On 26 March 2012 the Government published a Protocol on unscheduled announcements of changes in tax law.
This follows the Chancellor’s commitment in his Budget speech to crack down on aggressive tax avoidance, viz…
I regard tax evasion and – indeed – aggressive tax avoidance – as morally repugnant…
I have given plenty of public warnings that this abuse should stop.
Now I’m taking action…Let me make this absolutely clear to people…If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of Parliament.
I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around these new rules are found.
People have been warned.
…and this announcement is clearly intended to provide a legal framework for the future introduction of such retrospective legislation.
The protocol is intended to cover changes to tax law announced other than at a Budget and which take effect before the legislation implementing the change is enacted. This would normally be where:
- there would otherwise be a significant risk to the Exchequer;
- significant new information has emerged to identify the risk or indicate its scale; and
- changing the law immediately is expected to prevent significant losses to the Exchequer.
Announcements will usually take the form of a Written Ministerial Statement to Parliament before 2pm and the process with be that:
- a Minister will make a public announcement of the intention to change the law and make clear that the change will take effect before the legislation is enacted;
- the public announcement will be accompanied by the technical detail necessary to amount to a sufficiently clear warning of the nature of the change and its timing;
- HM Revenue & Customs (HMRC) will publish the Written Ministerial Statement and draft clauses on the HMRC website as soon as practicable after the announcement to Parliament. If, exceptionally, draft clauses cannot be published on the day of the announcement, a detailed technical note explaining the nature of the proposed change and the reasons for it will accompany the announcement; and
- legislation to give the measure effect will be included in the next available Finance Bill.
Retrospective legislation offends the general principle of the rule of law to the extent that it makes the law unpredictable. The publication of this protocol is an acknowledgement of this fact and is an attempt to strike a balance between maintaining (in the words of the protocol) the UK tax system’s…
…reputation for predictability, stability and simplicity and preserving its ability to protect the Exchequer by making changes where necessary.
It also demonstrates, however, that the government does indeed mean business in this area and that, again, ‘people have been warned’!