BN66 - Time to fight back (Chapter 3)

[bananarepublic]

I suspect they are pinning their hopes on the JR being rejected at the oral hearing.

The more I learn about this case the more I realise how far HMRC/Treasury have gone out on a limb on this one.

How do they justify applying retrospective legislation to this scheme when every other arrangement (eg. BN60 FB2009) has been closed prospectively? There is nothing exceptional about our scheme compared with the myriad of other schemes they have closed over the years.

Hopefully, when we can get hold of the case files from HMRC/Treasury under FOI we might finally discover why the scheme was singled out for unfair and disproportionate treatment.

IMHO there is no mystery about us being singled out.

HMRC are justifying the retrospection because they applied retrospection in 1987 after the Padmore case.

[DonkeyRhubarb]

Retrospective Legislation vs. Retrospective Tax

IMHO there is no mystery about us being singled out.

HMRC are justifying the retrospection because they applied retrospection in 1987 after the Padmore case.

If that is the basis of their case, then it is extremely tenuous.

The 1987 legislation was not a retrospective tax. It merely stopped several thousand people claiming a windfall tax rebate that they weren't expecting. No-one ended up paying backdated tax as a result of it. The legislation even excluded Padmore and a few others who had already made a claim, so they didn't have to repay tax.

No-one's legitimate expectation was infringed by the 1987 Act. This is why the then Conservative Govt (reluctantly) tabled the legislation. Ironically, the opposition Financial spokesman at the time was none other than Tony Blair, and Labour only agreed to support the measure because it didn't impose a retrospective tax liability.

This is what the Joint Committee on Human Rights had to say about retrospective tax in 2004:

“A retrospective provision would be one which levied the charge in respect of the benefit enjoyed in previous years. Such a tax would require very careful scrutiny for compatibility with the requirement of accessibility and foreseeability.”

The 1987 Act was not retrospective according to this definition, whereas BN66 clearly is.

Do NOT be taken in by HMRC/Govt's play on words.

[smalldog]

Guys its really no mystery why we have been singled out, weve talked about it on this forum loads of times..

This government and espcially Mr Timms (who coincidentlally happens to have had connections with consultancies in the past and probably could be argued continues too) hate freelancers and want us all to take permie jobs so:

A) we dont compete with consultancies for contracts, if we are wiped off the face of the earth they get all the work simple. Be interesting to see how many government reps are non-exec directors sitting on boards of the big 4 and/or software companies. There is nothing consultancies hate more than losing out to a highly skilled independent freelancer who costs the client 50% less than their grad on-site at £1000 per day. It is not practical due to sohrt and medium term demands to take on permanent staff, you need to be able to flex your manpower for specific periods of time, there will always be such a demand and if freelance contractors dont exist, only consultancies will be able to fulfil the demand.

b) They are a labour government remember, and the last thing left wing governments like or want are entrepreneurs and people working on their own account. They want everyone to be on PAYE being good robots ala 1984.

[PurpleTurtle]

Did HMRC loose this one based on the workings of the scheme being deemed valid or; the retrospective changes by HMRC?

If the latter, this hopefully this would be very close to being case law. (how would it be deemed valid to close 1 scheme retrospectively and not another)

Here's the official line on it:

http://www.lawreports.co.uk/WLRD/2009/CHAN/Apr0.3.html

[DonkeyRhubarb]

Guys its really no mystery why we have been singled out, weve talked about it on this forum loads of times..

Yes but they can't use the "we hate freelancers" argument in court.

Why was a retrospective tax justified in this case and not others? What was so exceptional/special/unusual about this scheme that it warranted such an extreme response?

If, as bananarepublic says, the only "legal" justification was that it was clarifying existing retrospective legislation then they are on extremely dodgy ground because the 1987 legislation was not a retroactive tax, which is why no-one challenged it at the time.

[DonkeyRhubarb]

Retrospective tax legislation

This has been said before but I think it's worth mentioning it again.

There is nothing wrong in principle with retrospective tax legislation. After all it's possible (albeit unlikely) that a retrospective provision could actually benefit taxpayers.

It is where a retrospective measure imposes an additional charge on transactions which occurred in the past that it could fall foul of the human rights act.

http://www.tax.org.uk/attach.pl/7561...23_TA_1208.pdf

The UK Parliament Joint Committee on Human Rights (JCHR) Twelfth Report noted in its comments on the pre-owned assets legislation that while states have a wide discretion under article 1 of Protocol 1 of the ECHR to impose taxes, the legislation must satisfy the principles of legal certainty and proportionality. The Committee then went on to note that:

‘For an interference to be lawful under the second paragraph of Article 1 of Protocol No. 1, it must satisfy the qualitative requirements of accessibility and foreseeability: the law which imposes the tax must be published, intelligible and generally available in a form which enables the individual to organise their affairs knowing with reasonable certainty the consequences of acting in different ways.’

[smalldog]

DR totally agree, im purely stating why I think they have done it, come on you know me I didnt for a minute suggest it was defensible. I dont think it will stand up in court either thats why Im confident we will win...

[BrilloPad]

Just heard the PWC JR hearing has been postponed until 3rd JUne.......

[DonkeyRhubarb]

DR totally agree, im purely stating why I think they have done it, I dont think it will stand up in court either thats why Im confident we will win...

It makes you wonder whether BN66 was just a PR exercise to scare other contractors off using the schemes. In that respect, it has probably worked and the tax planners must have lost a ton of business.

Even if we eventually win, I can't see schemes ever being as popular again.

Of course, it's a hollow victory for the Govt since, as far as I can tell, everyone has just gone back to running a ltd Co and flouting ir35 the conventional way.

[smalldog]

totally, ive gone back to LTD so in some ways they've done me a favour by bringing in BN66..!!!