Stephen Daly, University of Oxford
The life and times of ESCs: a defence?
Stephen Daly
Doctoral Candidate (Oxford)
i
Stephen Daly, University of Oxford
Abstract
Extra-statutory concessions (‘ESCs’) are one of the most controversial elements of the UK
tax system. Lay critics and judges alike have, by way of hyperbole, consistently speculated
upon the constitutional regression which would befall the UK should the jurisdiction to
grant concessions be legitimated. For them it would return us to a time prior to the 17th
century Glorious Revolution, a time when the Crown could exercise supremacy over
Parliament. This paper seeks to demonstrate that, far from undermining the constitutional
framework, ESCs in fact form an indispensable part and thus are defensible in principle.
This however is only half the story, for whilst concessions may be fundamentally desirable,
their flaws should not be overlooked. The paper will summarily propose that the adoption
of an Australian rulings system would reduce the magnitude of these flaws, whilst
protecting the benevolent principle of ESCs.
ii
Stephen Daly, University of Oxford
Table of contents
Abstract
ii
Table of contents
iii
1. Introduction
1
2. Defending ESCs
1
2.1 What are ESCs?
1
2.2 Are ESCs unconstitutional?
7
2.3 Why not simply regularise concessions?
13
2.4 Interim remarks
16
3. Problems with ESCS
16
3.1 Favoured Groups
16
3.2 The issue of vires
18
3.3 Publication
22
4. Summary proposal
24
4.1 Lack of oversight
25
4.2 Public Rulings in Australia
26
4.3 Recommendation
29
5. Conclusion
30
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Stephen Daly, University of Oxford
‘We may complain of unfairness in the incidence of tax, but that is a complaint against
Governments: no one in Britain can complain of unfairness in the administration of tax
collection by the Board of Inland Revenue and its officials. The integrity of the inspectorate
is a national honour.’1
1. Introduction
Extra-statutory concessions (‘ESCs’) are one of the most controversial elements of the
UK tax system.2 An ESC gives taxpayers a reduction in tax liability to which they would
not be entitled under the strict letter of the law. Although dispensations of the law
without Parliamentary approval have been unequivocally outlawed since the Glorious
Revolution in the 17th century,3 there is evidence of the existence of concessions from
as early as 1793.4 Given such an apparent incongruity, it is little wonder that the
Treasury once remarked that ESCs are ‘one of the great mysteries of the British
Constitution’.5
Are ESCs a cause for good, or, as critics would suggest, are they practically disagreeable?
The answer to this question, which this paper will explore, is that ESCs may occupy both
spaces and that accordingly a balance is required between the two. This paper seeks to
give a fuller account of ESCs than has been given to date.6 To this end it is necessary in
the first place to defend the use of ESCs, given their controversial standing in the tax
machinery. Thereafter the analysis shall shift to exploring problems in the promulgation
of ESCs, such as favouritism, lack of publication and vires. The final segment will
prescribe reforms which seek to strike a balance between maintaining ESCs and
mitigating the problems which arise.
2. Defending ESCs
Since time immemorial, ESCs have been under attack.7 Strong dissenters have accused
them of being unconstitutional8 and questioned their validity in light of the everavailable opportunity to simply amend the primary law9. Both arguments are
misconceived and the exploration of them below in fact sheds light on the merit and
necessity of ESCs. A prerequisite to mounting a defence however, is delineating the
parameters of the domain. To this end, it is necessary as a preliminary step to define
ESCs, the process of which should further buttress the argument of this section by
highlighting their largely benign nature.
1
JRL Anderson in the Foreword to Basil Sabine, A History of Income Tax (1st edn., George Allen & Unwin, 1966), 6
In Ireland, the jurisdiction to issue ESCs has been categorically denied by the Revenue, see: Fifth Report of the Commission on
Taxation, Tax Administration (Oct. 1995) p.75 para. 3.16. On the contrast between the UK and New Zealand, see: Shelley
Griffiths, ‘"No discretion should be unconstrained": considering the "care and management" of taxes and the settlement of tax
disputes in New Zealand and the UK’ (2012) 2 BTR 167
3
Bill of Rights Act 1689, Article 1.
4
In this case, it was the benevolent treatment of the supply of wine and tobacco duty free for use on board ships of war. See:
Comptroller & Auditor General, Revenue departments appropriation accounts 1946-47, (HC 1946-47, 24) v.
5
This was drawn from a memo to Sir Wilfred Eady subsequent to a meeting of the Committee of Public Accounts. See: Public
Record Office T 233/1594, 1950 memo to Sir Wilfred Eady, cited in John Booth, ‘Inland revenue concessions: convenience or
just illegal?’ (2000) 27 Amicus Curiae 23, 24.
6
Much of the early terrain was explored in articles following the Vestey cases. See: David Williams, ‘Extra-Statutory
Concessions’ (1979) BTR 137; Malcolm Gammie, ‘Extra-Statutory Concessions’, [1980] BTR 308; John Alder, ‘The Legality of
Extra-Statutory Concessions’ (1980) 1 NLJ 180.
7
See for instance, the Treasury Minute from 1897: Public Accounts Committee, Second report from the committee of public
accounts (HC 1897-98, 261-VIII).
8
Williams (n 6); Robert E. Megarry, ‘Administrative Quasi-Legislation’ (1944) 60 LQR 125; Edward Troup, ‘Unacceptable
Discretion: Countering Tax Avoidance and Preserving the Rights of the Individual’ (1992) 13(4) Fiscal Studies 128, 132.
9
Absalom v Talbot [1943] 1 All ER 589, 598 (Scott LJ); Inland Revenue Commissioners v Frere [1964] 3 WLR 1193, 1209.
2
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Stephen Daly, University of Oxford
2.1 What are ESCs?
ESCs grant to taxpayers relief or a reduction in tax liability to which they are not strictly
entitled.10 This is the fundamental foundation of the definition of a tax concession,
namely, that of relaxation of the strict law. Most concessions are made to deal with what
are, on the whole, minor or transitory anomalies under the legislation and to meet cases
of hardship at the margins of the code where a statutory remedy would be difficult to
devise or would run to a length out of proportion to the intrinsic importance of the
matter.11 This definition of ESCs, traditionally offered by HMRC, is incomplete however.
Concessions may also arise where they are necessary for the practical collection and
management of taxes. They may also relate to instances in which it would be an abuse of
power for HMRC to insist upon the strict application of the law.12 As ESCs relate to
benevolent treatment, they must by definition arise in the taxpayer’s favour.13
However, concessions can only operate within a narrow mandate.14 The constitutional
background to the power to grant ESCs informs us that one must be taxed by law and
not untaxed by concession.15 As such, it is important to distinguish between instances in
which the law is rough at the penumbra and gives rise to strictly unintended
consequences such as failing to give relief or encompassing cases at the fringe,16 as
against instances where the law at its core is deemed to be unfair by HMRC.17 In the
former, but not in the latter, concessions may apply. Similarly a concession may be used
so as to make the effectuation of the law more workable, but may not be reformulated in
such a way as to undermine its very intent.18
This definition of ESCs, as understood by the Revenue,19 does not distinguish between
concessions which are granted in individual cases, variously described by other authors
as remissions20 or waivers21, and those that relate to classes of cases. Class concessions
are those which are founded on fixed principles of general application affecting
classes.22 For the purposes of this paper, references to ESCs should be taken as meaning
concessions applying to classes of persons rather than individuals.
Further, HMRC’s definition does not distinguish between class concessions which are
published and those which are not published (of which there still exists a substantial
10
Basil Sabine, The Economist Publications: Pocket guide to Business Taxes (Edward Arnold, 1988), 3.
HMRC, Extra-Statutory Concessions: Concessions as at 6 April 2015, 2: available at:
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/422820/1500420_IR1_April_2015_final_clean.p
df> accessed 28 May 2015.
12
See below, ‘Abuse of power and administrative commonsense’, 6-7.
13
Malcolm Gammie, ‘“Revenue Practice”: A Suitable Case For Treatment’ (1979) BTR 304, 306; HC Deb 12 July 1976, vol
915, col 187.
14
The categories of concessions will be further detailed below, 3-7.
15
Vestey v IRC (no. 2) [1979] Ch. 198, 203.
16
Alexander Johnston, Inland Revenue (George Allen & Unwin Ltd 1965), 68.
17
On the relationship between the core and the penumbra, see: HLA Hart, ‘Positivism and the Separation of Law and Morals’
(1958) 71 (4) Harvard Law Review 593; cf: Lon Fuller, ‘Positivism and Fidelity to Law — A Reply to Professor Hart’ (1958)
71(4) Harvard Law Review 630.
18
Finance Bill Deb HC 17 June 2008 cols 754-755 (Philip Hammond)
<http://www.publications.parliament.uk/pa/cm200708/cmpublic/finance/080617/am/80617s08.htm> accessed 28 May 2015. See
also: John Whiting, “Power to give statutory effect to concessions – section 160” (2008) 5 BTR 533, 534.
19
On this, see: HMRC, Withdrawal of extra-statutory concessions (December 2010) (available at:
<http://www.hmrc.gov.uk/menus/extra-stat-con-tn.pdf> accessed 28 May 2015) which states: ‘For this purpose the term ‘extrastatutory concession’ refers to any stated concession from the statutory tax treatment. It is not limited to concessions published in
the former Inland Revenue booklet IR1 and the former HM Customs and Excise booklet Notice 48’.
20
John Booth, Stand and Deliver! The Inland Revenue and Non-statutory Taxation (Waterside Press, 1998), 23; Johnston (n 16),
67.
21
Judith Freedman and John Vella, ‘HMRC’s Management of the UK Tax System: The Boundaries of Legitimate Discretion’, 92
in Chris Evans, Judith Freedman and Richard Krever (eds.), The Delicate Balance: Tax, Discretion and the Rule of Law (IBFD:
Amsterdam, 2011), 111.
22
Johnston (n 16), 68.
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Stephen Daly, University of Oxford
body).23 This distinction is at times overlooked, as evidenced by Walton J’s erroneous
assertion in Vestey (no. 2) that ESCs represent a ‘published code’.24 ESCs on HMRC’s
published list are now available online25 and have been published since 1944.26 These
are tightly worded and ‘almost legislative in form’.27 Although they are intended to be of
general application, ‘special circumstances’ may arise in a particular case which will
need to be taken into account in considering the application of the concession.28 For
instance, a concession will not be given in any case where an attempt is made to use it
for tax avoidance.29
In brief then, ESCs grant to taxpayers relief or a reduction in tax liability to which they
are not strictly entitled.30 As the definition is expanded upon by reference to categories,
such as ‘cases of hardship at the margins’, it is prudent at this juncture to give concrete
examples of what might fall within these.
Minor anomalies
Some ESCs are made to deal with minor anomalies arising under the legislation. Such an
instance could previously be found in ESC F8 ‘Accumulation and maintenance
settlements’,31 which is now obsolete.32 In order for settled property to take the form of
an ‘Accumulation and Maintenance Settlement’, it was originally a requirement that the
beneficiaries would become entitled to the settled property either on or before
becoming 25.33 This concession merely irons out an anomaly such that even if the trust
document does not actually specify this to be the case, the Revenue will not seek to
disrupt the arrangement where it is clear that a beneficiary will in fact become entitled
to the settled property by the age of 25.
Other instances where the legislation anomalously overlooks certain fact patterns are
found in relation to rollover relief under the Taxation of Chargeable Gains Act 1992. This
relief provides that no taxable gain will arise where the whole of the consideration of an
old asset goes towards the purchase of a new asset, and both are the same class of asset
being used only for the purposes of a trade. A strict interpretation of the legislation
would deem that an ‘old asset’ cannot simultaneously be a ‘new asset’.34 However, ESC
D16 ‘Relief on the replacement of business assets: repurchase of the same asset’
provides that a ‘new asset’ may indeed be the same as the ‘old asset’ where it is
repurchased for purely commercial reasons,35 in other words, for the same purpose as
the original asset. Similarly, a strict interpretation would deny relief unless a wholly
new asset is purchased, rather than the purchase of a further interest in an existing
asset. However, ESC D25 ‘Relief for the replacement of business assets: acquisition of an
23
See below, 20-23.
Vestey (no. 2) (n 15), 204.
25
HMRC, Concessions as at 6 April 2015 (n 11) 2.
26
Inland Revenue, A List of Extra Statutory Wartime Concessions given in the Administration of Inland Revenue Duties (October
1944) Cmd. 6559.
27
John Tiley and Glen Loutzenhiser, Revenue Law (7th edn., Hart 2012), 49.
28
ibid.
29
See: R v CIR, ex parte Fulford Dobson [1987] STC 344; [1987] 3 WLR 277 (QB) wherein this proviso worked to prevent a
taxpayer obtaining the benefit of a concession.
30
Basil Sabine (n 10), 3.
31
HMRC, Extra-Statutory Concessions: Concessions as at 6 April 2013, 85, available at:
<http://www.hmrc.gov.uk/specialist/esc.pdf> accessed 28 May 2015.
32
HMRC, Concessions as at 6 April 2015 (n 11), 53 available at:
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/422820/1500420_IR1_April_2015_final_clean.p
df> accessed 28 May 2015.
33
See: Inheritance Tax Act 1984, s. 71(1)(a). Subsequent legislation deemed the age of entitlement to settled property to be 18.
This means the concession is only relevant for the interpretation of section 71D IHTA for age 18-to-25 trusts.
34
See: Taxation of Chargeable Gains Act 1992, s. 152 (‘TCGA 1992’).
35
HMRC, Concessions as at 6 April 2015 (n 11), 42.
24
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Stephen Daly, University of Oxford
interest in an asset already used for the purposes of a trade’ similarly fills in the
statutory definition by providing that a ‘new asset’ can include a further interest in an
existing asset.36
Another clear example of a minor anomaly arising relates to ESC B54 ‘Tax relief on films,
tapes and discs’. This reads as follows:
Notwithstanding Section 113(2) of Finance Act 2000, master audiotapes or
discs shall be deemed to be included in the definitions in Section 68(2) of the
Capital Allowances Act 1990. This ensures that treatment of the expenditure
on production of master audiotapes or discs will continue to be treated as
expenditure of a revenue nature.37
What arose here was an omission on the transition from one legislative provision to
another. The original provision, Capital Allowance Act 1990, s. 68(2), included in its
definition master tapes, master audiotapes, master discs and master audio discs. The
replacing provision, Finance Act 2000, s. 113(2), referred to master tapes and
master audio discs, thereby anomalously omitting master audio tapes and master
discs from the definition.
Transitory anomalies
Given not only the complexity of tax legislation but also the annual occurrence of
Finance Acts, it should come as little surprise that transitory anomalies should arise.
Concessions in this regard are issued by HMRC so as to counteract such matters, for
instance, as occurred in 1999, wherein an ESC provided transitional relief for taxpayers,
whose fate under new legislation was otherwise ambiguous.38 Under the provisions of
the Social Security Contributions Act 1999, interest would no longer be remitted where
there was a dispute over national insurance liability. However the Board of the Inland
Revenue continued to allow interest to be remitted in situations which were caught by
the transition, in other words, where disputes were outstanding at the time that the
legislation was introduced.
Transitory anomalies are especially to be expected in times of crises or emergency, as
witnessed during the ‘foot and mouth’ outbreak in the UK in the early 00s. A range of
concessions were introduced due to the acute problems which businesses faced as a
result of the outbreak, with HMRC even establishing a special hotline for distressed
taxpayers.39 At the time, ESC B56 purposively interpreted the meaning of “mature” in
the herd basis rules,40 so as to accord with the circumstances peculiar to the epizootic.
The general understanding of “maturity” for the particular legislative provisions is that
ewes, purchased by a farmer to replace ewes culled from the herd, do not normally
enter the “herd” until they bear their first lamb. Owing to the particular conditions of the
day however, slaughter took place in some flocks that year during lambing, with the
result that some ewes were slaughtered before they gave birth but others from the same
batch of intended replacements may have had lambs at foot when they were
36
HMRC, Concessions as at 6 April 2015 (n 11), 44.
HMRC, Extra-Statutory Concessions: Concessions as at 31 August 2005 (August 2005), 60 available at:
<http://webarchive.nationalarchives.gov.uk/20060213221903/http://www.hmrc.gov.uk/specialist/esc.pdf> accessed 28 May
2015.
38
‘Inland Revenue’ [1999] 22 Simon’s Tax Intelligence.
39
Inland Revenue, Tax Bulletin: Special Edition (May 2001), 1.
40
Income and Corporation Taxes Act 1988, Schedule 5, paragraph 8(2)-(4) (‘ICTA 1988’).
37
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Stephen Daly, University of Oxford
slaughtered. According to the usual effect of the provisions, this would lead to an
unexpected profit, as animals slaughtered before entering the herd are treated as
trading stock. ESC B56, which applied to animals slaughtered as a result of the outbreak
of foot and mouth disease, sought to counteract this effect and enabled farmers to treat
such animals as if they had entered the herd before slaughter. The concession was
introduced and approved by Ministers in October 200141 and rendered obsolete soon
after,42 as it was directed specifically to the outbreak.
A similar concession, ESC B55 was introduced which relaxed the rules restricting loss
relief in cases where there has been a run of losses of more than 5 years. Although
generally farming losses can be set against other income and capital gains of the same or
previous year for tax purposes, this relief is denied43 where there is an unbroken run of
farming losses for more than five years. ESC B55 provided that, for unincorporated
farmers for the tax years 2000-2001 and 2001-2002 only, if a farmer incurred six (or, in
2001-2002 six or seven) consecutive years of losses, relief would continue to be
available.44 This concession was introduced in December 200045 and was classified as
obsolete in August 2002.46
Cases of hardship at the margins
Some ESCs are designed to meet cases of hardship at the margins of the code where a
statutory remedy would be difficult to devise or would run to a length out of proportion
to the intrinsic importance of the matter. Sir Wilfred Morton, previously Chairman of the
Board of Customs and Excise, gave an example of such a concession in relation to
visiting forces which was necessitated due to complexity and the relative insignificance
of the concession. He noted that the provisions of the concession ‘are complex. They
vary according to the nationality of the forces in the light of bi-lateral negotiations which
have taken place. They are detailed.’47 This example was given in response to
questioning by the PAC as to why exactly some concessions were thought inappropriate
for statutory cover. Such explanation is far from satisfactory, as it fails to give any
detailed reasoning. Unfortunately, this adumbrated answer is representative of the
Revenue responses to enquiry of concessions by the PAC.48
A more apt exemplification is found in the case of wedding dresses and christening
gowns sent into the UK from abroad and then returned. These items would strictly be
subject to tax on their return. The commissioners opined that such concessions from the
hardship of the strict law were justified on the basis of triviality and on the basis that
these instances were clearly not within the intention of the legislation: indeed, the strict
interpretation would result in an absurdity.49 Putting such concessionary treatment on a
statutory footing would require either several legislative amendments or the
41
Inland Revenue, Tax Bulletin: Issue 55 (October 2001), 890.
Inland Revenue, IR1 (2004).
43
ICTA 1988, s. 397.
44
On the authority for HMRC to provide such a concession, see below, 6-7.
45
Inland Revenue, Tax Bulletin: Issue 50 (December 2000), 814.
46
Inland Revenue, IR1 (August 2002).
47
Public Accounts Committee, Third, fourth and fifth reports from the Committee of Public Accounts together with the
proceedings of the committee, minutes of evidence, appendices and index (HC 1966-67, (369-I, 529-I, 647-I)-VII), 295.
48
See also Select Committee on the parliamentary commissioner for administration, First report from the Select Committee on
the parliamentary commissioner for administration together with the proceedings of the committee relating to the report and
minutes of evidence, (HC 1970-71, 240- XLII), 5; Public Accounts Committee, Special report and first, second and third reports
from the Committee of Public Accounts together with the proceedings of the committee, minutes of evidence, appendices and
index (HC 1953-54 (67-1, 101-1, 183-1, 231-1)-IV), 3.
49
Public Accounts Committee, First, second and third reports from the Committee of Public Accounts together with the
proceedings of the committee, minutes of evidence, appendices and index (HC 1967-68 (156-I, 233-I, 314)-V), 127.
42
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Stephen Daly, University of Oxford
introduction of a general discretionary power (with limitations spelt out). In either
eventuality, the statutory amendment would run to a length far out of proportion to the
minor importance of the matter.
In some circumstances, these concessions merely relate to purposive interpretation,
placing the law in the context of specific sectors, which the law might have difficult in
specifying. For instance, the Greenwich University50 case gave rise to such a scenario in
relation to the supply of zero-rated goods as regards student accommodation. Under
strict legal interpretation, if Universities were to rent out accommodation during
summer months to non-students, they would not be entitled to claim the supply of
goods was zero-rated. By concession, the Revenue would allow a de minimis use of
student accommodation for non-students, given that it could not be expected that the
legislature would deprive relief in such circumstances. Put another way, it is simply not
feasible that the University would not rent out its accommodation to non-students in
any circumstances and to prevent them from doing so would effectively deprive the
relief of any value. The purpose of the concession, accordingly, was to ‘interpret the law
concerning VAT within the higher education context’.51 It is apparent that the
concession is necessary, as its absence would make the relief redundant. What is also
equally apparent is that putting this on a statutory footing would merely reflect what the
Revenue already could do in order to give effect to the primary provision. To try to
specify this more clearly on legislative paper would simply take up Parliamentary time
to arrive at a result which would be arrived at in the absence of a reforming provision
anyway. In other words, a statutory footing for such a provision would achieve the exact
same result as already occurs, but with the extra resources spent of pushing it through
Parliament.
Abuse of power and administrative commonsense
Although the above categories are conventionally understood to encapsulate the
majority of ESCs,52 not all fit nicely within such compartments. Public authorities are
preemptively constrained by public law considerations. For instance, before an official
can take a decision, she must be satisfied that it is rational, legal and devoid of irrelevant
considerations.53 This has manifested itself in the case of ESCs by constraining HMRC’s
strict application of the law where to do so would be an abuse of power.
For instance, in Unilever, HMRC was compelled to accept the submission of the
taxpayer’s application for tax relief, notwithstanding the fact that such submission
occurred outside the statutory time limit.54 To fail to do so would be an abuse of
power.55 Similarly, ESC A19 Arrears of tax arising through official error precludes HMRC
from seeking the arrears of income or capital gains tax liability if they result from the
Revenue's failure to make proper and timely use of information.56 ESC B41 likewise, but
50
R (on the application of Greenwich) v Commissioners of Customs and Excise [2001] EWHC Admin 230.
ibid [9] (Collins J).
52
This assertion is based upon the fact that the following category is not traditionally offered by HMRC in defining ESCs. See,
for instance, HMRC, Legislating Extra Statutory Concession D33 (July 2014), 4 available at:
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/339586/140731_ESC_D33_condoc_v1.pdf>
accessed 28 May 2015.
53
Denis Galligan, Discretionary Powers: A Legal Study of official Discretion, (Clarendon 1986), 144.
54
R v Inland Revenue Commissioners, ex parte Unilever plc [1996] STC 681. Kieran Corrigan also endorses this view that the
Revenue were forced to issue a concession as to fail to do so would be an abuse. See: Kieran Corrigan, Revenue Law: Volume I
(Roundhouse: Dublin, 2000), 226.
55
Unilever (n 54) 689-691 (Sir Thomas Bingham).
56
This is a curious concession in that, for all intents and purposes, it reflects what is generally understood now as a Legitimate
Expectations claim. However, this concession far predates that doctrine as it was introduced in 1971 on the basis of a
51
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Stephen Daly, University of Oxford
in the converse scenario, provides a concession in relation to repayments of tax.
Generally, a statutory claim for repayment of tax must be made within 4 years. However,
the Revenue will not enforce this time limit where over-payment of tax has arisen
because of an error on the part of the Revenue or another Government Department, and
where there is no dispute or doubt as to the facts. In these examples, a procedural right
precludes HMRC from collecting the full tax that may be due strictly under the law.
Other concessions are introduced for the practical functioning of the tax system. The
House of Lords57 endorsed this jurisdiction in the Fleet Street Casuals case.58 Therein, the
Revenue departed from their strict duty to collect all tax that was due from
unscrupulous Fleet Street print workers who had been evading tax. A concession was
offered whereby the Revenue would not formally investigate the workers provided they
paid two years of tax arrears and that systems were put in place to prevent future
evasion. This concession was viewed as necessary by the Revenue as there was a
distinct possibility that a settlement would be completely compromised in its absence.
In other words a concession was given as a compromise in order to minimise the
expenditure of resources as against potential return. A similar example is found in
relation to light oils. Light oils are made up for materials which are in themselves
subject to separate rates of tax; some at excise rate, others at full duty rate. As an
enquiry into the exact apportionments would be administratively burdensome with
negligible gains, a concession has been given such that the good would be subject only to
the excise rate.59 Other concessions may be issued where the pursuit of the tax owed
would be futile, for instance, where the taxpayer has died before the due date for
payment of tax.60
It is important to highlight that the concessions which come within this category could
potentially be viewed as distinct from those of the other categories. Whilst those were
concerned with concessions issued within the taxing provisions to which they relate,
this latter category of concession relates to issuing concessions within the primary
responsibilities of HMRC. In other words, concessions in this category require more than
mere purposive interpretation but rather require a flexing of HMRC’s managerial
discretion or are required by public law considerations.
2.2 Legal basis-are ESCs unconstitutional?
It follows that although it is possible to understand the scope of concessions, it is still
necessary to relate these to some power on HMRC’s part. To this end, the legal authority
for concessions has been a historic bone of contention. David Williams produced
probably the most critical and influential piece on the matter in 1979,61 transcribing the
history of judicial utterances on the subject, before concluding that:
recommendation from the Parliamentary Ombudsman (see: First Report from the Select Committee on the Parliamentary
Commissioner for Administration (Cmnd. 4729, 1971)).
57
In fact, it was Lord Diplock and Lord Scarman who endorsed this arrangement. The other Lords declined to base their
judgment on it.
58
IRC v National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617 (‘Fleet Street Casuals’).
59
Public Accounts Committee, Special report and first, second and third reports from the Committee of Public Accounts
together with the proceedings of the committee, minutes of evidence, appendices and index (n 48), 3-4.
60
Given statutory effect by Schedule 53, part 2, section 12 of Finance Act 2009, but in operation since 1951.
61
Subsequent articles dealing with this issue have consistently cited this article, see, for instance: Alder (n 6), 180 fn. 3; Michael
Nolan, ‘The Unsatisfactory State of Current Tax Law’ (1981) Statute L. Rev. 148, 149 Robert Baldwin and John Houghton,
‘Circular arguments: the status and legitimacy of administrative rules’ (1986) PL 239, 284 fn. 19; Geoffrey Lock, ‘The Bill of
Rights Act 1689’ (1989) 37(4) Political Studies 540, 547; William Hinds ‘Estopping the taxman’ (1991) BTR 191, 206 fn. 3;
Michael Zander, The Law-Making Process (6th edn. CUP, 2004), 457. Likewise, it has been cited by members of the judiciary,
see: Vestey v IRC [1980] AC 1148, 1194 (Lord Edmund-Davies). Lord Edmund-Davies speech in turn has been cited by McNeill
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Stephen Daly, University of Oxford
Most of the extra-statutory concessions are illegal. That they exist at all in either
overt or covert form is a matter of concern. That they not only exist, but grow
regularly, in open contradiction to the rule of law, cannot but reflect on the
quality of the executive that creates them and the polity that tolerates them62
At one time, the Chancellor of the Exchequer John Anderson sought to justify the
existence of ESCs on the basis that they arise ‘in wartime not in peacetime’.63 Indeed in
1944, in response to the Institute of Chartered Accountants raising the issue of public
awareness of concessions with the Board, the Board of Inland Revenue produced a list of
all wartime concessions.64 This was the first publication of any such list of concessions.
However, with concessions still existing 5years later in peacetime and another list
published therein containing the details of a completely new array of concessions, the
Chancellor (Sir Stafford Cripps) diverted to another justification. He stated that they are
issued ‘without any particular legal authority, but by the Inland Revenue under my
authority'.65 Suffice it to say that elementary constitutional law students would find
issue with this kind of justification.
2.2.1 David Williams and the first camp
Several camps emerged on the issue of the legal authority of concessions. The first camp
judged ESCs to be purely unconstitutional. Williams can be obviously counted within
that camp as he based his argument on several of the proceeding judicial attestations.
The starting point is Wills J in Swayne v IRC who stated as follows:
I certainly cannot assent to the suggestion made during the argument for the
Crown, that the Commissioners as representing Her Majesty, are at liberty to
avail themselves of anything like a dispossessing power – to say what portions of
a taxing Act they think reasonable and what unreasonable, and therefore to
collect some duties and reject others66
Similarly, Scott LJ in Absalom v Talbot posited that no 'judicial countenance can or ought
to be given in matters of taxation to any system of extra-legal concessions’.67 Ungoed
Thomas J in IRC v Clifforia Investments Ltd remarked that ‘[t]his offends our fundamental
conception of the rule of law’.68 The series of Vestey cases further illuminate upon the
apparent judicial aversion to ESCs. In somewhat caged language in Vestey (no 1), Walton
J spoke of the legal basis of concessions:
I am quite unable to understand upon what principle of law the Crown… feels
itself entitled to mitigate [the monstrous legislative results] by such concessions
as it chooses to make. One should be taxed by law, and not be untaxed by
concession69
J in Fulford Dobson (n 29), 987-988; Adrian John Wilkinson v The Commissioners of Inland Revenue [2002] EWHC 182 (HC),
[27] (Moses J); R (Wilkinson) v Inland Revenue Commissioners [2003] EWCA Civ 814; [2003] 1 WLR 2683, 2696.
62
Williams (n 6), 144.
63
HC Deb 15 June 1944, vol 400, col 2177.
64
Inland Revenue, Tax Bulletin Issue 32 (‘A Hundred Years of Inland Revenue Extra Statutory Concessions’) (available at:
<http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/bulletins/tb32.htm#A Hundred Years of Inland Revenue>
accessed 28 May 2015).
65
HC Deb 6 July 1949, vol 466, col 2267.
66
Swayne v IRC [1899] 1 QB 335, 344.
67
Absalom v Talbot [1943] 1 All ER 589, 598.
68
IRC v Clifforia Investments Ltd [1963] 1 WLR 396, 402.
69
Vestey v IRC (no 1.) [1979] Ch. 177, 197.
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Stephen Daly, University of Oxford
Walton J was less equivocal in Vestey (no. 2)
In the first place, I, in company with many other judges before me, am totally
unable to understand upon what basis the Inland Revenue Commissioners are
entitled to make extra-statutory concessions… This is not a simple matter of tax
law. What is happening is that, in effect, despite the words of Maitland, The
Constitutional History of England (1909), p. 305, commenting on the Bill of
Rights, "This is the last of the dispensing power," the Crown is now claiming just
such a power70
If what the Revenue in the case claimed were in fact legal, then ‘we are back to the days
of the Star Chamber’.71 This is a reference to the 1686 case of Godden v. Hales72 wherein
it was held that King James II’s power to dispense with the Test Acts was effectively
unlimited. Put another way, it would be a return to the time, prior to the Glorious
Revolution and Bill of Rights Act 1688, in which the Crown exercised supremacy over
Parliament.
The House of Lords in Vestey (no. 2) echoed the sentiments of Walton J. Lord Wilberforce
held that the Revenue’s ‘frightening’73 and ‘remarkable’74 claim to a discretionary power
in the case did not involve a process ‘of construction, even one of strained construction,
but is one of rewriting the enactment.’75 This would give rise to a course of
interpretation ‘which Parliament might certainly have taken, but which it has manifestly
avoided’.76 The courts, ‘acting on constitutional principles, not only should not, but
cannot, validate’77 the Revenue’s proposition as it would give rise to ‘taxation by selfasserted administrative discretion and not by law’.78 Lord Edmund-Davies, who
expressly cited David Williams,79 similarly stated that ‘it is surely high time to consider
the basis of this claim by the executive to make such extra-statutory concessions.’80
In the same vein, Moses J (as he then was) in Wilkinson made a connection between the
Glorious Revolution and a general levying or dispensing power in the hands of the
Revenue:
It is their haphazard nature, uncontrolled by any clear principle, promulgated as
they are by the executive and not by the legislature, which justifies the
criticism… Taxation by the executive, and not by the elected, has led to war; it
seems anomalous that the courts should be invited to adopt a less militant
attitude when tax has so often been relieved on the ukase of the executive81
A closer examination of the facts however reveals that in each of these cases, with the
exception of Wilkinson, what was at issue does not come within our definition of ESCs.
70
Vestey (no. 2) (n 15) 203.
ibid 204.
72
Godden v Hales (1686) 89 ER 1050. This point is noted by John Snape in his doctoral thesis: John Snape, ‘Public Law and
Public Management: ‘Theory’ and ‘Values’ in Corporation Tax Reform’ (PhD thesis, University of Birmingham 2008).
73
Vestey v IRC (n 61) 1172.
74
ibid, 1171.
75
ibid, 1170.
76
ibid, 1170.
77
ibid, 1172.
78
ibid, 1173.
79
ibid, 1194.
80
ibid, 1194.
81
Adrian John Wilkinson (61) [27].
71
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Stephen Daly, University of Oxford
For instance, Swayne v IRC concerned the assignment of leasehold property and the
quantum of this assignment which should be subject to stamp duty. The Revenue argued
that rent payable on the lease should form part of the consideration subject to stamp
duty. The problem with the Revenue’s argument was that in the case of other leases
where rent arose in a similar manner, it was their practice not to consider it part of the
consideration. They sought to distinguish between such cases and that which arose in
the case at hand, but the court held against such distinction given the substantive
similarity of the cases. As this was so, it would have to be that the Revenue had a wide
dispensing power at their disposal in order for the court to find in their favour. It was
the idea of such a wide dispensing power being implied by the legislation which
outraged Wills J. Likewise in Clifforia Investments, the Revenue had argued that,
although the legislation strictly applied would result in double taxation in certain cases,
they would use their discretion so as not to enforce the provisions in such
circumstances. Thus, they again sought to imply into the legislation a wide discretionary
dispensing power. Absalom meanwhile was concerned with the valuation of ‘doubtful
debts’ against which relief could be sought against profits. This valuation was subject to
an extra-statutory concession by which taxable profits would be estimated by reference
to actual receipts in a given year. Although clearly a prudent arrangement, this could not
be purposively read into the legislation. The justices in the Vestey series of cases were
dealing with the principle behind the argument that the Crown was putting forward to
support its interpretation of the relevant legislation. This was to the effect that they
were entitled to arrive at a working solution to incredibly complex and problematic
legislation such that in any given case the Revenue would divvy up the tax payable on
gains arising in trusts as they thought prudent. As in the previous cases, this argument
suggested a wide discretionary power in the application of legislation. More
significantly, the justices also sought to distinguish between instances in which ESCs
may properly apply and the contention of the Revenue that they had discretion in the
case at hand. Walton J in the High Court and Lord Edmund-Davies in the House of Lords
made clear the distinction between what may perhaps be a valid exercise of discretion
in the form of ‘relatively harmless’82 ESCs and what was being sought in the immediate
Vestey case. Walton J, with which Lord Edmund-Davies concurred,83 stated of the former
that:
they do represent a published code, which applies indifferently to all those who
fall, or who can bring themselves, within its scope. What is claimed by the Crown
now is something radically different. There is no published code, and no
necessity for the treatment of all those who are in consimili casu alike84
Lord Wilberforce likewise differentiated between the limited discretion available to the
Commissioners to grant ESCs and the general dispensing power being sought in Vestey:
They say that the income tax legislation gives them a general administrative
discretion as to the execution of the Acts…The judge described the comparison of
such limited discretions with that now contended for as "laughable." Less
genially, I agree85
Clearly the justices were not commenting upon the legality or otherwise of the limited
managerial discretion available to the Commissioners to issue ESCs, but were focusing
82
Vestey v IRC (n 61), 1194 (Lord Edmund-Davies).
ibid, 1194.
Vestey (no. 2) (n 15), 204 [emphasis added].
85
Vestey v IRC (n 61), 1172 [emphasis added].
83
84
10
Stephen Daly, University of Oxford
their judgments on the wide discretionary power being sought to be interpreted into the
relevant legislation in the case at hand.86 Further, the impugned discretion in each case
was not being operated in favour of taxpayers, as our definition of concessions requires,
but rather to their detriment.
Finally, the Wilkinson case concerned the issue of whether statutory relief for widows
ought to be extended to widowers. The Revenue advanced an argument to the effect that
the court should not intervene in the area of the allocation of resources, which is the
proper remit of Parliament. This argument angered Moses J, especially in light of the
apparent fact that ESCs had historically been used to do just that, namely, intervene in
Parliament’s allocation of resources. In spite of the criticism and expressive rhetoric,
however, Moses J actually found that a concession ought to be extended to the case at
hand. To this end, the reasoning of Moses J is fundamentally flawed in that he utilized
previous criticisms of the unconstitutionality of general discretionary powers in the
hands of the Revenue on the one hand and on the other hand found that such a power
could be extended to the widower, notwithstanding the clear contradiction to
Parliamentary will.
What underpins this first camp accordingly is that the issues which arose in these cases
could not properly be understood as falling within our definition of ESCs outlined above,
but rather dealt with arguments attempting to interpolate wide discretionary
dispensing powers. As a result, David Williams’ influential article is fundamentally
misconceived, as it conflates these judicial outbursts with not only the published list of
concessions, but also unpublished concessions which operate within the narrow
mandate. The strong and confusing dicta of Moses LJ on the other hand helps us little to
understand the legal basis of ESCs.
2.2.2 The second camp
A second camp emerged which endorsed the use of ESCs irrespective of their legal basis.
As far back as 1889, Matthew J is reported to have endorsed the process of concession
by the Revenue on certain issues.87 Likewise, Lord Upjohn in Korner v IRC noted that the
practice was ‘very old’ and worked ‘great justice between the Crown and the subject,
and I trust will never be disturbed’.88 Indeed, few would argue that the tax code is not
difficult to administer and thus in FS Securities v IRC, Donovan LJ recognised that
‘practical considerations no doubt justify at times some departure from strict law, for
the common convenience of the Revenue and the taxpayer’.89 Nevertheless, it was also
acknowledged that there was no firm legal basis for their existence. The 1949 Royal
Commission concluded that the concessions were reasonable but that it was
disconcerting to find the statute law being amended by this special and selective
process.90 Lord Upjohn (again) in Bates v IRC agreed that effectuating the true
construction of taxing provisions was a monstrous undertaking in certain circumstances
and as such HMRC may resort to working out ‘what they consider to be an equitable way
of operating’ the provisions, ‘which seems to them to result in a fair system of taxation’.
See also: Corrigan (n 54), 227 who similarly notes this distinction: “This, it must be admitted, is something less than a fullfrontal assault on the granting of concessions. It would appear that Lord Wilberforce was swayed by the facts of the case, which
were extreme and involved the most odious discrimination between persons in identical situations.”
87
R v Special Commissioner (1889) 2 TC 510, 515.
88
Korner v IRC [1969] 1 All ER 679, 686.
89
FS Securities v IRC [1963] 3 All ER 229, 234.
90
Final Report of the Royal Commission on the Taxation of Income and Profit (1949 CMd. 9474), para 240.
86
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Stephen Daly, University of Oxford
However, he was ‘quite unable to understand upon what principle they can properly do
so’.91
2.2.3 Resolution of the issue of jurisdiction
Underpinning this second camp was the acknowledgment of the practicality of ESCs.
Indeed, the legal basis for the issuance of ESCs has ultimately been resolved on that
basis, namely, their practicality.
When a concession arose in the Fleet Street Casuals case,92 whereby casual print
workers who had been less than truthful in their tax affairs were given a partial amnesty
in exchange for future compliance, Lord Diplock explained that the authority to provide
concessionary treatment came properly within the ambit of the Commissioners duty of
‘care and management’ of taxes (now found in Commissioners for Revenue and Customs
Act 2005 (‘CRCA 2005’), s. 5):
[T]he board have a wide managerial discretion as to the best means of obtaining
for the national exchequer from the taxes committed to their charge, the highest
net return that is practicable having regard to the staff available to them and the
cost of collection93
On the question of whether the Commissioners had exercised their discretion to grant
concessionary treatment appropriately, Lord Diplock held that:
no court considering this evidence could avoid reaching the conclusion that the
board and its inspector were acting solely for " good management" reasons and
in the lawful exercise of the discretion which the statutes confer on them94
The Chief Secretary to the Treasury reiterated this legal basis in 1984, citing that:
[b]oth the Inland Revenue and Customs and Excise are charged statutorily with
care and administration, and from that statutory power their authority ... is
thought to derive95
Such was similarly held in subsequent cases such as Fulford-Dobson96 and the House of
Lords hearing of Wilkinson.97
To this end, the legal basis of concessions has now been affirmatively put to rest on this
basis as falling within the managerial discretion bestowed upon HMRC by virtue of
Commissioners for Revenue and Customs Act 2005, s. 5. This discretion allows HMRC, for
reasons of administrative pragmatism, to depart from the strict law where such is done
with a view overall to obtaining a higher net yield from the taxes committed to charge.98
2.2.4 Limitation of ESCs in light of the resolution
91
Bates v IRC [1968] AC 483, 516.
Fleet Street Casuals (n 58).
93
ibid, 636.
94
ibid, 637.
95
HC Deb 11 July 1984, vol 63 col 1171; see also, in relation to Customs and Excise, R v Customs and Excise Commissioners,
ex p Kay & Co Ltd and another and other applications [1996] STC 1500 (Keene J).
96
Fulford-Dobson (n 29), 166.
97
R (Wilkinson) v IRC [2005] UKHL 30; [2006] STC 270 [21].
98
Fleet Street Casuals (n 58) 637 (Lord Diplock); Wilkinson (n 97) [20] (Lord Hoffmann)
92
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Stephen Daly, University of Oxford
However, this legal basis also serves to illuminate upon the inherent limitations of the
power to issue ESCs. As was stressed by member of the first camp, managerial
discretion cannot be extended to a wide discretionary dispensing power. ESCs are only
authorised within a strict mandate, in giving effect to the law and the primary
responsibilities of HMRC. Operation outside this mandate will be ultra vires.
Numerous commentators have recalled this distinction over the years. Former
Chairman of the Inland Revenue Alexander Johnston endorsed the use of ESCs but
stressed that it was the Revenue’s business to administer the law and not to change it.99
ESCs are only appropriate in the limited terrain at the edges of the legislation. Outside
this field, any problems must be corrected by legislation.100 Lord Wilberforce, in
typically lucid, pragmatic fashion insisted that HMRC ‘may, indeed should, act with
administrative commonsense’.101 The scope of the power to concede however cannot be
extended beyond that, because ‘self-asserted administrative discretion’ is no substitute
for law.102 Lord Hoffmann in Wilkinson stressed that the power to issue concessions
should not be construed ‘so widely as to enable the commissioners to concede, by extrastatutory concession, an allowance which Parliament could have granted but did not
grant’.103 An important distinction accordingly is that ESCs may deal with issues at the
rough edges of legislation where it is unclear whether a particular effect was intended
by the legislation,104 rather than instances where HMRC itself finds the law
objectionable.105
2.3 Why not simply regularise concessions?
It has been outlined that ESCs are not unconstitutional per se, but rather that
promulgation of them falls squarely within HMRC’s managerial discretion.
Constitutional concerns should already have been dampened by the examples above of
concessions which fall within the various categories, thereby demonstrating that in
large part ESCs are benign, mostly issued pursuant to purposive legislation and
generally made in response to legislation which is rough at the edges.
These remarks make way for an obvious challenge however. Why not simply amend the
primary legislation? This was put plainly by Lord Radcliffe in Inland Revenue
Commissioners v Frere:
I have never understood the procedure of extra-statutory concessions in the
case of a body to whom at least the door of Parliament is opened every year for
adjustment of the tax code106
A variety of practical issues arise in relation to this suggestion however. The first is that
there is simply insufficient Parliamentary time to place all ESCs on a statutory footing.107
This is no more evidenced than by the fact that despite a concerted effort over the last
99
Johnston (n 16) 68.
ibid.
101
Vestey v IRC (n 61), 1173.
102
ibid.
103
Wilkinson (n 97) [20], (Lord Hoffmann).
104
Whiting (n 18), 534-535.
105
Wilkinson (n 97) [20]; R (Wilkinson) v Inland Revenue Commissioners (n 61) [46] (Lord Phillips); see also Stock v. Frank
Jones (Tipton) Ltd. [1978] 1 WLR 231, 234 (Viscount Dilhorne).
106
Inland Revenue Commissioners v Frere (n 9), 1209, see also: Absalom v Talbot (n 9), 598 (Scott LJ).
107
Treasury and Civil Service Committee, Budgetary Reform in the UK (HC 1981-82; 137-vi) Q 500 (Sir Geoffrey Howe, then
Chancellor of the Exchequer); Gabriele Ganz, Quasi-legislation: recent developments in secondary legislation (Sweet &
Maxwell, 1987), 93.
100
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Stephen Daly, University of Oxford
ten years, the placing of concessions in legislation has occurred at a sluggish pace. The
Finance Acts of 2006108 and 2007109 gave a statutory footing to only one ESC relating to
direct tax each respectively. Income Tax Bill 2006-7 (which subsequently became the
Income Tax Act 2007) sought to incorporate a modest 4 class concessions, only two of
which were listed expressly in the HMRC publications as concessions.110 Neither ESC
was incorporated into the final Act however. Even with the delegated power to legislate
concessions by statutory instrument, namely section 160 of the Finance Act 2008, HMRC
in 2008 sought only to regularise 19, of which a mere 14 in were classified in HMRC
publications as ESCs, the others being either unpublished or to be found in HMRC
manuals.111 In 2009, the ambition was to legislate 19 concessions, only 15 of which were
previously in the concession lists;112 in 2010, 7 were sought to be legislated, only 4 of
which were classed as concessions;113 and in 2011,114 2012115 and 2014116, the goal was
to regularise a mere two in each year respectively.117
Secondly, the particular concessions may be unsuitable for legislation.118 Again, this is
partially evidenced by the fact that despite the effort since Wilkinson to reduce the
number of concessions, there remain 100 on HMRC’s lists.119 Some concessions are
unsuitable for placement in statute by virtue of triviality, for instance, as outlined inter
alia in the case of wedding dresses. It might similarly be a result of transience, as
demonstrated by the foot and mouth provisions, whereby the time spent attempting to
place the provision on a statutory footing will be disproportionate to the importance of
the matter given its insignificant lifespan. Finally, complexity of the concession might
make it not merely unsuitable for legislation, but rather practically incompatible with
placement on a legislative footing.
108
109
110
Finance Act 2006, s. 64.
Finance Act 2007, s. 62.
Explanatory Notes to the Income Tax HC Bill (2006-07), at [14].
HMRC, Extra-statutory Concessions – Technical Consultation on draft Legislation (November 2008), 5-6, available at:
<http://webarchive.nationalarchives.gov.uk/20090211090306/http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortal
WebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HM
CE_PROD1_028967> accessed 28 May 2015.
112
See here: HMRC, Extra-statutory Concessions – Second Technical Consultation on Draft Legislation (July 2009), 5-6
<http://webarchive.nationalarchives.gov.uk/20091102173035/http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortal
WebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HM
CE_PROD1_029701> accessed 28 May 2015 and see here: HMRC, Extra statutory concessions – third technical consultation on
draft legislation (December 2009), 7
<http://webarchive.nationalarchives.gov.uk/20100202200912/http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortal
WebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HM
CE_PROD1_029991> accessed 28 May 2015.
113
HMRC, Extra statutory concessions – fourth technical consultation on draft legislation (December 2010), 6 available at:
<http://webarchive.nationalarchives.gov.uk/20110202150218/http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortal
WebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HM
CE_PROD1_030872> accessed 28 May 2015.
114
HMRC, Extra-statutory concessions – fifth technical consultation on draft legislation (December 2011), 6
<http://webarchive.nationalarchives.gov.uk/20120207142922/http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortal
WebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HM
CE_PROD1_031784> accessed 28 May 2015.
115
HMRC, Extra-statutory concessions – sixth technical consultation on draft legislation (December 2012), 5
<http://webarchive.nationalarchives.gov.uk/20130103030714/http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortal
WebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HM
CE_PROD1_032505> accessed 28 May 2015.
116
HMRC, Extra-statutory concessions – seventh technical consultation on draft legislation (October 2014), 5 available at:
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/359867/141002_ESC_7th_draft_legislation_con
doc_v1.0.pdf> accessed 28 May 2015.
117
There was no consultation on draft legislation to regularise concessions in 2013.
118
Ganz (n 107), 93.
119
See: HMRC, Concessions as at 6 April 2015 (n 11), where 46 are still active, and HMRC, VAT Notice 48: extra statutory
concessions (March 2012), available at: <https://www.gov.uk/government/publications/vat-notice-48-extra-statutoryconcessions/vat-notice-48-extra-statutory-concessions> accessed 28 May 2015 where there are still 54 active.
111
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Stephen Daly, University of Oxford
For instance, ESC A94 is a fitting example of a concession too complex to legislate,
particularly in light of its very limited application.120 The concession applies to profits
and losses of theatre backers, an individual who backs a theatrical production but not as
part of a trade, and contains several separate options. Strictly, any return a theatre
backer receives over and above the original investment is assessable as an annual
payment.121 Any losses therefore could not be offset against income.122 However, UK
resident theatre backers may elect, by concession, to treat profits under section 687 of
Income Tax (Trading and Other Income) Act 2005 (‘ITTOIA’), as income not otherwise
charged, and thus losses can be offset against income under section 872 of ITTOIA 2005,
which allows for losses calculated on same basis as miscellaneous income. A further
limb to this concession is that, strictly, if there were revenue derived from the
investment and the payer is incorporated, there would be an obligation to deduct tax.123
HMRC however do not insist on deduction of tax from payments to theatre backers for
their theatrical investments if the angel's usual place of abode is in the United
Kingdom.124 In anticipation of legislating ESCs as part of the Tax Law rewrite, HMRC
examined ESC A94 and found it too complex for legislation.125 The reason is that it
straddles the taxes,126 failing to neatly fall within any category and is highly dependent
upon the circumstances. To this end, it would be very difficult,127 although not
impossible,128 to pick out parts of the concession and put them into a Bill.
Much the same issue is being experienced in the attempt to legislate the controversial
ESC D33.129 This concession was first published in December 1988,130 with the purpose
of mitigating the strict effects of the judgment in Zim Properties131 which found that the
right to take court action for compensation is itself an asset for CGT purposes. In January
2014, HMRC placed a monetary limit on the application of the concession in light of
concern that the concession might exceed HMRC’s managerial discretion.132 In line with
such a concern, HMRC in July 2014 released a consultation paper in which it sought
responses on a proposal to legislate ESC D33.133 The closing date for submissions was 15
September 2014.134 At the time of writing, however, HMRC’s website merely reads that
the feedback is still being analysed.135 When the consultation was initiated, it appears
that HMRC considered that the concession could be readily regularised, given that just
6weeks was provided for consultation (thereby breaking from the standard 12week
period prescribed as a default by HM Government).136 The reason for the shortened time
period, as per HMRC, was that ESC D33 is a long-standing concession with which
professionals are familiar.137 The current lag in action on this issue accordingly would
120
HMRC, Concessions as at 6 April 2015 (n 11), 30.
Income Tax (Trading and Other Income) Act 2005 (‘ITTOIA 2005’), s. 683.
122
They could be offset as capital losses however, see: Mike Truman ‘Angelic tax’ (2012) 170(4362) Taxation 31, 31.
123
ICTA 1988, s. 349(1).
124
HMRC, Concessions as at 6 April 2015 (n 11), 30-31.
125
Joint Committee on Tax Law Rewrite Bills, Income Tax (Trading and Other Income) Bill: Evidence (2004-05, HL 37, HC
285), ev 19.
126
ibid, ev 27 A19 (Hazel Colclough).
127
ibid.
128
ibid.
129
This is further examined below, 31-35.
130
Inland Revenue, Press Release (19 December 1988), available at [1988] 51 Simon’s Tax Intelligence 865
131
Procter (Inspector of Taxes) v Zim Properties Ltd [1985] STC 90.
132
HMRC, Changes to Extra Statutory Concession (ESC) D33 (27 January 2014), available at:
<http://webarchive.nationalarchives.gov.uk/20140109143644/http://www.hmrc.gov.uk/news/extra-statutory-concession-d33changes.htm> accessed 28 May 2015.
133
HMRC, Legislating Extra Statutory Concession D33 (n 52).
134
ibid, 1.
135
<https://www.gov.uk/government/consultations/legislating-extra-statutory-concession-d33> accessed 28 May 2015.
136
HM Government, Consultation Principles (July 2012, as updated November 2013), 1. Available at:
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255180/Consultation-Principles-Oct-2013.pdf>
accessed 28 May 2015.
137
HMRC, Legislating Extra Statutory Concession D33 (n 52), 21.
121
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Stephen Daly, University of Oxford
appear to depart from the initial optimism displayed by HMRC, thereby underlining the
fact that legislating ESC D33 is proving to be a taxing matter. This should come as little
surprise given that, as experienced with ESC A94, ESC D33 straddles the tax code, with
various parts of the concession falling between separate provisions.138 ESC D33 is 14
paragraphs in length and contains 4 separate concessionary practices concerning rights
of action for compensation which relate to instances where there either is or is not an
underlying asset!
2.4 Interim remarks
The fact that it is not practically possible to put concessions on a statutory footing brings
us back to the very heart of the matter: ESCs are justified as they provide a means of
guiding the public as to the effects of the law, such communication on an extra-statutory
basis being necessitated by the impracticality of amending the primary law. In this
sense, ESCs are an inevitability of, and desirable counteraction to, an imperfect system.
For this reason, HMRC should cease its current apparent moratorium on the official
issuance of ESCs,139 not only because such an approach is unattractive but also because
the apparent cessation is fallacious. Concessions are continuing to be issued, the
difference merely being that they are not being expressly recognised as such. For
instance, on the 4th of August 2014, HMRC announced that it was removing a
concession relating to the treatment of the use of unremitted foreign income or gains as
collateral for a loan enjoyed in the UK.140 What was curious about the announcement
was that when the ‘concession’ was introduced in 2010, it was neither cited nor listed as
a concession. Rather, it was published in an HMRC manual.141
In a normative state, ESCs should not seek to change the law but rather to make the law
more readily implementable. ESCs should not be used as a proxy for amending the core
fairness of a law, but rather may be used as a means of purposively interpreting the law
so as to entitle parties to relief, or take entities out of the scope of taxing provisions. The
foregoing has sought to argue that the use of ESCs in such a manner is in principle not
only constitutionally acceptable, but also inevitable and even desirable. However, as will
be chronicled in the proceeding section, ESCs are not without issue in practice.
3. Problems with ESCS
Concessions are much like today’s queen, they are in most cases harmless. History will
have taught us however that concessions, much like monarchs of the past, can be
dangerous. Discretionary powers are inevitably open to abuse. As such, an analysis of
concessions reveals a myriad of problems, such as favouritism, acting ultra vires and
failing to publish concessions. Although these problems may arise in soft-law generally,
they are particularly acute in the case of ESCs, as will become apparent.
138
Further examined below, 18-20.
HMRC has not added a single concession to its list of direct tax ESCs in the aftermath of Wilkinson. Compare for instance
HMRC, Extra-Statutory Concessions: Concessions as at 31 August 2005 (n 37) against HMRC, Concessions as at 6 April 2015
(n 11).
140
HMRC News, Remittance Basis (4 August 2014), available at:
<http://webarchive.nationalarchives.gov.uk/20140109143644/http://www.hmrc.gov.uk/news/remittance-basis.htm> accessed 28
May 2015.
141
HMRC, Remittance Basis: Identifying Remittances: Conditions A and B: Condition B - collateral in respect of relevant debt
(8 October 2010)
139
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Stephen Daly, University of Oxford
3.1 Favoured Groups
A common recurrence is that of concessions issued to favoured groups which appear to
be outwith the authority of HMRC. If Parliament had intended that such groups should
be favoured, then it must have done so. In the absence of legislative provision, what
occurs is unfair in the sense of distinguishing arbitrarily between groups in society. For
instance, a longstanding concession operates in relation to awards given to pupil
barristers, whereby the payment that is received in the first six months of pupillage can
be treated as tax-free.142 Another concession of this sort was found in relation to miner’s
free coal, which operated from at least World War II143 until 2003.144 This was criticised
by Walton J in Vestey (no 2):
[U]pon what basis have the commissioners taken it upon themselves to provide
that income tax is not to be charged upon a miner's free coal and allowances in
lieu thereof? That this should be the law is doubtless quite correct: I am not
arguing the merits, or even suggesting that some other result, as a matter of
equity, should be reached. But this, surely, ought to be a matter for Parliament,
and not the commissioners. If this kind of concession can be made, where does it
stop; and why are some groups favoured as against others?145
A similar charge can be issued against concessions which have been issued to Holocaust
Victims146 and members of the Police Service in Northern Ireland (‘PSNI’) who die from
injuries caused in Northern Ireland by terrorist activity.147 In the case of the former,
compensation payments made in respect of dormant bank and building society accounts
normally represent interest, and are therefore strictly subject to the Tax Deduction
Scheme for Interest. However, the Revenue have provided that no tax will be payable on
any monies paid out by banks or building societies under the “Restore UK” initiative to
Holocaust victims or their beneficiaries. Under this initiative, banks have made
exceptional up-rating payments to unclaimed accounts of Holocaust victims. In the case
of the latter, the Revenue have extended the relief given to members of the armed forces
under Inheritance Tax Act 1984, s. 154. However, the PSNI does not come under the
umbrella of ‘armed forces’, as such is used as a categorization of army members rather
than members of the police force.
Much like Walton J’s understanding of the allowance in relation to free coal, these
concessions are clearly not without intrinsic merit. But it is for Parliament to decide who
is to be accorded relief under the law, and not the Revenue. These are concessions
issued, not because the law is rough at the edges, but rather because the Revenue finds
it objectionable that the parties in question ought to be subjected to tax. As this is the
case, they fall outside our understanding of the Revenue’s authority to issue
concessions.
142
The General Council of the Bar, Taxation and Retirement Benefits Guidance (6th edn., 2012)
<http://www.barcouncil.org.uk/media/171635/taxation_and_retirement_benefits_-_6th_edition.pdf> accessed 28 May 2015. See
further below, 20-23.
143
Inland Revenue, A List of Extra-Statutory Wartime Concessions (n 26).
144
It was enacted in Income Tax (Earnings and Pensions) Act 2003, s. 306.
145
Vestey (no 2) (n 15), 203.
146
ESC A100 ‘Tax exemption for compensation paid on bank accounts owned by holocaust victims’, see: HMRC, Concessions
as at 6 April 2015 (n 11), 43.
147
ESC F5 ‘Deaths of members of the Police Service of Northern Ireland’, see: HMRC, Concessions as at 6 April 2015 (n 11),
53.
17
Stephen Daly, University of Oxford
Many obvious criticisms emerge in relation to this type of concession. It undermines the
authority of Parliament. It exposes ‘a Revenue official to temptation’148 to change the law
to fit their personal morality. It may open the Revenue to lobbying for de facto changes
in the law from interested parties. Whilst Parliament is also open to pressure from
lobbying, politicians at least can be called to account for favouring certain groups over
others. Finally, the use of such a dispensing power contradicts the Bill of Rights. As
Freedman J pointed out in R v Catagas:
Today the dispensing power may be exercised in favour of Indians, tomorrow it
may be exercised in favour of Protestants and the next day in favour of Jews. Our
laws cannot be so treated. The Crown may not, by executive action, dispense
with laws. The matter is as simple as that, and nearly three centuries of legal and
constitutional history stand as the foundation for that principle149
3.2 The issue of vires
If the power to issue concessions is (mis)construed as being broader than is
constitutionally valid, then the discretion from which this power derives would similarly
be interpreted widely. This is problematic in the sense that it would allow the Revenue
to play fast and loose with tax legislation and levy persons, parties or goods as they see
fit. Put another way, if the Revenue have a broad power to dispense with the law where
they see fit, then they would also have the power to tax as they see fit. Such a state of
affairs would effectively ‘reverse the result of the Civil War’.150
The inherent danger then of allowing the Revenue to issue concessions is that it may
lead to such a misconception in their hands of the powers that they have, as seen in the
past in cases such as Vestey, Absalom, Clifforia Investments and Swayne v IRC. This has
been particularly evident in the Wilkinson review of ESCs, wherein a significant number
of ESCs were found to be beyond HMRC’s powers.151 ESC D33 provides further evidence
of the potential for misconception. By way of background, Capital Gains Tax (‘CGT’) is
levied152 on any gain153 accruing to a chargeable person154 from the chargeable
disposal155 of a chargeable asset.156 A chargeable asset in turn is defined in very broad
terms as any form of property, whether situated in the UK or not, including:
(a) options, debts and incorporeal property generally, and
(b) any currency other than sterling, and
(c) any form of property created by the person disposing of it, or otherwise
coming to be owned without being acquired.157
In O’Brien v Benson’s Hosiery (Holdings) Ltd,158 a director under a seven-year service
contract with the taxpayer, Benson’s Hosiery, was released from his obligations in
return for payment to the taxpayer of £50,000. The House of Lords held that the £50,000
was subject to CGT on the basis that the contractual right of the taxpayer to the
148
Absalom v Talbot (n 9) 598 (Scott LJ).
[1978] 1 WWR 282, 287-288.
M v Home Office [1994] 1 AC 377, 395 (Lord Templeman).
151
See above fn 111-116.
152
By virtue of Taxation of Chargeable Gains Act 1992, s. 1 (‘TCGA 1992’).
153
TCGA 1992, s. 15.
154
TCGA 1992, s. 2.
155
TCGA 1992, ss. 21-27.
156
TCGA 1992, s. 21(1).
157
TCGA 1992, s. 21(1).
158
O’Brien v Benson’s Hosiery (Holdings) Ltd [1980] AC 562.
149
150
18
Stephen Daly, University of Oxford
director’s services was an asset which could be and had been turned to account. The
case of Zim Properties v Proctor,159 which is the catalyst for ESC D33, follows from this
case.160 Zim Properties concerned a settlement arrived at between a firm of solicitors
and Zim, the taxpayer. Owing to alleged negligence on the part of the solicitors, the sale
of three properties fell through. The solicitors settled the matter for £69,000, which the
Revenue in turn assessed to tax.161 In line with O’Brien, the court held that a right to
bring an action is an ‘asset’ for the purposes of CGT,162 provided such action is not
vexatious or frivolous.163 Further, Warner J held that the capital sum was not derived
from any underlying asset, in this case the three properties, but rather from the right of
action itself.164
For taxpayers generally, this case would have a wide-ranging effect. The ‘gain’ which is
subject to CGT is calculated by deducting the acquisition cost,165 exemptions,166 reliefs167
and losses (where applicable)168 from the proceeds of the disposal of the asset. As such,
rights of action would be assessable to tax in their own right and the acquisition cost,
statutory reliefs and exemptions relating to a separate, underlying asset would not be
deductible. An anomalous position thus arises whereby, taking Zim Properties as an
example, the £69,000 could not be used for any reliefs or exemptions as it arose from a
claim of negligence, but if the firm of solicitors had simply smashed up a property,
causing £69,000 in damage, then that sum would be subject to the full range of reliefs
and exemptions!169
ESC D33 was introduced in 1988170 to combat this anomaly by extending the range to
which an underlying asset would be engaged. In other words, despite the strict legal
position, the Revenue would treat a cause of action relating to an underlying asset as
being derived itself from the underlying asset and thus eligible for statutory reliefs and
exemptions in connection with the asset. The chargeable gain would be significantly
reduced by virtue of the ability to deduct the acquisition cost and apply lucrative reliefs.
This treatment was explained in paragraphs 8-10 of ESC D33:
8. Relief by concession
Where a gain arises on the disposal of a right of action, the case may
alternatively, by concession, be treated in accordance with the following
paragraphs of this statement.
9. Underlying assets
Where the right of action arises by reason of the total or partial loss or
destruction of or damage to a form of property which is an asset for capital gains
tax purposes, or because the claimant suffered some loss or disadvantage in
159
Zim Properties (n 131).
Ibid, in particular, 104-108.
£69,000 was paid in two instalments of £60,000 and £9,000 on 4 February 1976 and 23 April 1976 respectively. The
Revenue’s assessment related to the accounting period to 31 March 1976 and so only the £60,000 was discussed in the case.
162
TCGA 1992, s. 37(1).
163
Zim Properties (n 131), 106.
164
Ibid, 108-109.
165
TCGA 1992, s. 38.
166
Such as the Annual Exempt Amount (TCGA 1992, s. 3).
167
Such as, inter alia, Entrepreneurs’ Relief (TCGA 1992, ss. 169H-V) and Principal Private Residence Relief (TCGA 1992, ss.
222-226).
168
TCGA 1992, s. 16.
169
On part disposals, see: TCGA 1992, s. 42.
170
HMRC, Legislating Extra Statutory Concession D33 (n 52) 10.
160
161
19
Stephen Daly, University of Oxford
connection with such a form of property, any gain or loss on the disposal of the
right of action may by concession be computed as if the compensation derived
from that asset, and not from the right of action. As a result a proportion of the
cost of the asset, determined in accordance with normal part-disposal rules, and
indexation allowance, may be deducted in computing the gain. For example if
compensation is paid by an estate agent because his negligence led to the sale of
a building falling through, an appropriate part of the cost of the building may be
deducted in computing any gain on the disposal of the right of action.
The gain may be computed by reference to the original cost of the underlying
asset, with time-apportionment if appropriate if the asset was acquired before 6
April 1965, or by reference to its market value on 6 April 1965. For disposals on
or after 6 April 1988, the gain may be computed in appropriate cases by
reference to the value of the asset on 31 March 1982.
10. Other reliefs and exemptions
If the relief was or would have been available on the disposal of the relevant
underlying asset, it will be available on the disposal of the right of action. For
example, if compensation is derived from a cause of action in respect of damage
to a building suffered by reason of professional negligence, and the
compensation is applied in restoring the building, deferment relief under Section
23, TCGA 1992 will be available as if the compensation derives from the building
itself and not from the right of action.
Other reliefs which may become available in this way include private residence
relief, retirement relief and roll-over relief. HMRC Board will be prepared to
consider extending time limits in cases where because of a delay in obtaining a
capital sum in compensation, the normal time limit allowed for a relief has
elapsed. If the right of action relates to an asset which is specifically exempt from
capital gains tax, such as a motor car, any gain on the disposal of the right of
action may be treated as exempt.
HMRC has claimed that this extension of the range to which what will qualify as an
underlying is supported by the case of Pennine Raceway Ltd v Kirklees Metropolitan
Council (No 2)171 wherein Pennine Raceway held a licence to conduct drag racing on a
disused airfield. When Kirklees Metropolitan Council rejected planning permission, the
value of the licence dropped. The Council paid compensation to Pennine and the Court
of Appeal held that this compensation reflected the loss in value of the licence.172 But
there is a clear distinction between these two instances. There is no doubt that the
licence in Pennine Raceway represents an underlying asset and the impact of not
obtaining planning permission would have been to reduce the value of the licence. The
example accordingly is of false equivalence and cannot serve as the basis for extending
the range to what will qualify as an underlying asset.
To reiterate Lord Hoffmann’s appraisal, a concession may only be granted within the
interstices of legislation, but cannot relieve tax which Parliament has prescribed as due.
Could the concession here then be characterised as mere purposive interpretation and
as such legitimate? The answer to this question must equally be in the negative, as the
success of that argument hinges on some ambiguity in relation to the meaning of the
171
172
Pennine Raceway Ltd v Kirklees Metropolitan Council (No 2) [1989] STC 122.
HMRC, Legislating Extra Statutory Concession D33 (n 52), 12.
20
Stephen Daly, University of Oxford
legislative text. But the High Court in Zim Properties clearly set out that the capital sum
may derive from the right of action itself and so, this argument must make way for the
ultimate conclusion that the concession is ultra vires173 by reason of its ambition to
overrule a judicial decision.174
Similarly controversially, where a right of action arises that does not involve an
underlying form of property, the ESC holds that any gain accruing on the disposal of the
right of action would be exempt from capital gains tax. This treatment was explained in
para 11 of ESC D33:
11. No Underlying Asset
A right of action may be acquired by a claimant in connection with some matter
which does not involve a form of property which is an asset for capital gains tax
purposes. This may be the case where professional advisers are said to have
given misleading advice in a tax or other financial matter, or to have failed to
claim a tax relief within proper time. Actions may be brought in relation to
private or domestic matters. Where the action does not concern loss of or
damage to or loss in connection with a form of property which is an asset for
capital gains tax purposes, the approach in paragraph 9 above of treating the
compensation as deriving from the asset itself is not appropriate. In these
circumstances any gain accruing on the disposal of the right of action will be
exempt from capital gains tax.
As with paragraphs 8-10, the argument for purposive interpretation is moot given that
this paragraph cuts entirely against the decisions in Zim Properties and in O’Brien that a
right of action is an asset for CGT purposes. HMRC has argued however that the
concession was justified initially on grounds of administrative convenience.175 That
might be persuasive in the case of a negligible amount of compensation. When the
concession was introduced in 1988 however, there was no limit to the amount that
would be exempt from CGT. In January 2014, HMRC set a limit of £500,000 below which
there would be no question of CGT. It is, candidly, impossible to foresee any
circumstance in which the administrative cost and inconvenience of collecting gains of
up to £500,000 would outweigh the benefit.
The ultimate problem for HMRC in relation to ESC D33 is that a right of action is
recognised as an asset for the purposes of Capital Gains Tax. To this end, the concession
seeks to carve out an exception to the general rule and this might go someway to
explaining why HMRC are finding it so difficult to legislate ESC D33!176 At any rate, the
take home message is that ESC D33 is an example of HMRC issuing concessions to
provide relief contrary to Parliamentary intent.
3.3 Publication
173
On the interaction between judicial decisions and executive actions, see: R (Evans) v Attorney General [2015] UKSC 21.
David Southern QC equally holds that the concession in effect overrules Zim Properties. See: David Southern, ‘Changes to
the taxation of compensation (ESC D33)’ (March 2015), available at: <http://www.chba.org.uk/for-members/library/all-londonseminars/2015-seminars/changes-to-the-taxation-of-compensation-esc-d33> accessed 28 May 2015, 6.
175
HMRC, Legislating Extra Statutory Concession D33 (n 52), 13.
176
HMRC in July 2014 released a consultation paper in which it sought responses on a proposal to legislate ESC D33 (see:
HMRC, Legislating Extra Statutory Concession D33 (n 52)). The closing date for submissions was 15 September 2014. At the
time of writing, however, HMRC’s website merely reads that the feedback is still being analysed (see
<https://www.gov.uk/government/consultations/legislating-extra-statutory-concession-d33> accessed 28 May 2015)
174
21
Stephen Daly, University of Oxford
A strong argument can be made to the effect that all soft-law, and indeed ESCs, ought to
be published.177 Publication gives general assurance to citizens that there is no
discriminatory treatment between those who come within the same rule,178 thereby
increasing confidence in the system by demonstrating that there are ‘no favourites and
no sacrificial victims’.179 Publication also ensures greater visibility, thereby supporting
the role of oversight bodies, who can analyse the legality of the soft-law and also test
administrative action against the published policy, to ensure fairness of application.180
Publication provides a safeguard whereby the material is open to examination by
interested parties, consultation and critique.181 Third, where soft-law rules are
unpublished, their legal status ‘may be unclear’.182 The relevant decision-maker will be
unsure how much weight to attach to the soft-law at issue. In theory, this should not be
necessary, as HMRC is required to tax a person in accordance with a particular practice
even if the taxpayer is unaware of the practice.183 However, this theoretical basis only
holds in reality where a taxpayer approaches the Revenue and the Revenue then applies
the concessionary treatment. Apart from such an exceptional circumstance, the taxpayer
will fail to obtain the relief to which she or he is entitled.
Accordingly, as regards publishing concessions, the history of the Inland Revenue merits
criticism. Practitioners have written about many instances where HMRC has offered
class concessions which are not published. Michael Nolan in 1981 wrote about the profit
of a company being taxed as if it were the income of the shareholders unless it could be
proved that the profit were needed for ‘company purposes’.184 This practice which was
well known by the bar prior to 1966, was revealed in a letter from the Revenue in 1966
to a professional accountancy body, but was not explicitly published in a Press Release
until 1973.185 Similarly, the Inland Revenue went through a process of reviewing all
ESCs in the mid 1980s and published dozens of previously unpublished extra-statutory
class concessions.186 For this reason, the number of active Inland Revenue listed ESCs
grew from 122 in 1980187 to 169 by 1987.188
Similarly, the Wilkinson review has served to bring to light a number of concessions
which were previously unpublished.189 A consultation paper on draft legislation was
See also: A. Rowland, ‘Is the Revenue being Fair? Revenue Statements and Judicial Review’ (1995) BTR 115, 121; Gammie
(n 6), 320 who recommend this course of action.
178
KC Davis (n 20) 110; UK Uncut Legal Action v HMRC [2013] EWHC 1283 (Admin), [2013] SWTI 1849 [65]. See also, R (E)
v Nottinghamshire Healthcare NHS Trust [2010] EWCA Civ 795, [90].
179
Fleet Street Casuals (n 58) 651 (Lord Scarman). HMRC itself acknowledges the importance of confidence in the credibility of
tax policy making. See: HM Treasury and HMRC, The new approach to tax policy making: a response to the consultation
(December 2010), 19 (available at: <http://webarchive.nationalarchives.gov.uk/20130129110402/http:/www.hmtreasury.gov.uk/d/tax_policy_making_response.pdf.pdf> accessed 28 May 2015).
180
Craig (n 13), 469.
181
ibid, 471; Galligan notes that this is ‘one of the objects of the American Administrative Procedure Act’, see Galligan (n 100),
210.
182
Craig (n 13), 469. On this point, see R v IRC, ex parte J Rothschild Holdings plc [1986] STC 410; upheld [1987] STC 163; 61
TC 178 (CA), wherein the judge ordered discovery of internal HMRC manuals (which at that point were not published) because
the taxpayer’s argument relied upon having access to the manual. In brief, the taxpayer’s argument was that there was a Revenue
view, expressed in a manual, of the correct construction of a provision and that this construction would operate in his favour.
183
J Rothschild Holdings v IRC [1988] STC 645, 665g. For an explanation as to why reliance is not a necessary component of
Legitimate Expectations, see: R (Bibi) v Newham LBC [2002] 1 WLR 237 [55](Scheimann LJ). cf: R v IRC, ex p Kaye [1992]
STC 581; R v IRC, ex p Mead and Cook [1992] STC 482. See generally, Stanley Alexander De Smith, Harry Woolf and Jeffrey
Jowell, Judicial Review of Administrative Action (5th edn, Sweet and Maxwell, 1995), 23-024.
184
Nolan (n 61).
185
See also Malcolm Gammie who in turn cites several examples of unpublished concessions: Gammie (n 6); John Booth also
cites an instance of a statement of practice being later recharacterised as a statutory concessions: John Booth, Stand and Deliver!
(n 20), 180.
186
Inland Revenue, Tax Bulletin Issue 32 (n 64).
187
Board of Inland Revenue, Extra-statutory concessions in operation at 8 August 1980 (IR1 (1980)).
188
See: Board of Inland Revenue, Inland Revenue extra-statutory concessions as at June 1985 (IR1 (1985)) and Board of Inland
Revenue, Extra-Statutory Concessions Supplement (IR1 (Supp) (1987)).
189
See, for instance, HMRC, Withdrawal of extra statutory concessions – Technical Note (December 2009), 13, for an
unpublished concession which allowed VAT to be charged on school inspections supplied under contract to Ofsted.
177
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Stephen Daly, University of Oxford
produced in November 2008,190 which sought to place a number of concessions on a
statutory footing. Three of these concessions however were previously unpublished.191
For instance, the paper enlisted a concession allowing modest expenses for travel and
subsistence by self-employed persons.192 Although this departed from the strict position
otherwise outlined in HMRC’s manual,193 it can be traced back to a written answer in the
House of Commons in 1976. Robert Sheldon, then Financial Secretary to the Treasury,
wrote that a self-employed person ‘may be allowed a deduction for modest expenditure
on meals consumed in the course of a travelling occupation or an occasional business
journey outside the normal pattern’.194 As such, although the concession has existed
since 1976, it had nevertheless not been formally published and indeed departed from
HMRC’s published manual which still prescribes that expenses with an ‘intrinsic duality
of purpose’, such as food for sustenance, are not deductible.195 The other two
unpublished concessions listed in this document related to an extra statutory exemption
from duty of spirits-based flavourings 196 and a concession relieving goods supplied for
consumption during EU rail journeys departing from VAT, dating to the opening of the
Channel tunnel in 1994.197 In a document from April 2009, HMRC further sought
comments on its proposal to remove two other unpublished concessions.198 One related
to grants provided by the Highlands and Islands Enterprise (HIE).199 Some of these
grants were strictly taxable as revenue receipts, but by concession from HMRC, were
treated as capital receipts. The other related to the longstanding unpublished
concession entitled ‘Equitable Liability’.200 This concession concerned the acceptance of
time-barred returns in instances where there was never a legal right to adjust the
liability. This concession can be traced back to 1897 wherein the Revenue
acknowledged that it remitted tax debts on grounds of equity.201 Nevertheless, the
concession was not published until 1995.202
Even today, post-Wilkinson, there is evidence of unpublished concessions issued to
classes of taxpayers. For instance, a longstanding concession operates in relation to
awards given to pupil barristers, whereby the payment that is received in the first six
months of pupillage can be treated as tax-free.203 This might seem like curious treatment
to those outside the bar, as the effect appears to be that the pupil earns income like a
trainee in any other profession but diverges from such persons by not having to pay tax
on the first 6 months income. The position is partly supported by the Bar training rules,
which proscribes pupils from practising in their first six months,204 and the Court of
Appeal case of Edmonds v Lawson205 which held that the pupil relationship was the
subject of a legal contract, but that this contract was neither one of employment nor
HMRC, Extra-statutory Concessions – Technical Consultation on draft Legislation (n 111).
ibid, 5-6. Although there are five unlisted concessions in this document, two of these were previously to be found in HMRC
manuals.
192
ibid, 31.
193
HMRC, BIM37900 - Wholly and exclusively: expenditure having an intrinsic duality of purpose: contents, available at:
<http://www.hmrc.gov.uk/manuals/bimmanual/BIM37900.htm> accessed 28 May 2015.
194
HC Deb 6 December 1976, vol 922, cols 66-67W.
195
HMRC, BIM37900 (n 170).
196
HMRC, Extra-statutory Concessions – Technical Consultation on draft Legislation (n 111) 30.
197
HMRC, Extra-statutory Concessions – Technical Consultation on draft Legislation (n 111) 42.
198
HMRC, Withdrawal of Extra-statutory Concessions – Technical Note (April 2009),
199
ibid, 14.
200
ibid, 15.
201
Public Accounts Committee, Second report from the committee of public accounts (HC 1897-98, 261-VIII).
202
Inland Revenue, Tax Bulletin: Issue 18 (August 1995), available at:
<http://webarchive.nationalarchives.gov.uk/20050302035920/http://inlandrevenue.gov.uk/bulletins/tb18.htm> accessed 28 May
2015
203
The General Council of the Bar, Taxation and Retirement Benefits Guidance (n 141).
204
Bar Standards Board, Pupillage Handbook (September 2014), 24-25, 35, 40, available at:
<https://www.barstandardsboard.org.uk/media/1610725/pupillage_handbook_2014_new_code_full_doc.pdf> accessed 28 May
2015.
205
Edmonds v Lawson [2000] 2 WLR 1091.
190
191
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Stephen Daly, University of Oxford
apprenticeship. However, it is arguable that the pupillage award which covers the first 6
months of pupillage is nevertheless taxable under Part 5 of the Income Tax (Trading and
Other Income) Act 2005 (‘ITTOIA 2005’).206 Whilst the court in Edmonds v Lawson held
that the consideration received for the first 6 related to ‘agreeing to enter into the close,
important and potentially very productive relationship which pupillage involves’,207 this
would only preclude taxation under ITTIOA 2005, Part 2 (which charges profits from
trades, professions or vocations to tax).208 As the pupil is not yet engaged in a profession
as a barrister, this provision accordingly will not be engaged. However, this would not
preclude the application of Part 5, Chapters 7 and 8, which are much broader in scope,
encompassing income or annual payments ‘that are charged to income tax under or as a
result of any other provision of [that] Act or any other Act’.209
Whether this concession is based upon a correct view of the law accordingly is unclear.
What is undoubted is that this particular practice takes a benevolent view of the law and
thereby can be described as a concession. The fact, not only that it is not listed but also
that it is a concession published only in Bar Council guidance and not in HMRC guidance,
is particularly worrying as it evades oversight by other interested third parties.210
4. Summary proposal
If it is accepted that ESCs are desirable in principle, it must also be acknowledged, as
done in the preceding text, that their existence in practice is riddled with problems. If
reform is to be prescribed then, it must strike a balance between reducing the
magnitude of these flaws on the one hand, with protecting the benevolent principle of
ESCs on the other. The author proposes that the introduction of the Australian system
for public rulings may serve to strike such a balance.
4.1 Lack of oversight
To trace why the issues of favouritism, vires and lack of publication arise, one need look
no further than the machinery for the promulgation of ESCs, and in particular, the
supervision of them. The current supervisory mechanisms can be traced back to a
Treasury Minute from 1897. The Bank of England held part of the estate of Alexander III
of Russia and this concession attempted to exempt this segment from death duty.211 The
Treasury, perturbed by such gratuitous relaxations of the law by the Revenue, put in
place a process for the oversight of individual and class concessions. Individual
concessions above £50 would be furnished yearly to the Comptroller and Auditor
general (‘C&AG’), together with the reasons for the dispensations.212 The C&AG would
thereafter use their ‘discretion with care and tact’ and report to the Committee of Public
Accounts (‘PAC’) any case in which s/he considered that the particular concession ought
to be brought to their knowledge.213 Class concessions, meanwhile, should be put on a
statutory footing at the earliest opportunity.214 Although the Treasury was clearly
206
This is argued forcefully in Keith Gordon, Guide to the Tax Treatment of Specialist Occupations (4th edn. Bloomsbury 2012),
3.14-3.25.
207
Edmonds v Lawson (n 188), 1101.
208
Gordon (n 189), 3.18.
209
ibid.
210
See further below, 23-24.
211
David Tallon, Ian Young, Paul Elliott, Dinesh Dave, Inland Revenue Practices and Concessions: 1984/85 Bound Volume
(Oyez Longman Publishing, 1984), 11
212
1898 HC 261, VIII, 147, 31 December 1897.
213
ibid
214
ibid
24
Stephen Daly, University of Oxford
concerned with the use of concessions, it is notable that they did not suggest that the
Revenue should cease to issue them.215
However, the PAC and C&AG are, in terms of oversight, compromised in respect of both
their legal understanding and ability to properly scrutinize the power. Subsequent PACs
and C&AGs have been committed to the party line that class concessions ought to be
regularised by statute at the earliest practicable opportunity. In this regard however,
both bodies have demonstrated their own limitations vis-à-vis legal analysis. They have
concerned themselves historically with questioning why the Revenue has not put
concessions on a statutory basis, rather than analysing whether the concessions came
properly within the discretion of HMRC. For instance, the C&AG in the report for the
year ending 31st March 1953216 noted that
As the remissions still without statutory cover had become rather numerous I asked for
information as to the principal concessions which continued in force, and the intentions
of the Department with regard to seeking such cover.
In the report for the year ended 31st March 1968, the C&AG noted as follows:
The Committee of Public Accounts of Session 1966-67 endorsed the view expressed in
Treasury Minute of 31 December 1897 that statutory cover should be sought for
remissions applicable to classes at the earliest opportunity.217
Similarly, in the report for the year ended 31st March 1981, the C&AG noted that:
Over the years successive Committees of Public Accounts have endorsed the view, first
expressed by the Treasury in 1897, that wherever possible extra-statutory class
concessions should be placed on a statutory footing at the earliest opportunity.218
In 1991, the PAC intimated again its unease with Published ESCs:
We learnt that three concessions which were suitable for legislation were over 50 years
old and that one concession which had been classified as temporary was also 50 years
old219
Freedman elsewhere has noted that the shortcomings of the office of the C&AG were
highlighted in particular by the introduction of Sir Andrew Park to conduct a report into
215
It has also previously been claimed that since 1979, Ministerial authority has been sought for all new concessions. Gammie,
‘Revenue Practice’ (n 13), 310; Inland Revenue, Tax Bulletin Issue 32 (n 64). See also: 1981-82 HC 339, para 31: ‘Inland
Revenue consult Treasury Ministers on all proposed additions to their lists of extra-statutory class concessions’. As recently as
1997, it was also authoritatively stated that Extra-statutory class concessions are subject to ministerial approval: C&AG, General
report of the comptroller and auditor general (1997/98 HC 251-XIX Financial auditing and reporting: 1996-97), 31. However,
there are no recent records of such oversight. As this is the case, I will proceed on the assumption that in reality there is little, if
any, oversight exercised at the ministerial level,
216
pages iv-v 1953-54 (12) Revenue departments appropriation accounts 1952-53. Appropriation accounts of the sums granted
by Parliament for revenue departments for the year ended 31st March 1953; together with the report of the comptroller and
auditor general thereon and upon revenue and certain store accounts. (In continuation of House of Commons paper no. 14 of
1952-53)
217
Page x, 1968-69 (53) Civil appropriation accounts (classes I-V) 1967-68. Appropriation accounts of the sums granted by
Parliament for civil services, classes I-V, for the year ended 31st March 1968; together with the report of the comptroller and
auditor general thereon, and upon certain revenue and store accounts. (In continuation of House of Commons paper no. 51 of
1967-68
218
Page xi, 981/82 HC 76-IX Appropriation accounts (volume 9: classes XIII-XIV) 1980-81. Appropriation accounts on the
sums granted by Parliament for classes XIII-XIV for the year ended 31st March 1981; together with the report of the Comptroller
and Auditor General thereon, and upon certain revenue and store accounts. (In continuation of House of Commons Paper no. 98
of 1980-81.)
219
Page x, 1990/91 HC 71 Committee of Public Accounts. Second report. Inland Revenue Department
25
Stephen Daly, University of Oxford
Settling Large Tax Disputes.220 This further exemplifies the fact that the expertise of the
department is limited to the extent that it deals with facts and figures but not broader
issues such as the proper application of the law and the parameters of HMRC discretion
to issue concessions. As such, both bodies are limited to the extent of their expertise in
analysing the intricacies of tax law. Furthermore, the practice of the C&AG and NAO
submitting ESCs to scrutiny appears to have completely lapsed, with no mention of the
issue by either body since 1998.221
This lack of robust scrutiny of the power to issue ESCs inevitably led to the myriad of
issues outlined above. A proper functioning and robust supervision mechanism may not
be the perfect panacea, but it would ensure to a greater extent than currently occurs
that HMRC does not creep beyond the boundaries of its discretion to promulgate ESCs. A
prudent reform in this area thus would be to have another body supervise the granting
of concessions.
4.2 Public Rulings in Australia
The Australian Tax Office (ATO) has developed a comprehensive framework in relation
to rulings. There are 3 types of rulings: private (PBRs), oral and public. All of these are
binding on the ATO. PBRs are provided free of charge to either practitioners or ordinary
persons and set out the ATO’s interpretation of how a tax law applies in relation to a
specific scheme or circumstance.222 These are not binding in relation to other taxpayers
and are formally published in edited form so as to protect the privacy of the applicant.223
Oral rulings are given over the phone to taxpayers who are individuals and generally
relate to simple tax matters.224
Public rulings are binding advice issued generally and express the ATO’s interpretation
of the laws they administer.225 They are grouped in different series as follows: Taxation
Rulings series (TR series); Taxation Determination series (TD series); Class Rulings
series (CR series); Product Rulings series (PR series); Product Grants and Benefits
Rulings series (PGBR series); Excise Rulings series (ER series); Fuel Tax Rulings series
(FTR series); Fuel Tax Determination series (FTD series); Goods and Services Tax
Rulings series (GSTR series); Goods and Services Tax Determination series (GSTD
series); Miscellaneous Tax Rulings (MT series) that are labelled as 'legally
binding'; Wine Equalisation Tax Rulings series (WETR series); Wine Equalisation Tax
Determination series (WETD series); and Luxury Car Tax Determination series (LCTD
series).226 Topics on which the ATO is preparing public rulings are listed on the 'Public
Rulings Program,' which is also accessible to taxpayers on the ATO website.227
Judith Freedman, ‘The rule of law and revenue discretion’ at Do our tax systems meet rule of law requirements? (Bingham
Centre, 20 November 2013)
221
1997/98 HC 251-XIX Financial auditing and reporting: 1996-97. General report of the comptroller and auditor general. At
page 31.
222
<https://www.ato.gov.au/General/ATO-advice-and-guidance/ATO-advice-products-(rulings)/Private-rulings/> accessed 28
May 2015.
223
<https://www.ato.gov.au/General/ATO-advice-and-guidance/ATO-advice-products-(rulings)/Private-rulings/Register-ofPrivate-Binding-Rulings/> accessed 28 May 2015.
224
<https://www.ato.gov.au/General/ATO-advice-and-guidance/ATO-advice-products-(rulings)/Oral-rulings/> accessed 28 May
2015.
225
<https://www.ato.gov.au/General/ATO-advice-and-guidance/ATO-advice-products-(rulings)/Public-rulings/> accessed 28
May 2015.
226
<http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR200610/NAT/ATO/00001&PiT=99991231235958> accessed 28
May 2015.
220
227
<http://law.ato.gov.au/atolaw/Browse.htm?ImA=folder&Node=5~0&OpenNodes=,5~2,5&DBTOC=03%3AATO%20Rulings%
26
Stephen Daly, University of Oxford
4.2.1 Consultative framework
Public rulings go through a comprehensive development process before being released
in final form. This includes significant public consultation, including publication of
drafts, and importantly for our purposes consultation with an independent, expert body.
The standard process is as follows:228
Stage 1 – An issue is identified that may need to be resolved by a public ruling
The ATO considers whether to issue a public ruling in response to an identified risk. The
process involves consultation with taxpayers and professional groups to ensure that the
selected issues are indeed of concern to taxpayers.
Stage 2 – The topic is added to the public rulings program
If the ATO decides on the basis of the consultation to proceed with the ruling, the topic is
added to the Public Rulings Program.
Stage 3 – A draft public ruling is prepared
In most cases a draft public ruling is prepared and, if done, taxpayers and professional
groups are invited for consultation again.
Stage 4 – The draft public ruling is internally approved
The draft public ruling goes through a comprehensive technical quality review, which
includes the public rulings panel, the Deputy Chief Tax Counsel or Chief Tax Counsel.
This is an important step in the process, as will be further detailed below.
Stage 5 – The draft public ruling is released for comment
The draft public ruling is published on ato.gov.au, with notification also posted on the
government’s website.229 The draft ruling includes contact details of an ATO officer who
will receive feedback and discuss details. The standard feedback period is six weeks for
draft public rulings.
Stage 6 – The final public ruling is prepared
There is a further consideration of comments on the draft public ruling and
amendments are accordingly made where appropriate. Again, taxpayers and
professional groups are consulted throughout the preparation of the final public ruling.
Stage 7 – The final public ruling is internally approved
The process for approving the final public ruling is identical to that for the draft public
ruling. In other words, the final ruling goes through technical scrutiny from a panel of
20and%20Determinations%20(Including%20GST%20Bulletins)%3ARulings%20Program&anchor=5~0#5~0> accessed 28 May
2015.
228
<https://www.ato.gov.au/general/ato-advice-and-guidance/ato-advice-products-(rulings)/public-rulings/public-rulingsprocess/> accessed 28 May 2015.
229
www.consultation.business.gov.au
27
Stephen Daly, University of Oxford
independent experts. A compendium of comments on the draft ruling is prepared,
containing a summary of comments received and the ATO response or action taken.
Stage 8 – The final public ruling is published
The final public ruling and the compendium of comments are published on the ATO’s
website. Details of the final public ruling are also published in the Commonwealth
Gazette and tabled in Parliament. ATO officers are available to discuss details.
Stage 9 – Post-publication matters
A compendium of comments is sent to all who submitted comments within 7 days of the
final public ruling being issued. Further comments can be submitted through a feedback
mechanism on the ATO Legal Database. The ATO also conduct formal postimplementation reviews for significant public rulings to assess their effectiveness.
Public rulings are also reviewed regularly and updated as necessary to maintain the
currency, accuracy and consistency of the precedential ATO view.
4.2.2 Supervision
Supervision during the process is exercised at a number of levels-by taxpayers,
representative bodies and Parliament. Importantly, oversight of public rulings is
exercised by an independent expert body in the form either of the ‘Public Rulings Panel’
or the ‘Superannuation Ruling Panel’ at both stages 4 and 7. Membership of the rulings
panels is made up of senior ATO officers; respected tax specialists; academics and a
representative from the states and territories when goods and services tax (GST) rulings
are discussed. A Deputy Chief Tax Counsel or Special Tax Adviser chairs the rulings
panels, with up to three members from outside the ATO on a topic-by-topic basis.230 The
panels provide advice on the technical and practical merits of the proposed ruling. They
may also make suggestions to ensure that the legal, practical and commercial
implications of a ruling are taken into account.
As well as giving advice about interpretative matters and technical accuracy, the rulings
panels advise the ATO on a range of related issues associated with the preparation of
public rulings, including:





whether a ruling is the best way to clarify the law, or whether an alternative
should be used (such as legislative amendment or litigation);
whether the structure and wording of the proposed ruling can be improved to
make it easier to understand;
whether there are realistic examples we can include to make the ruling more
useful;
the most appropriate date of effect for the proposed ruling;
whether there are other related topics that may also be appropriate for rulings.
The panels may support, challenge or disagree with aspects of our proposed position
and make recommendations on the interpretation to be taken. They do not, however,
decide on the ATO position. The author and approving officer of a particular public
ruling will decide on the approach to be taken.
230
<https://www.ato.gov.au/General/ATO-advice-and-guidance/ATO-advice-products-(rulings)/Public-rulings/Public-rulingspanels/> accessed 28 May 2015.
28
Stephen Daly, University of Oxford
Thereafter, the relevance and performance of the public rulings program is monitored
by the National Tax Liaison Group, which consists of representatives of the major tax,
law and accounting professional associations and senior members of the ATO. Topics on
the program arise from or reflect suggestions made either internally through ATO issue
escalation processes, or from external sources such as tax professional and industry
representative bodies.231
4.3 Recommendation
It is clear that the current system for the promulgation of ESCs is in need of reform if the
institution itself is to be protected. With proper scrutiny of ESCs heretofore lacking, it is
little wonder that issues of favouritism, vires and lack of publication have emerged. The
introduction of an Australian type framework for the production of ESCs, it is suggested,
would serve to alleviate the ailment. This system works at several levels as noted above,
with Parliament, taxpayers and representative bodies having input into the process.
Importantly, an independent, external body, comprising experts from a diverse range of
occupations, supervises public rulings at both the initiation stage and going forward. It
is suggested that the establishment of a similar process and body in the UK would be a
prudent means of striking the balance between maintaining ESCs against the need to
ensure that they avoid the practical problems which arise. By way of composition, the
new body could mirror the Australian panels with members taken from UK academia, of
which there are many skilled tax lawyers, from the representative bodies, such as CIOT
and ICAEW, and members of HMRC. The Tax Assurance Commissioner (‘TAC’) could be a
member of the board. The role of the TAC is to ensure that Parliament and the public can
have confidence in HMRC's work and be satisfied that that the treatment of taxpayers is
even-handed and subject to appropriate governance.232 This role converges with the
need for proper supervision of ESCs, as public and parliamentary confidence are
undermined where there are visible favourites or sacrificial lambs owing to the whim of
the Revenue’s judgement. More specifically, one of the key roles of the office is to
oversee and provide assurance of large tax settlements.233 Although settlements are
distinct from concessions, in that the former deal solely with litigation disputes, the
Commissioner is nevertheless acutely placed to oversee concession by virtue of having
particular expertise in dealing with the interstices of tax legislation. Further, the TAC
operates a reviewing jurisdiction, which is precisely what is required in the case of
concessions.
It is not suggested that the recommended structure would be the perfect remedy, but it
would surely produce a system which is better than the status quo!
5. Conclusion
The relationship between ESCs and the primary law is much like the relationship
between the Queen and the House of Commons when it comes to the State Opening of
Parliament. Although apparently not permitted to enter, the monarch nevertheless
fulfills an important constitutional role. Similarly, whilst ESCs may at first glance appear
to be in conflict with the primary law, the two nevertheless can create a working
relationship. In this respect, the foregoing has sought to explore and defend ESCs in
greater detail than previous studies. The constitutionality of ESCs in principle has been
thoroughly demonstrated and that arguments of constitutional impropriety, in no small
231
<http://law.ato.gov.au/atolaw/view.htm?Docid=PSR/PS20083/NAT/ATO/00001> accessed 28 May 2015.
<http://www.hmrc.gov.uk/adr/edward-troup-message.htm> accessed 28 May 2015.
233
<https://www.gov.uk/government/people/edward-troup> accessed 28 May 2015.
232
29
Stephen Daly, University of Oxford
part due to conflating the power to issue ESCs and a broader power to dispense with the
law sometimes claimed by HMRC, have likewise been neutralized. Concessions provide
necessary, important and ‘useful lubrication to the wheels of fiscal machinery’.234 To this
end, the current blockage ought to be removed and HMRC should proceed to issue
concessions in the published lists as done pre-Wilkinson.235
Nevertheless, serious issues emerge in relation to the power to issue ESCs and
accordingly in relation to this proposal. HMRC are wont to favour particular classes of
persons. Relatedly, given the proximity to the line of constitutionality, it is little
surprising that HMRC has been found on occasion to go beyond the boundaries of the
power to issue ESCs. Likewise publication has been demonstrated to be a continuing
issue, notwithstanding its paramount importance.
Whilst concessions are defensible in principle then, the substance of concessions can at
times be worthy of criticism. The obvious question to follow must be how can it be
ensured that concessions are used for their proper purpose? The author proposes that
the adoption of an Australian rulings system would reduce the magnitude of these flaws,
whilst protecting the benevolent principle of ESCs.
234
235
Whiting (n 18) 533.
Also recommended in Whiting (n 18), 535.
30