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Westminster weekly update: Finance Bill Sub-Committee and the Courts and Tribunals Bill

25 October 2018

The government is currently considering the evidence submitted as part of its review of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which provides an important opportunity to bring back legal aid for early advice.


We are now entering a critical phase of our early advice campaign - and we need your help. The government is currently considering the evidence submitted as part of its review of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which provides an important opportunity to bring back legal aid for early advice. To mark Justice Week (29 October - 4 November) we are calling on all our members to show their support for our ongoing early advice campaign by writing to the Lord Chancellor. You can do this in just a few minutes using our online form.

The Chair of the Law Society's Tax Law Committee gave oral evidence to the House of Lords Economic Affairs Finance Bill Sub-Committee. The session was focused on HMRC's powers to tackle tax avoidance, and the Law Society conveyed its position that these powers were being used too aggressively and with insufficient safeguards. The Society also highlighted its concerns around the impact of follower notices on access to the courts.

The Law Society was mentioned three times as the House of Lords debated the Courts and Tribunals (Judiciary and Functions of Staff) Bill at report stage on Tuesday 16 October. The Law Society briefed peers ahead of the debate, and drafted amendments to the Bill that were moved by Baroness Chakrabarti.

The Law Society vice president Simon Davis gave oral evidence to the Justice Select Committee for its evidence session on the implications of Brexit for the justice system on Tuesday 23 October. This followed the launch of the APPG on Legal and Constitutional Affairs' report on the effect of Brexit on legal services on Monday. The Civil Liability Bill also returned to the House of Commons for Report Stage and Third Reading on Tuesday - the Law Society briefed MPs on its key concerns around the Bill's impact on access to justice.

This week in Parliament

Monday 22 October

House of Lords

  • Mental Capacity (Amendment) Bill [HL] - Committee Stage (day 3)

Tuesday 23 October

House of Commons

  • Civil Liability Bill - Remaining stages
  • Justice Select Committee oral evidence session on the implications of Brexit for the justice system
  • Home Affairs Committee oral evidence session on modern slavery

House of Lords

  • Mental Health Units (Use of Force) Bill - Committee Stage
  • EU Justice Sub-Committee oral evidence session on intellectual property and the Unified Patent Court

Wednesday 24 October

House of Commons

  • Home Affairs Committee oral evidence session on counter-terrorism

Thursday 25 October

House of Commons

  • DExEU oral questions

Friday 26 October

House of Commons

  • Homes (Fitness for Human Habitation) Bill - remaining stages

Last week in Parliament

Monday 15 October

House of Lords

Economic Affairs Finance Bill Sub-Committee oral evidence session

Lydia Challen, Chair of the Law Society's Tax Law Committee, gave oral evidence to the Economic Affairs Finance Bill Sub-Committee.

Lydia was able to land a number of the Law Society's key messages during the session, including:

  • The Law Society's concern for upholding the rule of law, and the impact that follower notices have had on access to the courts;
  • The Society's good working relationship with HMRC; and
  • Members' concerns around the increasingly aggressive way that HMRC is using its powers.

Watch the full session online.

Witnesses:

  • Lydia Challen, Chair of the Law Society's Tax Law Committee
  • Malcolm Gammie QC, Chair of the IFS Tax Law Review Committee
  • Jason Collins, Partner, Pinsent Masons

Lord Turnbull (CB) asked the witnesses about their concerns regarding the general atmosphere of HMRC powers.

  • Lydia Challen cited a general concern around the accretion of powers to HMRC. She said that the Law Society's concern was not focused on any specific measure, but on the general direction that HMRC has taken in recent years. Malcolm Gammie expressed a similar position.

  • Lydia stated that the Law Society's particular concern was in upholding the rule of law, and that in this context the most concerning measure has been the introduction of follower notices, which she stated were effectively a penalty against taxpayers for accessing the courts.

  • Lydia agreed with a suggestion by Lord Turnbull that rights of appeal are being chipped away, citing follower notices as an example.

Baroness Noakes (Con) asked whether there was an imbalance between the taxpayer and HMRC, and how Parliament could correct this balance going forwards.

  • Malcolm Gammie stated that it would be difficult for Parliament to correct the overall balance as it tends to focus on individual measures.

Lord Lee of Trafford (LD) asked whether there had been a proliferation of tax avoidance schemes in recent years.

  • Jason Collins stated that the opposite was true, and that in fact these schemes were drying up.

Lord Hollick (Lab) asked about confusion around the distinction between tax avoidance and tax evasion, and whether there as a case for introducing a timetable requiring HMRC to deal with issues in a timely manner.

  • Lydia and Jason both highlighted the fact that HMRC treats tax avoidance and evasion in the same way. Malcom stated that there was a distinction between avoidance and evasion, but that he was unsure what difference it made to distinguish 'aggressive avoidance' from the other categories.

Lord Hollick (Lab) asked whether a powers review should be carried out.

  • Malcolm stated that there was a need for someone to stand back and have a look at the balance of HMRC's powers and safeguards.

Lord Turnbull (CB) asked whether in certain cases HMRC's powers amounted to essentially retrospective taxation.

  • Lydia argued that the goalposts have moved regarding what is considered to constitute aggressive tax avoidance and what is tax planning, so that practices that were once considered to be legitimate tax planning were now being treated as avoidance. She also highlighted the changing language around legislation to alter how certain forms of tax planning are treated, which has had the effect of making it politically difficult to conduct deep scrutiny.

Baroness Kramer (LD) asked about the perception that HMRC was using its powers more aggressively, and whether there were any cultural checks on HMRC's ability to exercise those powers.

  • Lydia noted that the Law Society engages with HMRC a lot, and has a constructive dialogue with it. However, she noted that reports from members indicated that HMRC was taking a more aggressive approach in the last five years. She noted that the new powers had given HMRC the ability to pressure taxpayers into paying the tax they believe is due, and that taxpayers were facing difficulties in having their concerns escalated.

  • Jason and Malcolm noted that HMRC used its powers appropriately the vast majority of the time, but even so there is a need for oversight of any extensive powers that are given to HMRC.

  • In response to a claim by Baroness Kramer that these powers were aimed largely at individual taxpayers rather than large corporates, Lydia stated that while there isn't a specific distinction it is true that these cases will be proportionately more consequential for individual taxpayers who have fewer resources than a large business.

Baroness Drake (Lab) asked whether HMRC's powers treated big and small businesses equally.

  • Jason argued that this is not the case, as where an individual or small business comes up against the state which is requesting the payment of tax, the individual will comply whether or not they think the request is fair as they lack to power to resist. Jason argued that this required the state to consider carefully whether the use of such powers are appropriate, and drew parallels in this respect with stop and search powers and the safeguards placed on their use.

Lord Leigh of Hurley (Con) asked the witnesses whether the provisions to extend the time limits for dealing with offshore tax matters in the draft Finance Bill were appropriate.

  • Lydia highlighted the concern that these rules could impact on individuals who are classified as non-dom but who do not possess significant amounts of overseas assets - this could include recent immigrants for example.

  • Malcolm noted that these powers could be used even where there is no evidence that the taxpayer is at fault. He claimed that the burden of proof lay with the taxpayer, giving HMRC no incentive to progress its investigation.

  • Lord Forsyth of Drumlean (Con) stated his concern that the new powers could cover a lot of people who, for example, own shares in a foreign country, which Jason confirmed.

Baroness Noakes asked whether the witnesses had any concerns about the extension of HMRC's powers in clause 35 of the draft Finance Bill to require taxpayers to pay securities in tax disputes.

  • Lydia stated that as the clause creates a regulation making power it is difficult to comment on how it will operate until the regulations are made.

Viscount Hanworth (Lab) asked whether the proposed new penalty scheme to tie into Making Tax Digital was an improvement.

  • Lydia stated that the penalty points aspect of the scheme was an improvement. Jason and Malcolm however noted that the legislation as a whole was incredibly complex.

Tuesday 16 October

House of Commons

Business, Energy and Industrial Strategy oral questions

During Business, Energy and Industrial Strategy Oral Questions on Tuesday 16 October Lucy Powell MP (Lab Co-op) asked a question on 'what steps he is taking to support the provision of family-friendly working practices'.

Responding, Kelly Tolhurst MP (Parliamentary Under Secretary of State) said:

  • The government is considering requiring employers to assess whether a job can be done flexibly and to make that clear when advertising.

  • The government will also consult on a proposal to require large employers to publish their parental leave and pay policies.

  • Lucy Powell asked a supplementary question asking whether the Minister agreed that one of the keys to unlocking the gender pay gap and family-friendly working practices is to raise the esteem in which part-time workers are held, including encouraging more fathers to work part-time. In response, the Minister stated that she hoped the government's policies on flexible working would help to achieve equal esteem.

Read the full question and response.

House of Lords

Courts and Tribunals (Judiciary and Functions of Staff) Bill - Report Stage

On Tuesday 16 October the House of Lords debated the Courts and Tribunals (Judiciary and Functions of Staff) Bill at Report Stage.

The Law Society briefed peers on its key concerns around the Bill, and was mentioned three times during the debate.

An opposition amendment which would have provided for the right to judicial reconsideration of a decision made by an authorised person was defeated. All of the government amendments were agreed to.

You can read the full debate here. During the debate:

Post-qualification experience

  • Baroness Chakrabarti (Labour) moved amendments which would ensure that authorised persons under the Act must have three years post-qualified experience. These amendments were drafted by the Law Society. In moving the amendments, Baroness Chakrabarti noted that key stakeholders such as the Law Society and the Bar Council were supportive of these minimum requirements.

  • The Minister, Lord Keen of Elie, also tabled amendments which would restrict the delegated judicial functions to exclude the removal of a person's liberty, the making of possession orders in respect of a person's home of a family home, or injunctions or orders for preserving evidence.

  • Lord Marks of Henley-on-Thames (Liberal Democrat) welcomed the amendments tabled by the Minister. He said that Liberal Democrat peers would abstain on Baroness Chakrabarti's amendments.

  • Following debate, Baroness Chakrabarti's amendments were withdrawn, and the government amendments agreed to.

Reconsideration

  • Baroness Chakrabarti moved an amendment to provide for a right to reconsideration where judicial functions had been delegated. She noted support for the amendment from the Law Society and others.

  • The Minister, Lord Keen of Elie moved an amendment to provide for judicial reconsideration by introducing requirements for the rule-making bodies to consider judicial reconsideration specific to each function which is to be delegated.

  • Following debate, the government amendment was agreed and the Opposition amendment was defeated by a margin of 90 votes.

Review of the Act

  • Baroness Chakrabarti moved an amendment which would provide for a review of the Act within three years of it coming into force. She noted the delays to the current review of the implementation of the Legal Aid, Sentencing and Punishment of Offenders Act. The Minister, Baroness Vere of Norbiton committed to evaluating the reforms in the future, and the amendment was withdrawn.

Regulations

  • Baroness Chakrabarti criticised the 'legislative drip-feed' from government on court reform, and that regulations enabled through the Bill would be subject to the negative resolution procedure and therefore have less parliamentary scrutiny or oversight. The Minister, Lord Keen of Elie defended the use of regulations and committed to not use the powers in the Bill to amend primary legislation.

The Bill will now move to Third Reading stage in the House of Lords, the date of which is to be announced. Following that stage, the Bill will then move into the House of Commons.

Question or comments? Contact the Public Affairs team at parliamentary@lawsociety.org.uk

Tags: Westminster weekly update | legal aid

About the author

Alexandra Cardenas is Head of Public Affairs and Campaigns at the Law Society. Public Affairs manages the relationships with parliament and government. She is a dual qualified solicitor in England and Wales (2014), and Colombia (2002). Prior to the Society, she practised as a human rights lawyer and worked at Macmillan Cancer Support and Animal Defenders International.

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