The House of Lords Economic Affairs committee has called for the powers of HM Revenue & Customs to be reviewed, after claiming it is treating taxpayers unfairly.
In a 67-page report published today (December 4), titled ‘The Powers of HMRC: Treating Taxpayers Fairly’, the committee called for the "disproportionate" powers of the government department to be subject to greater scrutiny by Parliament.
The powers in question involve those to tackle tax avoidance and evasion HMRC had been granted in recent years, which included higher penalties, the impending loan charge and measures such as accelerated payment notices.
The report found the "careful balance" between clamping down and treating taxpayers fairly had now been tipped in favour of HMRC.
Lord Forsyth of Drumlean, chairman of the House of Lords Economic Affairs committee, said this imbalance was against the "fundamental protections" every taxpayer should expect.
He said: "Since 2012, perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards.
"High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice."
Lord Forsyth suggested new principles must be built for the tax system which take a "tough approach" to tax avoidance while treating taxpayers fairly.
The committee recommended the remit of the Adjudicator’s Office, the body which investigates HMRC complaints, be widened and the obligations of HMRC to follow its recommendations be increased.
The report also criticised the government’s current approach to the loan charge, which applies to disguised remuneration schemes and adds together all outstanding loans to be taxed as income in one year, in turn leading to higher tax rates.
Lord Forsyth said: "Some of these powers disproportionately affect unrepresented and lower income taxpayers.
"This [the loan charge] is devastating the lives of middle and lower income individuals, from the private and public sector, including the National Health Service, who used disguised remuneration schemes, in many cases being required to do so by their employers."
Lord Forsyth said the committee had found "disturbing" evidence on the government’s approach to the charge, which he claimed was retrospective in its effect, claiming tax from years which should be closed to enquiry.
The committee also objected to clauses in this year’s Finance Bill, announced in November 2017, which proposed to triple the time period the taxman has to investigate offshore assets from the present four years to 12 years.
The Lords claimed this extension would place an "unreasonable burden on a disproportionate number of taxpayers", who would now be required to retain records for two or three times longer than currently.
HMRC previously stated it would publish guidance in 2019, before any revised Finance Bill becomes law.
But advisers have voiced concern the taxman may not be able to deal with the historic data.
Philip Milton, an adviser at Philip Milton and Co, an advice firm in Devon, said: "I do not object to the tightening of the law in this regard. In theory there is no time limit for tax investigations for fraud either.