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Frequently Asked Questions
Here are some questions which I am often asked. Clicking on the question will take you to my answer.
How do I instruct a barrister?
The best approach is to go through your usual solicitor, in the same sort of way as you would often be referred through your usual GP if you were to need a specialist doctor. A New Zealand barrister must normally be instructed through a solicitor. If necessary, assistance can be provided in organising an instructing solicitor (a "reverse brief"). Whichever way it happens, the client's contract is with the instructing solictor, who sub-contracts to the barrister.
The reasons for this requirement are to some extent historical, but it also has a real and continuing justification in preserving the benefits to clients of a barrister's absolute independence.
In some matters, from July 2015, I can take "direct instructions" without an instructing solicitor.
What proportion of your tax work has been for/against Inland Revenue?
About 2/3 for taxpayers, 1/3 for Inland Revenue on average over the first five years of my practice, although since 2009, due to a Crown Law Office change of policy on briefing out cases, I have had no Inland Revenue instructions.
Does working for both taxpayers and Inland Revenue cause problems?
It shouldn't do. A barrister must serve his or her particular client on a particular case fearlessly, wholeheartedly and dispassionately, subject only to an over-riding duty to the Court. It would be very wrong for any barrister to compromise a client's case in any way for fear of losing favour with any other client, actual or potential. Having said that, there could be issues around conflict of interest, although I have not had any such situations in my practice to date.
Additionally, as above, I have not had any Inland Revenue briefs since 2009.
On the other hand, I believe there are real advantages to my experience of having worked for both sides: it enables me to give objective and informed advice as to the other side's likely options in any dispute, and to approach the other side fairly, realistically and without rancour. This in turn helps promote sensible settlement of a dispute when that is possible, and the (cost-)efficient conduct of litigation when settlement is not possible.
How much does a court case cost?
"Have you been saving up for a rainy day? Guess what? It's raining." Primal Fear (1996)
Even in the context of a particular dispute, there are so many variables that an accurate estimate is impossible. I endeavour to give an estimate at the start of an engagement, to bill any significant costs on a monthly basis, and to discuss the potential impact of developments on likely costs as those developments occur.
Civil litigation can be a ruinously expensive business. It is also an area where skimping on the preparation of a case and reducing the calibre of a legal team can be disastrous. It is important to have a legal team that can best identify the strong points of your case. A feature of litigation is that a 10% advantage in one side's case over the other side's case will usually translate into a 100% victory.
Because civil litigation is so expensive, and because it is vital, if embarking on it, to resource it as well as possible, I strongly believe that often the best thing a litigation lawyer can do for his or her client is to keep the client out of court if at all feasible. In all but the biggest of disputes, or for an institutional litigator (like a government department), the financial, emotional and organisational costs of going to court mean that there are no absolute winners.
Are the scales weighted in Inland Revenue's favour in a tax dispute?
This question presupposes that Inland Revenue and taxpayers are in a remotely comparable position, as if, for example, they were two individuals on each side of a contract. In reality, I think that there are fundamental differences, and some of the rules recognise these differences. Whether they give an unfair advantage to one party or the other in any given situation is often debatable. Some examples of the different positions are:
- A taxpayer will have much more knowledge of the transactions in dispute than Inland Revenue.
- As against that, Inland Revenue has very wide powers to obtain information and evidence. Complying with information requests can put a very heavy burden on the taxpayer.
- There are a number of fixed deadlines, usually two months, by which taxpayers must respond to procedural steps in the disputes process. Failure to meet one of these deadlines will usually end the dispute in Inland Revenue's favour.
- Inland Revenue has a limited time within which it must complete the investigation and some stages of the disputes process, before issuing an amended assessment. After that period an amended assessment can only be made in rare circumstances, usually involving some wrongdoing on the taxpayer's part.
Tax administration is the area where the coercive powers of the State touch most citizens most frequently, and often most painfully. Almost every adult has regular contact with Inland Revenue (even if only represented by deductions of PAYE), and the same cannot be said for any other government department. In this area, tensions between the individual's rights, obligations, powers and immunities as regards the State will continue to arise and require to be tested and enforced in novel and unexpected ways. The law will inevitably continue to be fluid.
When should a tax litigation expert be brought in to a dispute?
My advice is to err on the side of caution, and to instruct a tax litigation expert as early as possible. There are two, inter-related, reasons for this:
- As mentioned above, often everyone loses if a case goes to court, and if litigation can be avoided by settlement, both sides may be winners. A litigation lawyer can give a realistic view of where a dispute is likely to go, and what the various outcomes could be, and help develop and carry through a successful negotiation strategy. The best outcomes may well happen when the other side does not even realise there's a litigation lawyer advising the client.
- If litigation is going to happen (or may well happen), the sooner a litigation lawyer is involved the safer a client will be. This is especially the case with the use of Inland Revenue information-gathering powers and the pre-assessment tax dispute resolution process in Part IVA Tax Administration Act 1994. There are many pitfalls for the unwary or the ill-advised, on both sides of the fence.
At the very latest, I would suggest that a tax litigation expert be involved at the "Statement of Position" stage under the Part IVA Tax Administration Act pre-assessment process.
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