Tax and human rights in the UK and Europe
Robin Williamson looks at the law on tax and human rights in the UK and Europe – including the European Convention, the Human Rights Act 1998, privacy and property and the future of human rights in the UK – and whether Brexit will make any difference
The European Convention
The Convention for the Protection of Human Rights and Fundamental Freedoms (the formal name for the Convention) was conceived in the aftermath of the Second World War and followed the 1948 Universal Declaration of Human Rights. It was drafted by the newly-formed Council of Europe in 1950 and entered into force in 1953. All member states of the Council of Europe are signatories to the Convention and new member states are obliged to sign at the earliest opportunity. There are currently 47 member states of the Council of Europe, including the 28 member states of the European Union. Any aspect of EU law is automatically governed by the Convention, and every court and tribunal has power to take the provisions of the Convention into account.
The Human Rights Act 1998
While the UK took a leading role in drafting the Convention and was an early signatory, it was not until 1998 that a newly-elected Labour government enshrined it in national legislation in the Human Rights Act 1998 (HRA 1998). That Act prescribes that, so far as possible, primary and subordinate legislation must be read and given effect in a way that is compatible with the Convention rights (section 3), and if a court is satisfied that a provision is incompatible with a Convention right, it may make a declaration of incompatibility (section 4).
The Act also provides that it is unlawful for a public authority to act in a way that is incompatible with a Convention right, unless it could not avoid doing so because it was following existing incompatible legislation (section 6). The remedy it provides is for the aggrieved party to bring proceedings in the appropriate court or tribunal, or rely on the Convention right concerned in any legal proceedings (section 7), and the court or tribunal may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate (section 8).
Nothing in the Act affects, or can affect, the validity or continuing operation of any piece of legislation that is incompatible with the Convention rights, and though the courts can make declarations of incompatibility, they are just that – declarations. The UK parliament is sovereign and cannot be forced to change or repeal an Act that is incompatible with the Convention; in this, the UK differs from certain other jurisdictions such as the USA. Nevertheless, Acts of Parliament are prefaced with a declaration of compatibility, signed by the responsible minister.
The European Court of Human Rights
The European Court of Human Rights (ECtHR) based in Strasbourg (not to be confused with the European Court of Justice based in Luxembourg) is the supreme judicial authority on human rights jurisprudence within the member states of the Council of Europe. Under section 2 of the HRA 1998 every court or tribunal in the UK is bound to take into account any judgement or advisory opinion of the ECtHR in determining a question that has arisen in connection with a Convention right.
Human rights and tax
In 18 Articles and 17 subsequent Protocols, the Convention covers a wide spectrum ranging from (for example) the right to life and prohibitions against torture, slavery and the death penalty, to rights to a fair trial, enjoyment of property, education, free association, religion and conscience.
The rights and freedoms that have the closest relevance to tax and have most frequently been litigated in a tax context are:
- Article 6 – right to a fair trial. This provides that “in the determination of his civil rights or obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law . . .” Judgement is to be pronounced publicly but there are provisions to exclude the press and public in certain circumstances. Everyone charged with a criminal offence is to be presumed innocent until proved guilty according to law. Article 6 also guarantees certain minimum rights to everyone charged with a criminal offence.
- Article 8 – right to respect for private and family life, including one’s home and correspondence. The exercise of this right is subject to a ‘margin of appreciation’, ie, permitting interference by the state only so far as is “in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic wellbeing of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others”.
- Article 14 – prohibition of discrimination. This provides that the rights and freedoms in the Convention are to be enjoyed without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. Importantly, this is not a stand-alone right, but only a right not to be discriminated against in the exercise of other rights and freedoms secured by the Convention.
- Article 1 of Protocol 1 – protection of property. This confers the right of peaceful enjoyment of his or her possessions on every natural or legal person. Like Article 8, this provision is subject to a ‘margin of appreciation’: no one is to be deprived of their possessions “except in the public interest and subject to the conditions provided for by law and by the general principles of international law”, and the “right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties” is not impaired.
In the European Court
Taking Article 1 Protocol 1 (A1P1) first, the starting point for any court in a tax context was set out by Judge Lorenzen in NKM v Hungary  ECHR 430 (second section): “It has been the Court’s constant case-law that the imposition of taxes as a general rule is for the States to decide and that only if the system or the way it has been applied in a particular case is arbitrary or devoid of reasonable foundation can the imposition of taxes be challenged under Article 1 of Protocol 1”.
In that case the ECtHR, while upholding the principle that it was for the states to decide rates of taxation, nevertheless held that the applicant, a Hungarian civil servant who had been subject to a 98% rate on part of her severance pay, had a legitimate expectation that she would receive a statutorily guaranteed payment and the confiscatory nature of the tax burden had effectively deprived her of it. By contrast, several cases involving tax avoidance schemes have failed successfully to invoke A1P1 because of the wider public interest in countering such avoidance: see, for example, Huitson v HMRC Commissioners  UKFTT 448 and Roao APVCO 19 Limited v HM Treasury & HMRC Commissioners  EWCA Civ 648, in both of which appeals against retrospective legislation were dismissed.
In general, A1P1 has not been successfully invoked to strike down tax penalties, although a line of cases has upheld the principle that the protections conferred by Article 6 may be relevant if a tax penalty is tantamount to a criminal charge because of its severity (King v UK  ECHR 631 (fraudulent and negligent delivery of tax returns)) or because of alleged dishonesty on the part of the taxpayer (Han v C&E Commissioners  EWCA Civ 1048 (civil evasion)).
This is so despite the domestic classification of such penalties as ‘civil’, as in the UK whose civil penalty code for taxation matters follows the recommendations of the Report of the Committee on Enforcement of Powers of Revenue Departments headed by Lord Keith in 1983. Article 6 will apply where the nature of the offence and the severity of the penalty, in addition to the domestic classification, point to its being criminal in nature. It also applies in determining a person’s civil rights and obligations, but the performance of a taxpayer’s obligations in general, being public in nature, falls outside the scope of the taxpayer’s civil rights and obligations and therefore outside the scope of Article 6 (Ferrazini v Italy ECHR Case 44759/98, in which a 12-year delay in hearing the taxpayer’s appeal against an assessment to tax was held not to be a breach of Article 6). However, the absence of an effective right of appeal may attract Article 6 (Berlioz Investment Fund SA v Director of the Direct Tax Administration ECHR Case 682/15, in which the national court failed to consider the question of whether an information notice served on the taxpayer was lawful as not being foreseeably relevant to the checks being carried out by the revenue authority).
Privacy and property
Respect for privacy (Article 8) has been invoked in cases involving legal professional privilege (unsuccessfully in R v Special Commissioner of Income Tax ex parte Morgan Grenfell Co Ltd v  EWCA Civ 329, at para 43ff), but is subject to an even wider margin of appreciation than A1P1 (see above). Nevertheless, as HMRC’s powers of search and inspection become more intrusive, there may be greater scope for Article 8 in future.
Article 14, while not stand-alone, can be engaged in conjunction with other articles – as, for example, in LH Bishop Electrical Co Ltd & Ors v HMRC Commissioners  UKFTT 522 (TC) where regulations which made online filing of VAT returns compulsory without making allowances for the appellants’ disability, age or remote location, were held unlawful under A1P1 and Article 8 combined with Article 14. Discrimination can be direct or indirect, as in R (oao SG and others (previously JS and others)) v Secretary of State for Work and Pensions  UKSC 16 in which it was argued (unsuccessfully) that the welfare benefit cap imposed on out-of-work households was discriminatory (A1P1 combined with Article 14) in that it affects primarily lone parents, most of whom were mothers, and therefore discriminated indirectly against women. A difference in treatment is only discriminatory “if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised” (ibid, per Lord Reed).
The future of human rights in the UK
Some strands of contemporary political thought are hostile to aspects of how the Convention and the HRA 1998 are applied in the UK. Such hostility seems founded in the belief that it is for the elected representatives, rather than the courts, to decide questions of public law such as those raised by human rights cases. The Conservative party manifesto of 2015 promised that the HRA 1998 would be replaced by a ‘British Bill of Rights’, but the 2017 Conservative manifesto was more ambivalent, promising only that they would not repeal or replace the HRA 1998 while the process of Brexit was under way, but would consider the UK’s human rights framework when the process of leaving the EU concludes. The manifesto also confirmed the UK would remain a signatory to the Convention for the duration of the next parliament.
Assuming the UK continues to be a signatory to the Convention, repealing the HRA 1998 would not take away the right of British subjects to apply to the ECtHR, though it might make such applications more frequent (subject to there being adequate funding for individuals to apply) if the machinery of the HRA 1998 were no longer available to UK courts and tribunals.
What might a British Bill of Rights look like? One view is that it might look very similar to the Convention, but with enhanced margins of appreciation allowing governments wider powers of derogation. Others favour the model on which the Labour government consulted in 2007 – akin to a written constitution that would, unlike the present Convention, entrench certain constitutional principles, allowing the courts to rule certain types of parliamentary legislation unlawful. The idea of a British Bill of Rights seems to be to give the public a greater sense of ownership of human rights principles rather than their being supposedly handed down by a remote and unelected judicial elite. Whether that is a fair assessment of the present arrangements is debatable, but for now, the urgency of Brexit seems to have given the HRA 1998 a reprieve.
About the author
Robin Williamson is technical director of the Low Incomes Tax Reform Group of the CIOT