At the Committee’s meeting on 30 October 2019 it scrutinised a number of instruments. It was agreed that the special attention of the House of Commons should be drawn to four of those considered in accordance with Standing Orders. The Instruments and the grounds for reporting them are given below. The relevant Departmental memoranda are published as appendices to this report.
1.1The Committee draws the special attention of the House to these Regulations on the grounds that they require elucidation in one respect, there is doubt whether they are intra vires in one respect and that that they fail to comply with proper legislative practice in one respect.
1.2These Regulations (made under the Taxation (Cross-border Trade) Act 2018) form part of the legislation that provides for the UK’s Value Added Tax regime to operate as required in the event of the United Kingdom leaving the EU without a deal. Section 51(3)(a) of the 2018 Act enables regulations in connection with the withdrawal of the United Kingdom from the EU to make such provision as might be made by Act of Parliament. Section 56(7)(b) enables regulations made in consequence of the 2018 Act to make provision by reference to things specified in a public notice. In answer to the Committee’s question, Her Majesty’s Revenue and Customs (in a memorandum printed at Appendix 1) confirm that in relation to the sub-delegation of power to make provision by public notice (in regulations 4 and 5), section 51(3)(a) is the more appropriate vires as the issues being addressed are a consequence of the United Kingdom’s withdrawal from the EU rather than a consequence of the 2018 Act. The Committee accordingly reports regulations 4 and 5 for requiring elucidation, provided by the Department’s memorandum.
1.3The Committee asked the Department to explain why the preamble cites specific subsections of section 51 but does not include section 51(3)(a). In its memorandum, the Department acknowledges that section 51(3)(a) should have been cited in the preamble and apologises for this oversight. Since the decision of the Court of Appeal in Vibixa Ltd and another v Komori UK Ltd and others [2006] EWCA Civ 536, preambles have been relevant not merely to legislative practice but also to vires: a failure to cite a provision relied on might result in a decision that a provision is ultra vires. Accordingly, the Committee reports these Regulations on the ground that the omission from the preamble, acknowledged by the Department, gives rise to doubts whether they are intra vires.
1.4The Committee also asked the Department where the public notices referred to in regulations 4(1), 5(4) and 5(8) will be made available and why availability details are not given in the instrument. In its memorandum, the Department apologises for this oversight and undertakes to amend the Explanatory Note to include availability details for both electronic and hard copies of the notices. The Committee agrees that this can properly be achieved by correction slip. The Committee accordingly reports regulations 4(1), 5(4) and 5(8) for failure to comply with proper legislative practice, acknowledged by the Department.
2.1The Committee draws the special attention of the House to these Regulations on the ground that they fail to comply with proper legislative practice in one respect.
2.2These Regulations form part of the legislation that provides for a United Kingdom customs regime to be in place before exit day in the event of the UK leaving the EU without a deal. The Committee asked Her Majesty’s Revenue and Customs to explain (in relation the public notices referred to in regulations 2, 6, 11, 12 and 14) why the web address in paragraph 3.2 of the Explanatory Memorandum is not given in the instrument itself and why details of where hard copies of these notices will be available is not also given in the instrument. In a memorandum printed at Appendix 2, the Department apologises for this oversight and undertakes to amend the Explanatory Note to add availability details for the public notices in both electronic form and hard copy. The Committee agrees that this can properly be achieved by correction slip. The Committee refers to its First Special Report of Session 2017–19, Transparency and Accountability in Subordinate Legislation at paragraphs 4.5 to 4.8 and accordingly reports regulations 2, 6, 11, 12 and 14 for failure to comply with proper legislative practice, acknowledged by the Department.
3.1The Committee draws the special attention of the House to these Regulations on the ground that they purport to have retrospective effect without express authority in one respect.
3.2This instrument relates to the period during which hold-over relief on capital gains tax applies under Schedule 8B to the Taxation of Chargeable Gains Act 1992. Under the original sunset provisions in Schedule 8B, that period expired on 6 April 2019; regulation 2 extends it to 6 April 2021. It appeared to the Committee that regulation 2 has limited retrospective effect in so far as it allows hold-over relief in respect of gains accrued between 6 April and 4 November 2019, when this instrument comes into force. But while the enabling powers do allow the Treasury to “substitute a later date” for that in the original sunset provisions, they do not expressly state that a substitution may be made after the fact. Moreover, Her Majesty’s Revenue and Customs acknowledged in the Explanatory Memorandum to these Regulations that there might be uncertainty about the availability of hold-over relief between 6 April and 4 November 2019. The Committee therefore asked the Department to clarify whether in its view the amendment results in relief being available during that period, and if so, which provision it relies on to enable such retrospective effect.
3.3In a memorandum printed at Appendix 3, the Department clarifies that it believes the amendment to have the described retrospective effect, and that it considers the power of retrospection to be implied in the enabling powers cited in the preamble, because a claim for relief in an annual tax return cannot be made until the start of the next tax year. The Committee is not persuaded by this reasoning. These enabling powers came into force on 17 July 2014; at that time, the period during which gains were required to accrue to be eligible for hold-over relief was from 6 April 2014 to 6 April 2019; a later sunset date could have been substituted at any time before 6 April 2019 without requiring retrospection. The Committee notes that the effect of the amendment is wholly beneficial and it therefore may not fall within the classic presumption against retrospection, but it is not clear that this is sufficient to imply a power to make retrospective provision. The Committee accordingly reports regulation 2 for purporting to have retrospective effect without express authority.
3.4(Having acknowledged the uncertainty as to the legal basis for relief between 6 April and 4 November 2019, HMRC nonetheless undertook, in the Explanatory Memorandum, to ensure that investors could claim relief that had accrued during that period and to “manage availability of the relief without interruption” for any investor claims made during that period. The Committee asked the Department to clarify on what basis it would do so if regulation 2 did not have retrospective effect, and what it would do in practice to manage availability of relief in such circumstances. In its memorandum, the Department asserts that it will be able to rely on its collection and management powers under section 1 of the Taxes Management Act 1970 and section 5 of the Commissioners for Revenue and Customs Act 2005 to ensure that relief is available to adversely affected taxpayers. It does not seem to the Committee that these provisions allow HMRC to avoid collecting capital gains tax for this period—if statute requires the tax to be paid—simply because that is its policy preference. This appears, rather, to be the type of extra-statutory concession not permitted by section 1 of the 1970 Act according to the Court of Appeal’s decision in Wilkinson v Inland Revenue Commissioners [2003] 1 WLR 2683.)
4.1The Committee draws the special attention of the House to these Regulations on the grounds that there is doubt as to whether they are intra vires in one respect.
4.2These Regulations exempt regulatory capital issued by banks and insurers from counteraction under the hybrid and other mismatch rules. The Regulations come in to force on 29 November 2019 and take effect in relation to payments made on or after 1 January 2019. The enabling power for this retrospective effect is section 19(8) of the Finance Act 2019. This power is not cited in the preamble and the Committee asked Her Majesty’s Revenue and Customs to explain. In a memorandum printed at Appendix 4, the Department apologises for the oversight. Since the decision of the Court of Appeal in Vibixa Ltd and another v Komori UK Ltd and others [2006] EWCA Civ 536, preambles have been relevant not merely to legislative practice but also to vires: a failure to cite a provision relied on might result in a decision that a provision is ultra vires. Accordingly, the Committee reports these Regulations on the ground that the omission from the preamble, acknowledged by the Department, gives rise to doubt whether they are intra vires.
Published: 1 November 2019