Draft FB17 Clause 21 Schedule 7: Corporate interest restriction - CIOT comments

6 Jul 2017

Secondary legislation ‚ the delegation of powers

We have has always maintained that tax laws should be enshrined in primary legislation as far as possible, but we accept that this is not always feasible. However, we consider it appropriate to review the use of secondary legislation, particularly in regard to its frequent application in the field of taxation. We consider taxation is something that should be controlled actively by Parliament, and we expressed concern that the delegation of powers reduces the control and supervision of Parliament. In regard to taxation, we believe that it should be used only to deal with technical matters or the finer detail of matters decided by Parliament.

That restriction is especially important if the Commons is not granted power to review the merits of Sis, nor to amend them in appropriate circumstances.

The importance of consultation

We have always believed that the consultation process is an important part of the development of effective legislation. It should not be allowed therefore to become a perfunctory process just so as to ‚ tick boxes‚ .

There needs to be sufficient time for HMRC (or any other department) to receive, consider and act on responses. A concern of ours is that that secondary legislation does not receive the proper level of external challenge and scrutiny before implementation, leading to a risk of unintended consequences and burdens for both HMRC, taxpayers and their advisers.

The process of developing effective measures

We appreciate that using secondary legislation to develop effective and useful measures may be complicated. This is particularly the case given the difficulties in amending, delaying or referring it back for further consideration. However, we consider that such a process has to some extent become necessary given the limited time available for detailed scrutiny.

In relation to taxation, we take the view that there needs to be capacity to make changes to deal with significant issues.


Brexit will pose significant challenges for all. To overcome these, we believe that there needs to be continuous consultation from the outset and not just when legislation is developed and changes then become difficult (if not impossible) to make.

Because of the huge volume of legislation that will need to be amended or repealed, there will be the inevitable temptation to use delegated legislation to deal with the complexities of Brexit. Unless the powers over secondary legislation are amended, it will be more difficult for delegated legislation to be subject to effective scrutiny.

Whatever legislative approach is ultimately taken, it will be necessary to ensure that both HMRC and taxpayers know what version of the European legislation the Government intends to follow (eg what happens should EU legislation such as a Directive or Regulation be amended or if the Court of Justice of the EU interprets legislation relating to pre-Brexit legislation?).

We suggested that decisions that have arisen before Brexit should continue to be applied unless Parliament expressly legislates to the contrary. However, it also needs to be clear what position the UK will take if there are interpretative decisions of the Court after Brexit relating to the European legislation that Parliament has decided to reflect in the GRB.

We would suggest that consideration should be given to the inclusion of more explicit purposive explanations in Brexit legislation similar to that adopted in existing EU legislation.

Technical Team