The Roles of the Following in the UK Taxation System - Essay Example

The Roles of the Following in the UK Taxation System 1. Statute In the taxation system of the United Kingdom, similar to the other commonwealth nations, the approach that has been given to statutes in the constitution process is the literal interpretation of the laws of tax. The involuntary adoption of the purposive interpretation of a statute so as to craft glosses on to it, which are not text based is also a purpose of the statutes’ construction. Traditionally, the British court’s attitude was based upon the perspective of the court’s proper role. Generally, the main role played by tax law statutes in the UK is that of courts’ interpretation. At this juncture, it is good to take note of the fact that courts were not involved in the legislation and it was, thus, not their responsibility, but that of the parliament. It, therefore, follows that any defects in the taxation laws were not under the responsibilities of the courts. Since the year 1980, however, the courts of the UK have had the urge to take up a more purposive kind of statute’s interpretation. Where a given statute was said to be obscure or ambiguous, the House of Lords made an acceptance of making consultations to the history of the legislature so as to establish the role of the legislature in the particular statute. The courts of the UK have overcome schemes of tax avoidance by way of finding that the given context’s taxpayer had not gotten the result desired. An example is a relationship, where an employment contract has undergone transformation into another arrangement- of independent contractor. This purposive type of approach to the construction of statutes has also been taken up by other nations of common law like Canada, India, and Australia among others. The Irish courts on the contrary, despite the fact that they give a chance to legislative history, stick to the strict approach to the interpretation of law. Also the supreme court of Canada has been under criticism due to its purposive interpretation approach; the critics have cited excessive literal approach to interpretation. (Thuronyi, 2003 pp137-141) 2. Case law The case law to cite in this scenario is; CASE: Pepper (Inspector of Taxes) Versus Hart (1993) FACTS: Some private school teachers were given discounts upon fees paid if their children joined the school, in which the teachers taught. Mr. Hart was party to the inclusion and he was a teacher at Malvern College. Besides his being a teacher, in the year 1975 he was the mastermind (TV series) victor. Along the way the Inland Revenue made a decision to levy tax on the discount based upon the proportional coat outlay of a pupil to the particular school. The amount was significantly higher, than would have been the case of the extra cost of having that extra in this classroom. The 1976’s Finance Act (61) as well as section 63 was obscure as far as the right measure was concerned. Subsequently, the House of Lords was requested whether there was any material from parliament that could be applied to assist in this interpretation. HELD: The House of Lords concluded that the utilisation of statements made in parliament did not go against the stipulations of Article 9 since this did not amount to any questioning of a parliamentary proceeding. Apart from the function of questioning the parliamentary independence as well as its debates, courts would just be effecting what was said as well as done in parliament. This case has a role of showing that despite the consultation of parliamentary statements by the court; this did not in any way rob the parliament of its prior priveleges. According to Lord Browne- Wilkinson, he would trust that the decision reached by the House of Commons would not affect in any way the privileges bestowed to parliament. Thus, the Lordship would go on and carry out the parliamentary intentions in the legislations enacting and therefore, have no desire to criticise any statement from any person in parliament during the enactment process. The main purpose was, therefore, to effect the parliamentary intentions. (Littleboy and Kelly, 2005) 3. Extra-statutory concessions In the purpose of shedding some more light in the role of Extra-statutory Concessions in the UK taxation system, it is vital to give a definition of the same. It refers to a relaxation which leads to the taxpayers being granted a reduction as far as their tax liability is concerned. This is in a situation where such a taxpayer would not be entitled to the same under the strict legal statement. Most of the concessions devised are for the application in transitory and minor anormalies insofar as the legislation is concerned as well as to meet hardship cases at the situations where statutory remedies are not easy to make. Such concessions would also be applied under scenarios where statutory remedies would run in a duration that is not reasonable in proportion to the matter’s essence. The Extra-statutory concessions have been utilised in the Inland Revenue and Her Majesty’s Custom and Excise. For instance; the Act of Civil Partnership got the Royal Assent in November 2004. This Act took effect as from December 2005. The commitment of the government was that, for the entire purposes of tax, couples of same sex who come together to form a civil relationship would be treated similarly to married couples. The concessions described refer to general applications, but it is very important to take note of the fact that specific cases may have special situations calling for their being taken into account with the concession’s application in consideration. In a circumstance where a concession is aimed at tax avoidance, such a concession will not be granted, though. Amended concessions since December 2004’s edition are shown by way of square-type brackets around the contents’ list number. For example; [A 27]. (hmrc.gov.uk, 2009) 4. Statements of Practice The obligation of the issuance of “Statements of revenue practice” falls under the UK Inland Revenues. The statements of practice are of great essence for the purpose of practical administration of the system of tax. Statements of practice are devoid of the force law, though. These are basically the tax administration’s interpretation of the taxation law. Statements of revenue practice are with the inclusion of the extra-statutory concessions. These statements are usually written in a way very close to the legislative form, but they lack the formal status since the tax administration is not obliged to use them. Developments in case laws of the administration give the suggestion that there is no authorisation for Inland Revenue to deny any concession to a given taxpayer. In a case of a denial of such to a taxpayer by the administration it would result to a breach of the call to the administration to act in a fair manner to all taxpayers. (Thuronyi, 1996 p60) A good example to illustrate a statement of practice is the statement of practice applied to the treatment of expenses reimbursement of Travel as well as subsistence to holders of office and employees in 2007. The purpose of this statement of practice puts into consideration the fact that the reimbursement to the parties concerned with the perspective of having an approach that is consistent and that which puts into account the business travel necessary for different employees and office holders. (revenue.ie, 2007) 5. Statutory instruments Generally, statutory statements refer to secondary legislation or delegated type of legislation and in the UK about 3,000 statutory instruments are issued per annum. Thus, these form the biggest chunk of the delegated legislation. Approximately 2/3 of statutory instruments actively looked at in parliament and they are transferred into law on a particular future date. (parliament.uk, 2009) Statutory instruments have had a major purpose in that legislation subject to a highly elaborate consultation including draft clauses as well as an reasonable amount of revenue kind of explanation to go tandem with the draft as well as the final legislation. This process often takes over a year. This legislation has even called for a lot of detailed statutory instrument or subordinate legislation. Such power bestowed to make statutory instruments has sometimes included the power o amend the original legislation. In spite of the fact that statutory instruments are a major player to delegated legislation, they are rarely used in the context of tax. In the few scenarios they are applied, they have applied their purpose a great deal, however. (Ault and Arnold, 2004 pp124, 125) 6. HM Revenue and Customs manuals HM Revenue and Customs was founded in the year 2005 and this was after the merger of HM Customs and Inland Revenue and Excise Departments. The process of the programme of restructuring is still on, though. The main purpose of this body is to make sure that the correct amounts of taxes are paid and this they ensure is paid on time. This they enhance regardless of whether the receipt of payment of taxes is made by the concerned department or the benefits paid entitlement. HMRC- HM Revenue and Customs collects and administers two major tax categories- indirect and direct taxes. Indirect taxes are those paid by a person or his/her business upon the money utilised on commodities. These include Stamp Duty, excise duties, stamp duty land tax, insurance premium tax, stamp duty reserve tax, petroleum revenue tax and VAT. Direct category taxes are those taxes paid by a person or his/her business upon money earned or capital gained in the process. The examples of direct taxes are; income tax, corporation tax, capital gains tax, inheritance tax as well as contributions to national insurance. HMRC also pays and administers tax credits, child trust fund and child benefit. This body also protects UK’s nationals by way of enforcing as well as administering environmental taxes, border as well as frontier protection, national minimum wage enforcement and the recovery of loans to students. Besides the roles stated, the HMRC makes it their goal to see to it that there is money available for the purpose of funding the public services of the UK. It also aids families as well as individuals with the financial support targeted. (hmrc.gov.uk, 2009) Also HMRC has the office of the solicitor and it forms an integral portion of HMRC. This is similar to other departments of the government. Its role broadens beyond taxation roles and goes to the many public law aspects like human rights, European law, freedom of information and judicial revenue. To this, this department works as a close range with the lawyers in the other departments of the government. (gls.go.uk, 2009) 7. European Directives A directive, according to eu-oplysningen.dk website, is one of the classic kinds of the Acts of law within the European Union cooperation. As per the Article 249 of EC a directive is binding as regards the result targeted upon all states which are members. However, member states have to transpose a given directive in their national law as by a deadline set in the specific directive. Subsequent to implementation by a member state in its national law, it is up to the state to notify the European Commission of this. The major role played by a directive in any given member state is to set an objective that has to be achieved, but it is up to that member state’s determination of how and the methods to be utilised for the directive’s implementation. Insofar as the legal practice of directives is concerned there is large difference when it comes to the member state’s scope in determining how and the methods for implementation. Some of the EU directives only give general frameworks within a given area of policies, upon which basis the given member state can put up more strict requirements. On the other hand, there may be directives which have highly detailed provisions, which end up not letting the member states to have a role to play in the directive’s implementation. In case a member state does not implement a certain directive before the given deadline, nationals have the chance to invoke the directive’s provisions after the deadline of implementation. The provisions have to be very clear and accurate, though. This principle of directives is known as the direct effect of the directive that is laid down through the justice’s court of law. (eu-oplysningen.dk, 2008) The legislation of tax in the UK has usually stringently construed. It is thus drafted in a very clear form. However, the European directives have a more general nature as well as the fact that they must be construed by a purpose. To the UK tax lawyers, this is not highly instinctive as well as the UK judiciary, who are aware of the need for uniformity in the community’s interpretation. These hardships cannot, however, be blamed upon the incompleteness of country’s implementation of the legislation since it has become more common for taxpayers to depend upon the directives directly, unlike would have been the national’s implementation of the same. There are interpretive predicaments associated with the directives’ implementation as stated before. (Ballin and Senden, 2005 p65) 8. European Court of Justice decisions As stated in the website of kc3.co.uk, the overall role of the European court of justice is coming up with a tax law that is common to all EU states. It has especially been highly commended for the speedy process of achieving a convergence in the matters to do with tax unlike in common commodities’ market slowness on the same. This court has been working very hard to ensure that tax laws are harmonised to fall under the umbrella of the establishment freedom. This is to the unexpected approach of European court of justice by most state governments with UK forming part. UK has been in opposition of the legislation of tax-harmonising in the minister’s council. 40 cases of tax have been solved in the European court of justice reality in comparison to 40 which were solved for the decade of the 1990’s. For approximately 90% of the tax cases, the court has found for the taxpayers. (kc3.co.uk, 2009) The European court of justice’s role as far as its decisions are concerned can be seen to influence member states’ decisions a great deal. For instance; the Stamp Duty Revenue Tax case. It was subsequent to the European court of justice’s decision that the UK has decided to abolish the SDRT- Stamp Duty Reserve Tax. SDRT would be otherwise levied on those securities that are issued into specific EU systems of clearance. In UK SDRT is a type of tax that is charged upon the transfer or shares issue as well as specific debt securities. A particular case for illustration is that of HSBC Holdings plc & Vidaros Nominees Limited versus HMRC. It was held by the European court of justice that the SDRT of UK of 1.5%, among other things, the companies of the UK issuing shares into the clearance system of the EU breached the directive of the capital duties of the EU. This case would therefore, lead to HSBC reclaiming about £27 million of the Stamp Duty Reserve Tax paid while acquiring the bank CCF of France in year 2000. (kslaw.com, 2009) You should describe how the various sources of tax law and practice are formulated and discuss their importance, the extent to which they are subject to parliamentary or democratic scrutiny and whether they have the force of law. In the UK there is the primary as well as the secondary legislation which form the government branches that have the obligation of writing and passing laws. The branch of legislation, in the UK, issues the primary legislation, but the secondary legislation is the responsibility of the excessive branch’s passing. Parties to the legislative branch are the parliamentarians- House of Lords and House of Commons. The executive branch, on the other hand, is constituted by the England’s King or Queen as well as the Prime Minister. In line with the doctrine about the supremacy of the parliament, the parliamentary Acts are put into consideration by the Supreme Court insofar as the cases of court are concerned. It, therefore, follows that in case there are laws that conflict, that law that has been passed in parliament stands. Thus, courts cannot question laws passed through the primary form of legislation. That is, only the parliament can amend the law. The most common of primary legislation is public Acts. General Public Acts refer to the legislations that are passed in parliament which are meant for application in the general public of the nation of UK. Public Acts include legislations like public safety measures, tax law and resources appropriation. For approval purposes, public Acts require the judicial and executive branches’ approval. They must subsequently be signed by UK’s Queen for them to be made law. Therefore, tax laws go through the parliament just like other bills before they become law. (ehow.com, 2009) Reference list: Ault, Hugh J. and Arnold, Brian J. (2004). Comparative Income Taxation: A Structural Analysis. Kluwer Law International. Edition 2. pp 124, 125. Ballin, E. M. H. Hirsch and Senden, Linda. (2005). Co-Actorship in the Development of European Law-Making: The Quality of European Legislation and Its Implementation and Application in the National Legal Order. Cambridge University Press. Edition illustrated. p 65. ehow.com. (2009). Define Primary Legislation. Retrieved November 17, 2009 http://www.ehow.com/about_5510537_define-primary-legislation.html eu-oplysningen.dk. (2008). What is a Directive? Retrieved November 17, 2009 http://www.eu- oplysningen.dk/euo_en/spsv/all/63/ gls.gov.uk. (2009). HMRC Solicitor's Office. Retrieved November 17, 2009 http://www.gls.gov.uk/about/departments/hmrc.htm Hmrc.gov.uk. (2009). Extra-statutory Concessions. Retrieved November 17, 2009 http://docs.google.com/gview?a=v&q=cache:HjwNmsAmKyAJ:www.hmrc.gov.uk/speci alist/esc.pdf+extra+statutory+consesions+in+UK+tax+law&hl=en&pid=bl&srcid=ADGE ESiQ- hZHe1WbTtXCAnn3nRXh4ZBchSeXtWhFA2xIxEAAFysr4UeDdAsKe2KpTNkF3uc14 JBDqgUH2dQRc4-dOMnGwVN1ggeFfOOB2TyXKQH_3rh1dbz8EZlNES- RlLyO_q7k1LCB&sig=AFQjCNH64IVwj88En9OHoXFTtmSPBw90mA hmrc.gov.uk . (2009). About us: Retrieved November 17, 2009 http://www.hmrc.gov.uk/menus/aboutmenu.htm kc3.co.uk. (2009). Tax and the European Court Of Justice. Retrieved November 17, 2009 http://www.kc3.co.uk/~dt/tax_and_ecj.htm kslaw.com. (2009). European Court Forces Changes on Certain UK Tax Laws. Retrieved November 17, 2009 http://docs.google.com/viewer?a=v&q=cache:RKwyHzmR9NUJ:www.kslaw.com/Librar y/publication/ca100809a.pdf+European+court+of+justice+on+UK+tax+law&hl=en&gl= ke&pid=bl&srcid=ADGEESi_Lm8hdNC4w9gzVa395tJWa4vBCsXDwlMf69hqbNuIYO QfknmqLNRY3vAffY-WpZ1QYweeBy8eP_3044GmW85eC1tsqwmK- fv7rH4Lh2v7wuvJLUHaWKmn6pfxp0mW9VBTJVxD&sig=AHIEtbS4sr5pB7av0tzq_r aDAqR9BGrHKg Littleboy, Charlotte and Kelly, Richard. (2005). Pepper v Hart. Retrieved November 17, 2009 http://docs.google.com/gview?a=v&q=cache:Poae0BVVIn0J:www.parliament.uk/comm ons/lib/research/briefings/snpc-00392.pdf+Pepper+v+Hart- +held&hl=en&sig=AFQjCNEfAFHhAaBNDs2Fz3abdeLjJ6g67w parliament.uk. (2009). Statutory Instruments. Retrieved November 17, 2009 http://www.parliament.uk/about/how/laws/delegated.cfm revenue.ie. (2007). Income Tax Statement of Practice SP - IT/2 /07. Retrieved November 17, 2009 http://www.revenue.ie/en/practitioner/law/sp_it_2_07.pdf Thuronyi, Victor. (2003). Comparative Tax Law. Kluwer Law International. Edition illustrated. pp137-141. Thuronyi, Victor. (1996). Tax Law Design and Drafting, Volume 1. International Monetary Fund. p 60. Read More