Wednesday, 21 March 2012

Budget and Tax

Taxation has a long history.  Magna Carta Article 12 declared that, with certain exceptions, a medieval tax known as "Scutage" was not to be imposed unless "by common counsel of our Kingdom."    Charles I  reigned for lengthy periods without calling Parliament and he attempted to raise a tax known as "Ship Money."  The first ship money writ of 1634 simply requested the coastal towns to provide ships, following on from earlier acts of Elizabeth I. This could be justified at a time when pirates threatened coastal trade around the country.  The following year ship money writs were sent to inland areas, provoking increasing resistance, especially after John Hampden refused to pay. The resulting court case - R v Hampden (Case of Ship Money) (1637) 3 St Tr 825 - found for Charles I but by a very small margin, and the judgement, which in effect gave Charles the power to do whatever he wished, alienated almost the entire nation, including many who fought for Charles in the Civil War. Ship money was made illegal by the Long Parliament in 1641.

The Bill of Rights stated that - "levying money
for or to the use of the Crown by pretence of prerogative, without grant of Parliament, for longer time, or in other manner than the same is or shall be granted, is illegal."

In Bowles v Bank of England [1913] 1 Ch 57 - The House of Commons Ways and Means committee resolved to assent to the imposition of income tax at the required rate for the next year.   The High Court held that such a resolution was inadequate to authorise the Crown to levy the tax by its deduction from the Bank's dividends payable to its shareholders. Authority could be granted only by statute.   Parker J said: " No practice or custom, however prolonged or however acquiesced in on the part of the subject could be relied on by the Crown as justifying an infringement of the provisions of the unrepealed Bill of Rights."

The follow up to this case was enactment of the Provisional Collection of Taxes Act 1913.  Today, the relevant enactment is the Provisional Collection of Taxes Act 1968 (as amended, from 30th December 2011, by the Finance Act 2011 s.88).  The PCTA gives temporary statutory effect to resolutions of the House of Commons which renew, vary or abolish certain taxes and duties. Such resolutions enable the renewal and collection of income tax on a provisional basis in the period between the end of the tax year and the enactment of the annual Finance Act (usually several months later). This is necessary because income tax expires at the end of each tax year and is renewed for the following tax year by the Finance Act. Resolutions having statutory effect under the PCTA can also serve other purposes, such as enabling the provisional collection of taxes and duties at new rates set on Budget day. Without such resolutions, collection at the new rates could not occur before the enactment of the Finance Act (which makes the necessary legislative changes).

Details of the 2012 Budget may be seen via the Treasury website together with some interesting facts about the Budget.


  1. Interesting - were the `ship money writs sent to inland areas` the derivation of the term 'Inland Revenue'?

  2. Ade - interesting question and I am not sure why it was called Inland Revenue but it might have been to distinguish its functions from those of Customs and Excise - the latter operating, historically, mainly at ports. The term Inland Revenue appeared in law with the Inland Revenue Board Act 1849 which brought together a Board of Excise and a Board of Stamps. Of course, the Inland Revenue (as such) disappeared from 18th April 2005 with the creation of Her Majesty's Revenue and Customs (HMRC) - see Commissioners for Revenue and Customs Act 2005

  3. Correct - Inland Revenue as opposed to Customs. Excise was itself different from Customs because duty was and is charged on exciseable product produced within the Realm as well as that imported. Hence Scotch pays excise duty whereas Bourbon pays customs - although I believe they are charged at the same rate and there is little difference in the administration.

    And why different Schedules for Income Tax and a Collector as well as an Inspector? Historically, so that no one official or set of them knew too much about the taxpayer's affairs. Even in these days of transparency and FOIA HMRC may not discuss a taxpayer's affairs publicly - except in open court in litigation. A journo recently suggested that that rule should be relaxed in the case of corporate taxpayers - slippery slopes and thin ends of wedges, anybody?

  4. The separation of collection from inspection was because there was commission paid at one stage on the former and there was a need for the Collector not to have a vested interest in the quantum of the amount collectible.