§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Alan Howarth.]
9.59 pm§ Mr. Michael Marshall (Arundel)My reason for putting forward the case for drawing up comprehensive rules of procedure for the general commissioners of income tax is twofold. First, I have been seeking to meet the justified complaints of a constituent in his dealings with the general commissioners. Secondly, it it evident that this is not an isolated case and I intend to refer specifically to the appropriate recommendations of the Council on Tribunals on the matter.
The complaint made by my constituent, Mr. P. H. J. Palmer of Bognor Regis, first reached me nearly three years ago. Mr. Palmer, who was then 74 years of age, wrote to me as a result of his experience in an appeal to the commissioners of taxes, Chichester division, in May 1986. The appeal was for an allowance on his income tax for expenses and legal fees in revising the level of his pension through negotiations with a former employer.
However, it is important to grasp that Mr. Palmer's principal objections—
§ It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Alan Howarth.]
Mr. MarshallIt is important to stress that neither then nor subsequently did my constituent argue with the fact that his appeal was refused, but rather with the manner in which the decision was made. Among the complaints that he made were that a large number of persons attended what was supposed to be a private hearing with commissioners and those persons clearly had no involvement with his case; that the chairman gave no reasons or explanation for the decision; that he was refused permission to ask questions or make a statement after the decision was announced; that the general commissioners did not have the necessary professional expertise to understand the detailed submission made by the tax inspector, and that the clerk to the commissioners failed to respond to written questions on the basis for the decision or to suggest any other authority to whom he could turn by way of appeal.
At that stage, Mr. Palmer approached me and I wrote to my right hon. Friend the Financial Secretary to the Treasury. He advised me that the commissioners' decision was final and took the view that it would be improper for the Treasury or the Inland Revenue to comment on decisions of the general commissioners or the conduct of their meetings because of their function as an independent appeal body and given the Inland Revenue's own need—and, by extension, that of the Treasury—to accept a ruling in a case in which it was one of the competing parties.
I could not believe that there could be a total lack of accountability for the general commissioners and the clerk whom they appoint. Approaches to the ombudsman confirmed that the general commissioners were appointed by the Lord Chancellor, and their allowances, as well as the salaries for their clerks, were met from the Inland 552 Revenue vote. The ombudsman also recommended an approach to the Council on Tribunals which monitors the activities and efficiency of such bodies.
Correspondence between my constituent and myself with the Council on Tribunals over a period of many months revealed that a number of options were open to Mr. Palmer. Although it is correct that the commissioners do not have to give reasons for their decisions, those could be obtained by asking for a case to be stated in the High Court as part of an appeal. In the light of that advice, Mr. Palmer contended, almost a year after the initial hearing, that the chairman's refusal to answer questions and the clerk's unwillingness to provide information by subsequent letters all ruled out his opportunities for a prompt appeal. He also objected, as many would, to the necessity and expense of going to law for the purpose of unearthing the commissioners' reasons for rejecting his case.
Meanwhile, I had kept my right hon. Friend the Financial Secretary informed, and in a letter of 23 March 1987 he advised me—this is particularly significant—that the Inland Revenue felt that it was arguable that the procedures at the original hearing were inadequate. He added:
The Inland Revenue agree that they would not want to deprive Mr. Palmer of the opportunity to air his views properly and accordingly they proposed to approach the matter afresh.Unfortunately, the meeting which followed produced only a further agreement to disagree on the details of the claim. Meanwhile, the Council on Tribunals had taken up Mr. Palmer's complaints with the clerk to the general commissioners. In a letter to Mr. Palmer of 5 May 1987, the council, acting on information received from the clerk, criticised a number of aspects of the procedures followed at the original hearing. They included the number of income tax inspectors attending the case, with which they were not concerned. In addition, they said that the clerk should have explained in response to subsequent letters why no reasons had been given for the decision, and he should also have provided information on how to appeal. However, it is fair to add that the clerk, himself a solicitor, subsequently said that he advised Mr. Palmer to seek legal advice.Arising from all this and from later correspondence—we are now about 18 months away from the original hearing, which illustrates the sort of difficulty that members of the public, and even Members of Parliament, have in unearthing the detailed opportunities that exist to pursue such matters—it became clear that both the Treasury and the Council on Tribunals recognised the problems caused by a lack of procedural rules for the general commissioners, and indeed the Treasury had put forward a consultation document in response to the Keith committee's recommendations, with a deadline of 31 October 1987.
The scene in this long-running detective story now shifts to the Lord Chancellor's office. It was clear that my constituent still felt that his complaints should be considered by a responsible person. Accordingly, on the advice of the Council on Tribunals, I took up the case with the Lord Chancellor. In letters of 31 March and 10 June 1988, he replied to a number of letters in considerable detail, and I pay tribute to his part in this in responding in the way he did, although, as I shall show later, that highlights one of the problems in the present procedures.
553 In the interest of time, I will comment only on a number of points that arose from correspondence with the Lord Chancellor. First, it seems ridiculous that complaints against the general commissioners and their clerk, particularly in cases not involving massive matters of principle, and possibly involving even relatively small complaints, should have to involve the highest Law Officer in the land in pursuing complaints about procedure.
Secondly, if he wishes to consider complaints against an individual commissioner, the Lord Chancellor has powers to ask his advisory committee to investigate and make recommendations. Thirdly, in the case of the clerk, his powers are those of outright dismissal.
All those powers constitute using a sledgehammer to crack a nut, and it is typical of the problems that I have highlighted—the delays in finding out who could do what—that the clerk concerned had retired before the Lord Chancellor had an opportunity of considering the matter and deciding whether dismissal would be appropriate in such a case.
To summarise, I can do no better than to draw attention to the annual report of the Council on Tribunals which was laid before the House on 16 January 1989, and which I hope that the House will find an opportunity to debate before long in its wider context. In paragraph 2.21 of that report, the council says:
The need for change is clear from the visits made by our members to hearings, from representations that have been made to us and from complaints we have dealt with. We urge the Lord Chancellor's Department and the Inland Revenue to consider our proposals as a whole and to introduce a comprehensive range of reforms. In particular, we stress the need for—I understand that at present, the Lord Chancellor's Department and the Inland Revenue accept the need for change in departmental responsibility to overcome any doubts about the impartiality of the commissioners as a result of their close working relationship with the Inland Revenue.
- (1) an early change of departmental responsibility for General Commissioners from the Inland Revenue to the Lord Chancellor's Department;
- (2) establishment of a central body capable of representing General Commissioners, whether by introduction of a presidential system or of a national consultative body;
- (3) early provision of procedural rules for conduct of tribunal proceedings; and
- (4) introduction of proper training and the provision of adequate resources for this to be undertaken."
The problem here seems to be one of time and other commitments, and the council has already expressed its concern at what it sees as delays in making a vital change. But on the question of rules of procedure, I understand that consideration was to be given to the possibility of including such proposals in this year's Finance Bill. I hope that the Solicitor-General will give a clear indication of the Government's intentions in that matter.
Training is a key element in ensuring that the procedural rules can be implemented effectively. That bears directly on my constituent's concern and that of the Council on Tribunals about lack of technical expertise. I understand that training will be undertaken in future by the recently established tribunals committee of the Judicial Studies Board. Will the Solicitor-General comment on that?
To sum up, my constituent is clearly not alone in feeling that there is too much of "a law unto themselves" about the procedures of the general commissioners. I join the 554 Council on Tribunals in expressing admiration of the substantial amount of work done by the commissioners on an unpaid basis, which is a measure of their dedication of public service. I recognise the value of the important work that they willingly undertake in communities throughout the country. However, it is equally clear that the problem is not with the commissioners but with the lack of procedural rules and the training that goes with them. Together with an over-dependence on the Inland Revenue, those are all factors which require early change if my constituent and others are to feel that they have not suffered injustice.
§ The Solicitor-General (Sir Nicholas Lyell)I am most grateful to my hon. Friend the Member for Arundel (Mr. Marshall) for raising a number of interesting and significant points on a subject of considerable importance relating to the general commissioners of income tax. I welcome the opportunity that the debate gives to meet his points and to outline for the benefit of my hon. Friend and of a wider audience the considerations that lie behind our present policy and our proposals to meet some of the concerns that my hon. Friend expressed.
I shall concentrate, as my hon. Friend expects me to do, on matters of principle and practice rather than on the case of his individual constituent. That case is not itself the subject of a complaint as to the decision reached, which was fully and fairly dealt with at a number of levels, concluding with a long and detailed letter from my noble and learned Friend the Lord Chancellor himself.
The starting point to any understanding of the role of general commissioners is the Taxes Management Act 1970. In England and Wales, and recently Northern Ireland, the Act places responsibility for the appointment of general commissioners upon the Lord Chancellor. Scotland has different arrangements. At the last count, there were 4,081 general commissioners in England and Wales, and to that number must be added the 55 commissioners appointed in Northern Ireland. General commissioners are appointed to sit in a division, and the country is divided into 417 of those.
It is important to emphasise one of the safeguards for the general public, which is also a ground for reassurance. The general commissioners are lay people who volunteer their service. I express my thanks to my hon. Friend for his kind remarks about the enormous bulk of good work that the general commissioners perform. Their names come to the Lord Chancellor for appointment through 80 advisory committees that he established for that purpose. The general commissioners have a clerk—and if needs be, an assistant clerk—to assist them in the discharge of their duties. It is for the clerk to make the necessary arrangements for the disposal of work, including notice of appeal hearing dates, and to advise the general commissioners on procedural matters and on any questions of law that may arise.
A distinction must be drawn between general and special commissioners. The latter are full-time, legally qualified appointees who deal mainly with more complicated cases—and I know from my limited experience that some cases are very complicated—or those likely to last for some considerable time. The jurisdiction of general commissioners covers income tax, corporation 555 tax, capital gains tax, and certain aspects of class 4 national insurance contributions paid by the self-employed.
The bulk of their work is devoted to dealing with delay appeals. That may explain some of the complaints in the individual case that my right hon. Friend mentioned, the number of cases that must be dealt with on a particular day can be very high.
For those who do not appreciate it, a delay appeal is generally one in which the taxpayer—usually a trader or trading company—has lodged an appeal against an estimated tax assessment, but has taken no further step, by submitting his business accounts or other relevant information, to show that the assessment is incorrect in principle or excessive in amount. There must be few hon. Members with any business experience who have not experienced this procedure—at least through their accountants. The latest available information—and this shows the weight of work—reveals that 591,486 delay appeals were referred to the general commissioners in 1987, although most of these were subsequently determined by agreement with the inspector.
The Lord Chancellor regards it as important that the general commissioners should acquire and maintain experience and consistency in their determination of these appeals, and as a general rule, it is expected that each general commissioner will sit for a minimum of six sessions a year. The private affairs of taxpayers are recognised to be confidential and therefore a general commissioner on appointment is required to sign a form of declaration of secrecy before he can act. In general, three general commissioners are present at each sitting.
It is also important to note that general commissioners must act impartially, and section 5 of the Taxes Management Act 1970 provides that no general commissioner shall act as such in relation to any matter in which he has a personal interest, or is interested on behalf of another person, except with the express consent of the parties to the proceedings. The commissioners are instructed to seek advice if they are in any doubt about whether they have any connection with the proceedings that might be seen as bringing the commissioners' impartiality into question. They are also instructed that they should take particular care to treat appellants and representatives of the Inland Revenue in a like manner. That is important because it is not merely enough for justice to be done, it must be seen to be done.
§ Mr. Michael MarshallI entirely accept what my hon. and learned Friend the Solicitor-General has said. Does he agree that this gives even greater force to a point which, in the interests of time, I omitted—the Council on Tribunals' recommendation that Inland Revenue officers concerned with cases should come into cases at the same time as members of the public? The idea of coming in to see members of the Inland Revenue and the general tax commission sitting, as it were, at the top table, gives the wrong impression in terms of treating each even-handedly.
§ The Solicitor-GeneralThere is force in what my hon. Friend says. Whether exactly the right way to deal with it is for the two parties to come in separately or whether the matter should be handled so that it is more like what, in some ways it is—a crowded court—I know from my own 556 experience that courts dealing with large numbers of matters in one morning always have large numbers of counsel. I appreciate that one of his constituent's concern was that he seemed to be in a room in which there were an awful lot of people with a precise purpose. It would have given a better impression if, at least, their respective functions had been clearly delineated. We shall look carefully at that matter and I shall pass on my hon. Friend's remarks.
As part of the necessary background to an appreciation of the role of general commissioners, I draw attention to certain relevant provisions of the Taxes Management Act. First, in an appeal against an assessment, the initial burden of proof is normally—as hon. Members will realise—on the taxpayer, unlike most other cases, where the burden is on the prosecution or the plaintiff. Secondly, the decision of the general commissioners is normally final. However, if aspects of difficulty arise before the decision is reached, the matter may be referred—either at the request of the taxpayer or on the initiative of the commissioners—to the special commissioners.
Once made, the decision of the general commissioners is final and conclusive unless the appeal is taken further by way of case stated or, in unusual circumstances, by judicial review. In this context it is understandable that, once the decision is taken, it would not be appropriate for a taxpayer to ask questions. It is important to stress that, in this particular case, there was plenty of opportunity to ask questions and present the case before the decision was reached.
Having sketched in outline the background to the general commissioners, let me now address some of the other points made by my hon. Friend. He emphasised the case for drawing up comprehensive rules of procedure for the commissioners. The Lord Chancellor and the Treasury are indeed considering carefully the proposals of the Council on Tribunals, but—as my hon. Friend would be the first not only to recognise but, I believe, to urge—a balance must be struck between the formality of procedures which, in other respects, are often criticised for being over-formal, and the need for a speedy, effective and common-sense process.
Treasury Ministers have decided to seek further views on that difficult question, and it would be unwise to form a concluded opinion until the results of the exercise have been received. Thorough consideration, however, will be given to the various advantages and disadvantages of moving away from the present relatively informal system to what would inevitably be a rather less flexible one. No doubt attention will be given to the fact that the vast majority of appellants are not represented by someone legally qualified.
My hon. Friend also stressed what he perceives as a lack of accountability on the part of the general commissioners. There is no doubt, however, that the commissioners play a responsible and invaluable part in dealing fairly and efficiently with a large number of appeals. The Council on Tribunals has joined my hon. Friend in paying tribute—in its recent annual report—to the substantial amount of good work that the commissioners do.
If, however, my hon. Friend is concerned about the lack of a proper chain of command, I can make some observations. The general commissioners are lay people drawn from the community—this cannot be emphasised enough—and for the most part their duties involve a common-sense approach. Where there is an issue of law, a 557 Commissioner will rightly turn to his clerk for guidance and will act accordingly. If a mistake is made, the appellant has the right to take the case to the High Court by the case stated procedure.
Let me put the matter into perspective. To the best of my knowledge such cases are few and far between. If the appellant is aggrieved at the method by which the Commissioners have reached a decision on the facts, it is open to him to consider seeking redress through judicial review. Should his complaint relate to the conduct of a commissioner—this was raised at one stage in the case in question—and if there appears to be a case to answer, the Lord Chancellor will require his advisory committee to investigate and make a report to him before deciding on the appropriate course of action.
My hon. Friend also had in mind the criticisms levelled at the general commissioners in the 1987–88 annual report by the Council on Tribunals. In particular, the council expressed disappointment that the Lord Chancellor had not accorded a higher priority to his Department's assuming overall control of the general commissioners. The Lord Chancellor, while recognising and accepting the case for his Department to take over full administrative responsibility, is engaged in a wide-ranging consideration of a number of his responsibilities, which need to be sensibly dovetailed. He wishes to reach a conclusion on how to deal with a number of matters in the legal and quasi-legal sphere, and he needs to balance the competing demands on resources before deciding on the order of priorities for action.
Let me counterbalance that by mentioning some of the other actions that have been taken. An association of general commissioners for the London area is well on its way to formation and it is hoped that other areas will join 558 in. Revised interim notes for the guidance of general commissioners have been prepared and issued in Northern Ireland. They will be issued in England and Wales in the near future. These notes stress the importance of not only being independent but being seen to be independent. They also stress the need to give an appellant full opportunity to put his case. A copy of these interim notes will be placed in the Library.
With the introduction of general commissioners in Northern Ireland, a training programme for them has been set up involving sitting in with a special commissioner, attendance at seminars, shadow meetings when cases have been put up for consideration and visits to meetings in this country. The Judicial Studies Board has been invited to consider training for general commissioners and will do so through its tribunals sub-committee when time allows. The Association of Clerks to Commissioners is to consider a code of good conduct for its members. The Lord Chancellor is also giving thought to other means whereby he can be satisfied that the independence of general commissioners is safe and apparent.
As my hon. Friend will have noted, I have not commented in great detail on the individual case that is the background to the debate, but I have dealt in some detail with the matters of general principle. With regard to the specific case, the Lord Chancellor was satisfied that there were insufficient grounds for him to intervene in the case. He has set out his reasons, however, in considerable detail in a private letter to my hon. Friend and, through him, to his constituent.
Question put and agreed to.
Adjourned accordingly at twenty-seven minutes past Ten o'clock.