Memorandum submitted by the Low Incomes Tax Reform Group (LITRG) (TRI 10)
Tribunals, Courts and Enforcement Bill
Comments of the Low Incomes Tax Reform Group
The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented in the tax system. We welcome the opportunity to comment on the Tribunals, Courts and Enforcement Bill at the start of its passage through the House of Commons. Our comments relate to Part 1 only, and are made from the perspective of the low-income, unrepresented appellant before the tax appeal tribunals.
We responded to the Leggatt report in 2001 and more recently, in September 2004, to the DCA White Paper Transforming public services: complaints, redress & tribunals. Latterly we have been represented on the Tax Appeals Stakeholder Group, and have submitted written representations on issues such as costs and expenses in first-tier tax tribunals and the use and value of oral hearings in the administrative justice system. In September 2006 we published a report Tax appeals - a low income perspective in which we considered the proposed reform of the tribunals system from the point of view of the unrepresented appellant and made recommendations designed to remove the barriers they faced.
We have the following comments on the Bill.
While we welcome and support many aspects of the Bill, we note that much of it merely provides a framework (albeit sometimes elaborate) for the making of rules or orders. No doubt many matters of detail are best dealt with in that way, but it is desirable when reviewing the Bill to have a clear idea of what is likely to be in the rules and orders made under it. Many of the points we raise will probably become clearer when those rules and orders are available, but meanwhile it would have been helpful to have had the delegated legislation available at least in draft so that the enabling provisions in the Bill could have been considered in the light of it.
Composition of the First-tier Tribunal (cl 4 and Sch 2)
LITRG has consistently argued that the features of the General Commissioners of Income Tax which currently make them a suitable appellate body for unrepresented taxpayers should be retained in any reformed tribunal. Their local base makes them geographically accessible to appellants who might have difficulty in travelling to a more distant location, in terms of both travel costs and time involved; while their broad composition of mostly local people without necessarily a legal, accountancy or tax qualification gives them a 'common sense' perspective.
We note that provision is made both for judges, who it seems may be drawn from holders of a wide range of professional qualifications, and tribunal members to serve on the First-tier Tribunal. While we regard it as desirable that at least one person with a suitable qualification should serve on each panel (whether as judge or as tribunal member), that should not be allowed to dilute or to put at risk the informality and approachability of the General Commissioners.
Judicial review and the lower tier tribunals (cl 15-21)
There is an ever growing tendency for primary and secondary legislation to give Government department officials discretion to determine matters which are of crucial importance to people's lives. In such cases, it is essential that the officials exercising the discretion do so according to clear guidelines which ensure that they give proper weight to all relevant factors in making their decision, and set aside irrelevant considerations. It is also necessary that they exercise their judgment fairly and rationally.
In order to test whether an official has observed these requirements, there should always be an independent avenue of appeal. A right of review within the department making the decision, or by an Adjudicator within the department, may not be sufficient to comply with the principle of natural justice that nobody may be judge and jury in their own cause. To provide an independent appeal route against the exercise of official discretion, where no statutory appeal route exists, is of course a function of judicial review.
But unless the administrative decision complained of affects an individual of considerable wealth, or one who can count on the financial support of an organisation such as a charity or trade union, the remedy of judicial review is likely to be out of reach of the vast majority of people on whose lives such decisions impact.
Take, for instance, the recovery of tax credit overpayments under HM Revenue and Customs (HMRC) Code of Practice (COP) 26. The tax credits system is predicated on paying first, calculating entitlement later. In the ensuing adjustment of the award, overpayments will inevitably accrue through no fault of the claimant, but HMRC will nevertheless seek recovery. Sometimes overpayments are due to official error, and in such cases HMRC may write off the overpayment, if and only if the claimant could 'reasonably have thought their award was right'.
There is no right of appeal against HMRC's decision on that point. Accordingly, the sole arbiter of that 'reasonableness test' is HMRC itself, one of the parties to any potential dispute. This is not the place to go into the quality of HMRC's decision-making. Suffice it to say that the very principle of the sole arbiter of any dispute being itself an interested party is held by most to be contrary to natural justice; yet because those affected are usually on low, or very low, incomes, judicial review is out of the question.
For judicial review to be fully effective, it is necessary for it not only to be robust, but also widely accessible.
For this reason we welcome the proposal for the judicial review jurisdiction to be exercisable by the upper tier of the new tribunals. However we would go further by similarly enabling the lower tier, at least to the extent necessary for the lower tier to adjudicate in disputes over the exercise of administrative discretion. The numbers affected by such decisions make it essential that people who do not necessarily have the means to pursue an expensive appeal nevertheless have an effective means to challenge administrative decisions, and this end is better served by allowing some kind of judicial review jurisdiction to be exercised at the most accessible level.
Mediation (cl 24)
We very much welcome the provision made here for mediation with the consent of the parties, subject to the failure of mediation not affecting the outcome of proceedings (sub-cl (1)(b)).
In our report Tax appeals: a low income perspective we recommended that the Tribunals Service should provide a good case management service from the moment when the appeal is lodged right through to the hearing (para 3.4.3(1)). We said that the process should be subject to the overall supervision of a tribunal member, to the extent that the papers in each case would cross the desk of a panel member at least once (para 3.4.3(1)). In addition, consideration should be given to incorporating in the early preparatory stages of an appeal an opportunity for an unrepresented appellant to receive independent professional advice on the merits of their appeal. All this could usefully be provided for as part of the mediation stage.
Such a procedure should also serve as a check upon any possible abuse by HMRC of the procedure provided for under TMA 1970, section 54, under which HMRC and taxpayer may settle an appeal between them. The dangers here are that HMRC sometimes use the prospect of an appeal before the General Commissioners as a threat to persuade a taxpayer to agree to settlement terms which may not be to the taxpayer's advantage. Alternatively HMRC sometimes delay unreasonably over the settlement process, thereby effectively barring the right of appeal to unrepresented appellants. This is particularly so with tax credit appeals. Again, if the taxpayer or claimant can ask the tribunal to intervene, whether by way of mediation or to list the matter for hearing, that will provide a means for the appellant to counteract any delay on the part of HMRC.
Enforcement (cl 27)
This provides for a sum payable in pursuance of a decision of the First-tier Tribunal or Upper Tribunal to be recoverable as if it were payable under an order of a county court or the High Court, or the equivalent courts in Scotland and Northern Ireland.
Our concern here is that the same sum may become recoverable both under this provision, and under some other set of rules such as Part VI of the Taxes Management Act 1970. That would mean that a taxpayer could be proceeded against under either, or both, sets of provisions. We would propose, at the very least, an amendment to sub-cl (4), or a further sub-clause, excluding sums recoverable under TMA 1970, Pt VI from the scope of section 27, or that Tribunal Procedure Rules should ensure that only one or other provision should apply (sub-cl (6)(b)).
Costs or expenses and fees (cl 29 and 42)
We note that provision is made for the First-tier Tribunal or Upper Tribunal to have discretion over costs. Similarly, the Lord Chancellor has control over fees chargeable in either Tribunal.
We trust that it will be possible for costs and expenses regimes to vary depending on the chamber in which the proceedings in question take place. Within the Tax Appeals Stakeholder Group a model of costs has been devised which is regarded as appropriate to the tax chamber. LITRG supports this model as it offers good protection to the unrepresented appellant against an adverse costs order in the First-tier Tribunal and, to some extent, on appeal by the other party from a first instance decision in favour of the appellant. We note cl 7(9) of the Bill and trust that that provision, or some other part of the Bill, will allow for some autonomy within chambers regarding costs.
We argued in our report Tax appeals: a low income perspective (para 3.7.4) that appellants on low incomes should be offered assistance with travel and other out-of-pocket expenses, as happens with benefits appeals. We trust that Tribunal Rules will be able to take account of that.
We note also that cl 42(2) allows for fees to be scales or rates of fees, and for exemptions from, reductions of and remission of fees in whole or in part. We would argue strongly that such scales, reductions, remissions etc should have particular regard to the means of the appellant, in particular fees charged for mediation, which would probably be the facility most used by appellants on low incomes.