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The Chartered Institute of Taxation (CIOT) has expressed delight at the news that its campaign to retain the ‘equitable liability’ practice has been successful.

HM Revenue and Customs (HMRC) has long had the power not to pursue tax in cases where it would be ‘unconscionable’ (excessive and unfair) for them to do so. This is the ‘equitable liability’ practice and applies in cases where, although an amount is technically due (typically because a taxpayer has missed the deadline for appealing against an HMRC estimate of their tax liability because of ignorance or misunderstanding about procedures), the taxpayer can demonstrate that the true amount of tax which should be payable is less. Often it is the most vulnerable taxpayers who have benefited from HMRC’s exercise of discretion in these cases. 

A review in 2008 listed the practice among a number of concessions scheduled to be abolished from April 2010. This followed a court ruling in 2005 that HMRC had no power to alter tax demands unless there was specific legislative power. 

However, following strong representations from the CIOT, led by the Institute’s President, Andrew Hubbard, and others, the Government have told the CIOT that they will be legislating “at the earliest opportunity” to retain the practice. 

Welcoming the news, Andrew Hubbard said, “The most vulnerable in society need protection when things have gone badly wrong, even when they themselves may have caused the problems by their own action – or more often inaction – and the equitable liability practice was an important safety valve of last resort.  So I am delighted to have received confirmation directly from the Minister that a decision has been taken to introduce legislation to put this on a proper, permanent footing.”

“Following last week’s HMRC Charter, this is another example of how constructive working between HMRC and tax professionals is leading to beneficial results and a fairer tax system – and that is in the interests of tax collectors, advisers and payers alike.”