ADML3400 - Collection and Management: Tests to apply

This section outlines the tests which you must apply if you wish to consider using the Commissioners’ powers of discretion under section 5 of CRCA 2005. However the decision of whether to exercise discretion is a judgement based on the full facts of each specific case and not limited to the tests below.

The starting point in all cases must be that HMRC should apply the law correctly. However, if in a particular case this does not seem the best course of action, for example if it might be unduly expensive to administer, you can consider if it is appropriate to exercise the Commissioner’s discretionary powers using the following tests.

What would give the highest net return?

HMRC must collect all of the tax under its care but must do so in the most efficient way. In some cases applying a discretionary treatment may result in a higher net return to the Exchequer than if the law were strictly adhered to. For example, if it would cost £10,000 to collect £1,000 in tax due, a higher net return to the Exchequer would be achieved by not collecting the tax in question.  It would therefore be reasonable to allow concessionary treatment to achieve a net increase in funds to the Exchequer.

For information about Extra-Statutory Concessions (ESCs), see ADML4000.

Purposive Interpretation

Where the law is clear, HMRC must apply it correctly (subject to any other considerations in this section). However where the law in a particular situation is unclear HMRC can make a purposive interpretation by interpreting the effect Parliament intended to achieve and act accordingly. Where possible, you should consult Hansard for any reference in the House to what the law in question was designed to achieve as this may help you to find the intended policy objective. However, Hansard is not admissible in any proceedings unless it meets the conditions laid down in Pepper v Hart [1993].

If you have a case where you think the law is unclear and you wish to make a purposive interpretation, you must consult the TADPol1 team using the guidance form. It may also be necessary to obtain legal advice from SOLS.

Is there a minor or temporary anomaly that needs to be addressed?

In some cases the strict application of the law could have unforeseen or unintended effects that would cause difficulty for taxpayers or the department, or would be counter to the intended effects of the law. If these effects are likely to be considerable or to be of indefinite length, it is not generally possible to exercise the powers of discretion to overcome them. Policy teams should instead consider amending the law to remove the unintended effects.

However where these unintended effects are minor or temporary, it may be possible to exercise discretion to overcome them.

If you think you have a case where the law is clear but creates a temporary or minor anomaly, you must consult the TADPol1 team using the guidance form before deciding on any concessionary treatment. It may also be necessary to obtain legal advice.