Memorandum submitted by the Institute of Chartered Accountants in England and Wales (ICAEW) (TRI 11)



Tribunals, courts and enforcEment bill




1. In this document we present the comments of the Tax Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW) on the Tribunals, Courts and Enforcement Bill. We are commenting on the House of Lords version of the Bill (Bill 65) at the start of its passage through the House of Commons.


2. We are submitting our comments to the Scrutiny Unit of the House of Commons and to the Department for Constitutional Affairs (DCA).


3. Appendix 1 gives some general information about the ICAEW and the Tax Faculty.


4. Our interest in the Tribunals, Courts and Enforcement Bill (TCE Bill) is specifically in the context of the tax tribunals and matters dealt with by HM Revenue and Customs (HMRC). Our comments are confined to those areas.


5. The Tax Faculty has previously submitted comments on the White Paper Transforming Public Services: Complaints, Redress and Tribunals (published as TAXREP 47/04), on the Leggatt Report, Tribunals for users (published as TAXREP 35/01) and on the DCA paper Reform of the Section 703 Tribunal Appeal Routes (published as TAXREP 24/05). We are represented on the Tax Appeals Stakeholder Group set up by the DCA and have participated actively in that Group's discussions on how tax and tax credit appeals should be dealt with under the new tribunals structure.




6. Our detailed comments are given below but some key points are as follows:


The TCE Bill provides a framework for the new tribunals system with the detailed procedures to be determined by orders and procedural rules. While we are aware of the reasons for this, it is difficult to comment on the implications of the provisions in the Bill without seeing the detailed rules, and we have a concern that Parliament should be in the same position and asked to pass the Bill without knowing precisely what effect it may have on citizens' rights.


We strongly believe that the best features of the current tax tribunals, especially the General Commissioners, should be preserved in the new structure. Thus we are pleased to note that non-lawyers can be members of the First-tier Tribunal and feel strongly that this should include suitably qualified accountants, tax advisers and other specialists. We should also welcome clarification as to whether a person with a non-legal qualification could have 'gained experience in the law' sufficient to be a First-tier Tribunal judge.


We do not see the need for the restriction in Clauses 9(3) and 10(3) on the tribunal's power to review its own decisions, especially as these restrictions are to be made by tribunal procedure rules.


We welcome the judicial review power of the Upper Tribunal but strongly recommend that the First-tier should also be able to carry out a judicial review function.


It is important that different chambers should be able to set different rules, and that the Tribunal Procedure Committee should be required to consult the chamber president on rules pertaining to that chamber.


It is important that the Tax Chamber preserves the rights of audience available before the current tax tribunals.


We are concerned that Clause 27 (enforcement) could result in taxpayers being proceeded against under both these provisions and the existing enforcement rules already in the taxes acts.


It is crucial that the costs and fees for taking an appeal to a tribunal should not deter potential appellants. We would welcome confirmation that each Chamber can make its own rules on costs (not clear from Clause 29(1)) and that the Tax Chamber's rules will be on the lines already developed by the Tax Appeals Stakeholder Group.






7. The Tax Faculty welcomes many aspects of the reform of the tax tribunals which the TCE Bill is designed to achieve.


8. The Bill itself merely provides a framework which is very widely drawn, and leaves many crucial features of the new tax tribunals to be determined not by primary legislation but by orders or procedural rules. We appreciate that it has been a deliberate decision to leave matters of detail out of the primary legislation and that many of the rules have yet to be developed. However, it is hard to comment sensibly on the implications of the provisions in the Bill without having seen the detailed delegated legislation. It would have been helpful to have had this available at least in draft when reviewing the Bill.


9. We also think it regrettable that Parliament should be asked to pass the Bill 'blind' to what the detailed proposals actually are, and therefore in ignorance of the effect the Bill may have on citizens' rights. The tribunal rules will affect the fundamental rights of a large part of the populace, but will not be subject to Parliamentary scrutiny as primary legislation would be. We should welcome reassurance from the DCA as to how the detailed rules developed for each Chamber will receive proper independent scrutiny.


10. Because the detailed rules are so crucial to how the tax tribunals will function under the new structure, our comments below highlight some key issues which the rules will need to address.


11. Some important features of the new tax tribunals which will be determined not by primary legislation but by procedural rules include: the composition of tribunal panels; case allocation; case management procedures; the treatment of costs; and rights of audience.


First-tier Tribunal (Clause 4 and Sch 2)


12. As noted, we support the reform of the tax tribunals but with the caveat that we would wish to see the best features of the current tax tribunals system retained in the new one.


13. In particular, the accessibility and informality of the present General Commissioners of Income Tax, and the practical experience and expertise of its non-legal members, are features which we strongly believe must be preserved in the First-tier of the new structure. The strength of the General Commissioners is that it provides an informal way for a taxpayer to air his grievances at little or no cost before an independent tribunal in a relatively informal atmosphere.


14. In particular, we would like to make the point that the best person to hear a tax appeal may not necessarily be a lawyer. Currently many non-lawyers, and in particular qualified accountants, sit as General Commissioners. A member of the ICAEW or the Chartered Institute of Taxation who specialises in tax may often be a more appropriate person to hear an appeal to which accounting treatment is crucial than a lawyer. Accordingly, we strongly believe that suitably qualified accountants and tax specialists should be able to sit as members or indeed judges in the First-tier tax tribunals.


15. It appears that the TCE Bill does permit non-lawyers to be members of the First-tier. Clause 4(3) and para 2(2), Sch 2 allow the Lord Chancellor to prescribe what qualifications make a person suitable to be a member of the First-tier. In this connection we also note that General Commissioners could become judges or other members of the First-tier Tribunal under Clause 31(2), but that according to the Explanatory Notes, it is not the intention to use this power for existing General Commissioners. We recommend that this legislation should be used to permit those with suitable accountancy, tax or other relevant qualifications to become tribunal members, and in addition to transfer in certain existing General Commissioners who are 'qualified by experience'.


16. It is unclear whether a person with a non-legal qualification could be eligible to be a judge of the First-tier under Clause 4(1) and para 1(1), Sch 2. It depends on whether such a person could be deemed to have 'gained experience in law' for the purposes of Clause 52(2)-(5). A non-legal tax specialist, depending on the nature of their experience and expertise, could well be viewed as qualifying under Sub-clauses 52(4)(d), (e), (f) or (i). We should welcome clarification on this point.


Chambers (Clause 7)


17. We assume, although it has not been officially confirmed, that one of the Chambers of the new tribunals system will be a Tax Chamber. We would support this.


18. We are concerned to know which chamber will deal with tax credits appeals, which are at present handled within the Social Security appeals system. Understanding the tax credits system often requires knowledge of both the tax and social security system, along with specialist knowledge of (for example) disability issues. It is important that such appeals are handled by appropriate panels.


Review of its own decisions by a tribunal (Clauses 9 and 10)


19. We welcome the provision of a discretionary power for a tribunal to review its own decisions. However, we are concerned that Clauses 9(3) and 10(3) enable these wide review powers to be restricted by making them subject to tribunal procedure rules. We note that these clauses were not in the draft TCE Bill published in July 2006 and would welcome clarification as to why they are thought necessary. We cannot see the need for such restrictions. In our view it would be much better for the tribunal to have complete flexibility to review its own decisions. We are particularly concerned about this because as yet we have no idea what rules the Tax Chamber might make under Clauses 9(3) and 10(3).


Judicial review (Clauses 15-21)


20. We are pleased to note that judicial review powers will be conferred on the Upper Tribunal by Clauses 15 et seq.


21. However, we strongly recommend that the First-tier Tribunal should also be able to carry out a judicial review function. Indeed, we had understood that the DCA and HMRC were together considering this possibility, but we note that the TCE Bill confers no such power.


22. Our reasons for this recommendation are:


Firstly, we believe the tax tribunals should have a general power to review situations where under primary or secondary legislation government officials are given power to exercise discretion in making decisions. Judicial review is the only legal route for redress where there is no specific right of appeal against an administrative decision. However, the judicial review power of the Upper Tribunal is to be exercisable only in specified classes of case, to be designated by the Lord Chief Justice with the concurrence of the Lord Chancellor.


Secondly, a major drawback of judicial review at present is that it is effectively unavailable to most potential applicants - they do not know about it, cannot understand it, cannot afford it, or find the prospect of going to the High Court too daunting. In exercising its judicial review power the Upper Tribunal will effectively be equivalent to the High Court and, although we do not yet know what the costs for the applicant might be, it is likely that the same difficulties as at present could bar access to justice for most people.


23. An example of a situation where judicial review at the First-tier tribunal would be of benefit is the recovery of tax credit overpayments. In case of official error HMRC can decide to recover the overpayment if the claimant could reasonably have known that HMRC had made an error. HMRC take the decision on what is 'reasonable' and should follow the guidance in their own Code of Practice 26. There is no right of appeal and HMRC are effectively acting as judge and jury. If the claimant considers that HMRC have not followed their Code of Practice, the only legal remedy is a judicial review application to the High Court. For most tax credit claimants, this is not feasible - but a similar remedy in a First-tier tribunal could well be accessible.


24. Another example, where HMRC similarly decide whether a taxpayer could reasonably have believed that his tax affairs were in order, is in the application of Extra-statutory Concession A19.


25. Recently, some of the draft clauses that the Government has authorised HMRC to issue in relation to new tax penalties and the New Taxes Management Act appear to allow HMRC to impose tax merely because they 'think' that some tax may be due. It has been suggested that these wide provisions can be justified on the grounds that the TCE Bill no longer reserves judicial review to the High Court. As the Upper Tribunal is effectively equivalent to the High Court it is disingenuous for the Government to take wide powers on the basis that judicial review is no longer limited to the High Court and then introduce a Tribunals Bill which limits it to tribunals of an equivalent standing to the High Court.


Tribunal procedure rules (Clause 22 and Sch 5)


26. As noted, the TCE Bill creates a broad framework with scope for appropriate procedural rules to be set up under the aegis of the Tribunal Procedure Committee. We agree with the required features of tribunal procedure rules set out in Clause 22(4).


27. It is our understanding that different chambers can and will adopt different rules. This is not brought out clearly in the main part of the Bill but we assume it is provided for by para 19, Sch 5, which enables different provisions to be made for different purposes or different areas. We would like to emphasise that it would not be appropriate to have the same rules applying to very different types of tribunal, and the Tax Chamber will need its own set of rules.


28. There are safeguards against the making of rules which are inappropriate for a particular Chamber under Part 3, Sch 5, whereby the Tribunal Procedure Committee can consult chamber presidents before making the rules, and the rules can be disallowed by the Lord Chancellor. However, we note that the Committee need only consult 'such persons (including ... Chamber Presidents) as it considers appropriate' (para 28(1)(a)). We recommend that it should be a requirement to consult the Chamber President on rules pertaining to that Chamber.


29. With regard to Clause 22(4)(b), we agree it is important that proceedings are handled quickly and efficiently once the taxpayer is ready to take his case before the tribunal. However, currently in direct tax matters very few cases go before the Commissioners because both HMRC and taxpayers strive to resolve their differences without recourse to the tribunal. We would not welcome a quick and efficient procedure if speed involves a curtailment of this ability to resolve matters without recourse to the tribunal at all. Conversely, in some cases appellants who want to go to the tribunal find that HMRC can be obstructive and dilatory in dealing with the settlement stage. In all such cases the tribunal needs to exercise a supervisory role so that the appellant can go directly to it at any point while 'discussions' with HMRC under s 54, TMA 1970 are in course. These considerations point towards the importance of good case management exercised under the supervision of the tribunals, to ensure that cases are listed for hearing when they need to be.


30. Under para 9, Sch 5, tribunal rules can confer additional rights of audience before either tier. Currently accountants have the right of audience before the General and Special Commissioners and in practice more appeals are taken before the tribunals by accountants than by lawyers. We feel it important that the tribunal rules preserve this right of audience.


Mediation (Clause 24)


31. We welcome the provisions for mediation in Clause 24.


Enforcement (Clause 27)


32. Clause 27 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.


33. The tax legislation contains its own enforcement rules and we are concerned that Clause 27 might mean that there are two sets of enforcement rules that taxpayers have to cope with. That could mean that a taxpayer could be proceeded against under either, or both, sets of provisions.


34. We would welcome clarification on this point. We also propose that the Bill should be amended to ensure that only one or other provision should apply.


Costs and fees (Clauses 29 and 42)


35. We note that Clause 29 allows the tribunal to have discretion about the treatment of costs, and this is a particular area where different tribunals may have very different considerations. However, it is not clear in this clause whether a single set of rules on costs will be applied across each tier. The last line of Clause 29(1) says costs will be '... in the discretion of the tribunal in which the proceedings take place'. But 'tribunal' is not defined - does it mean either the First-tier or Upper Tribunal generally, or a particular tribunal panel, or a particular chamber under the new structure? This needs to be clearer.


36. The importance of this issue is that a system that requires a taxpayer to pay court fees, or that leaves the question of costs to the discretion of the tribunal, is bound to deter very many taxpayers, particularly those with low incomes, from appealing at all. As tax represents a transfer of part of a person's possessions to the State for the benefit of the common good it is important that aggrieved taxpayers are able to vent their grievances if they feel they have been unreasonably treated. Accordingly any system that deters a taxpayer from being able to do this, either because he believes that the costs of an appeal are too high or because there is a risk that if he loses he will have costs awarded against him, is likely to undermine confidence in the tax system.


37. The Tax Appeals Stakeholder Group has been developing a cost model which would be appropriate to the tax tribunals and which has received general support although no final decision has been taken on whether it will be implemented. We would welcome confirmation that the Tax Chamber will be able to make its own policy on costs, will follow the model that has been devised, and that there will not be an over-riding set of rules on costs to apply across the board for each of the two tiers.


38. Similarly considerations apply regarding fees (Clause 42). We are pleased to note that Clause 42(2) provides for scales or rates of fees. Different types of tribunals are likely to have very different underlying costs - for example, the cost of a social security paper-only hearing will be small compared to a tribunal hearing for a complex tax case - and we trust that the fee scales will cater for this. The fees which might be charged should not in any way present a bar to appellants' access to justice.


39. It is important that there is provision for exemptions from, reductions in and remission of fees in whole or in part (as per Clause 42(2)) and these should have regard to the means of the appellant. There should also be provision for the tribunal to pay the out-of-pocket costs of low-income appellants in person, as is currently possible for social security appeals.


40. It is particularly important that fees for mediation - which is a facility most likely to be used by appellants on low incomes - to be affordable and not deter people from using this service.



March 2007











1. The Institute of Chartered Accountants in England & Wales is a professional body representing some 128,000 members. The Institute operates under a Royal Charter with an obligation to act in the public interest. It is regulated by the Department of Trade and Industry through the Accountancy Foundation. Its primary objectives are to educate and train Chartered Accountants, to maintain high standards for professional conduct among members, to provide services to its members and students, and to advance the theory and practice of accountancy (which includes taxation).


2. The Tax Faculty is the centre for excellence and an authoritative voice for the Institute on taxation matters. It is responsible for tax representations on behalf of the Institute as a whole and it also provides services to more than 11,000 Faculty members who pay an additional subscription.


3. Further information and copies of our published Tax Representations (TAXREPs) are available on the ICAEW website,