An Englishman's home - is it really his castle?

By Carol Barrie on Aug 15, 08 05:42 PM in Tax

The 2008 Finance Act has introduced new draconian powers whereby Her Majesty's Revenue and Customs ("HMRC") will be able to enter into business premises without notice and without reference to any third party. Business premises include your home if your business is run from there or if business records are kept there. These powers are greater than those of the police who still need to obtain a search warrant.

Can granting these powers to HMRC who are there to collect tax and make sure we will pay the correct amount really be appropriate in a democratic society?

Prior to its merger with the Inland Revenue (to form HM Revenue and Customs); Customs and Excise had a justifiable reputation for being aggressive and not slow to use the draconian powers which they have. These powers are, of course, very necessary when dealing with smugglers and ruthless drug runners but concerns were expressed back in 1972 about their potential use in relation to ordinary traders when VAT was put under the control of Customs and Excise rather than being dealt with by the Inland Revenue.

As had been feared, Customs and Excise did indeed bring their aggressive approach to bear on VAT registered traders.

There was a hope that when the Inland Revenue and Customs and Excise merged the historically more measured and less aggressive approach adopted by the Inland Revenue would influence the behaviour of Customs and Excise in relation to VAT. Regrettably the opposite seems to be the case.

The new powers in the Finance Act 2008 will allow HMRC to enter into business premises having given seven days notice (increased during the Finance Bill debates from 24 hours!). HMRC can in certain circumstances enter without notice and without reference to any third party, if they see reason to do so.

The Inland Revenue have always had power to enter any premises without prior notice provided that they could convince a Judge that their actions were reasonable. The power was used sparingly and usually when HMRC were looking for evidence for criminal prosecutions.

What, you may ask, is the problem with the powers that they already have? If officials want to enter your business premises without prior notice, especially if those premises are also your home, why should they not have to convince an independent third party that they have reasonable grounds to do so?

The police have to get a search warrant to enter premises and their role is specifically to catch the bad guys. HMRCs role is to administer the tax system.

Cynics might be forgiven for thinking that the reason why 24 hours notice was put into the Finance Bill was so that MPs would focus on increasing the notice period rather than seriously questioning the need and justification for policy in the first place!