing within HMRC. There is no reason to suppose that the Civil Service is any more immune to this than any other section of society. In due course precisely the same point can validly be made about mistakes.

For more information contact andy@avnvenustax.co.uk

AVN Venus Tax LLP, Morwick Hall, Mortec Park, Leeds, LS15 4TA. ryan@avnvenustax.co.uk