A core function of HMRC is to collect taxes prescribed as ‘due’. HMRC is vested with a managerial discretion, which allows it to take decisions conducive to the collection and management of taxes and credits, which includes engaging in co-operative compliance, and settling disputes, e.g. through mediation. The boundaries of this discretion are unclear. The exercise of discretion raises three questions:
1. ‘Legal’ – What may HMRC do with the discretion?;
2. ‘Normative’ – What ought HMRC do?; and
3. ‘Practical’ – What can HMRC do?
The pervasive managerial discretion which HMRC exercises to collect tax is derived from section 5 of the Commissioners for Revenue and Customs Act 2005 (CRCA 2005), which is supplemented by section 9, which provides that HMRC may do anything which it considers:
(i)          necessary or expedient in connection with the exercise of their functions; or
(ii)        incidental or conducive to the exercise of their functions.
However, s.5 does not specify how HMRC should go about performing this task, and correspondingly it provides legal discretion as to how the task is to be performed. This provision is to be contrasted with statutes that do express how a ‘discretion’ is to be exercised. The fact that a legal discretion arises means that the courts will respect the decisions taken by HMRC pursuant to the ‘discretion’ provided that the limits or boundaries of the ‘discretion’ are not breached. Therefore, provided HMRC does not cross any statutory and judicially developed ‘boundaries’, then it has open to it a range of choices, any one of which will be considered to be lawful if chosen. S.11 of CRCA 2005 also provides, ‘In the exercise of their functions the Commissioners shall comply with any directions of a general nature given to them by the Treasury’, e.g. On 30 April 2020, the Chancellor made a ‘Treasury Direction’ under Section 71 and 76 of the Coronavirus Act. It sets out that HMRC were responsible for the payment and management of amounts to be paid under the Self-Employment Income Support Scheme, as set out in the Schedule to the Direction. Therefore, it would appear that this power can be used to provide grants. Can it also be used to provide ‘targeted’ tax relief to e.g. entrepreneurs and SME’s who meet certain criteria and threshold requirements, in order to encourage and boost growth in the economy? If so, could it also be used as a political tool to avoid/end a strike by public sector workers, by providing temporary tax incentives in lieu of a pay increase?