BN66 - the road to Judicial Review

[bananarepublic]

The problem is getting HMRC to come clean about what they did and didn't know. Their usual response is to claim ignorance.

There are some users since 2001 whose returns have never been challenged, but HMRC's excuse is that it is difficult for them to identify everyone.

It might, be an acceptable, albeit cynical approach for HMRC to take by claiming ignorance as a reason for not answering FOI requests. It is surely a wholly different matter in a court of law.

The Dual Tax Agreement was used prior to 2001 to relieve tax on land sales and/or royalties if memory serves me correct. This scheme was modified so it could be used by contractors to avoid IR35.

I don't think HMRC non disclosure will wash in the JR - can an organisation perjure itself?

[bananarepublic]

Whilst IR35 is riddled with holes and is farcically applied, I'm not sure that it is retrospective in the same way that S58 is. OK, HMRC can go back years and deem contracts within IR35, but at the time of taking those contracts we did know IR35 already existed and might be applied to those contracts.

Lets not forget that IR35 was the catalyst behind all of these schemes. None of them - composite companies, EBTs, partnerships - whether on or off shore, etc. would exist - or at least to the same extent - without IR35. A whole avoidance industry was created out of nothing. Prior to IR35, tax avoidance "schemes" were bespoke products sold to very rich people. IR35 lowered the bar and produced a mass market product - which will continue irrespective of what happens to IR35.

Perversely enough I joined the scheme because it seemed that it offered more certainty than trying to run a company outside IR35. The issue with IR35 - at least for me - is that even if you ran your company in the belief it was outside IR35 - with full due diligence - it was possible that many years in the future that could be overturned. And so it has proved. IR35 is incredibly iniquitous - with two people in exactly the same situation being judged - and thus taxed - differently.

To be honest, if I knew what I know now back in 2001, I would probably have still joined up. We may still have some uncertainty for a while, but at least we will get a decision one way or the other. For the vast majority of contractors who have worked through a limited company IR35 will hang over their heads for ever.

[DonkeyRhubarb]

Answering the FOI Request

http://www.whatdotheyknow.com/reques...e_before_20012

Remember, however they respond will become a matter of public record on an open website.

I can think of 5 possible ways they could respond to this request, which probably explains why it is long overdue.

1) Stick to their original story that they aren't aware of any
This would be untrue because Special Investigations (SI) have since acknowleded the existence of a claim prior to 2001.

2) Reject the request on cost grounds
If SI have already searched the records as part of the Judicial Review disclosure, then the information should already exist. To refuse on cost grounds would be an admission that no such due diligence has taken place.

3) Only publish what they think we already know
It would look very fishy if SI claimed the only scheme usage they could find prior to 2001 was the single example that had been pointed out to them.

4) Publish the true facts
Had tax offices followed the guidelines in their own Tax Manual then all claims to double tax relief should have been referred to the International Division (Double Taxation), and the information would be readily available.

As it is, the information is probably much harder to track down and SI may not want to look too hard for fear of what they might find.

5) Reject it as vexatious

[SantaClaus]

http://www.whatdotheyknow.com/reques...e_before_20012

Remember, whatever they say becomes a matter of record on a Public website.

There are 5 possible ways they could respond to this request, which probably explains why they have let it go way overdue.

1) Stick to their original story that they aren't aware of any
This would be an outright lie because they have subsequently acknowleded the existence of a claim prior to 2001.

2) Reject the request on cost grounds
If they have already searched their records as part of the Judicial Review disclosure, then the information should already exist. To refuse on cost grounds would be an admission that they haven't bothered looking.

3) Only publish what they think we already know
It would look very fishy if they claimed the only scheme usage they could find prior to 2001 was the single example that had been pointed out to them.

4) Publish the true facts
Had they followed the guidelines in their own Tax Manual then all claims to double tax relief should have been referred to the International Division (Double Taxation), and the information would be readily available.

As it is, the information is probably much harder to track down and they may not want to look too hard for fear of what they might find.

5) Reject it as vexatious

Looks like someone has posted an annotation to back you up, DR.

[Emigre]

http://www.whatdotheyknow.com/reques...e_before_20012

Remember, whatever they say becomes a matter of record on a Public website.

There are 5 possible ways they could respond to this request, which probably explains why it is way overdue.

1) Stick to their original story that they aren't aware of any
This would be an outright lie because they have subsequently acknowleded the existence of a claim prior to 2001.

2) Reject the request on cost grounds
If they have already searched their records as part of the Judicial Review disclosure, then the information should already exist. To refuse on cost grounds would be an admission that they haven't bothered looking.

3) Only publish what they think we already know
It would look very fishy if they claimed the only scheme usage they could find prior to 2001 was the single example that had been pointed out to them.

4) Publish the true facts
Had they followed the guidelines in their own Tax Manual then all claims to double tax relief should have been referred to the International Division (Double Taxation), and the information would be readily available.

As it is, the information is probably much harder to track down and they may not want to look too hard for fear of what they might find.

5) Reject it as vexatious

They seem to be abnormally late on this response DR. have you tried following it up with a gentle phone call. It may be that the department is understaffed over Xmas. Still, hopefully your request will get the priority and attention that it deserves in the New Year.

[DonkeyRhubarb]

HMRC Manual

For those who haven't seen it, this is what it used to say in HMRC's Tax Manual from at least 1993 onwards. (This section was removed a few months ago.)

The text in bold exactly describes our scheme.

The legislation is written in terms of United Kingdom residents who are partners but some tax planners have already suggested that it may be possible to develop the Padmore principle to apply to other situations where there are primary and secondary taxpayers for example where there is a trading trust with non-resident trustees and the profits pass to a United Kingdom resident life tenant.

These further refinements will be kept under review.

It has also been suggested that the legislation has not succeeded in overriding the treaties. Any claim to exemption connected either with a new scheme or the effect of subsection (4) should be referred to International Division (Double Taxation).

[SantaClaus]

For those who haven't seen it, this is what it used to say in HMRC's Tax Manual from at least 1993 onwards. (This section was removed a few months ago.)

The text in bold exactly describes our scheme.

You mean, they have removed a section of their tax manual retrospectively?

Do you think certain members of HMRC might be acting illegaly?
Happy New Year to Her Majesties Racketteers and soon to be Convicts

[smalldog]

For those who haven't seen it, this is what it used to say in HMRC's Tax Manual from at least 1993 onwards. (This section was removed a few months ago.)

The text in bold exactly describes our scheme.

you've got to be kidding, they removed it!!!! on what basis?? hmmm cover up this is getting fishier and fishier...

[DonkeyRhubarb]

you've got to be kidding, they removed it!!!! on what basis?? hmmm cover up this is getting fishier and fishier...

They removed it because FA 2008 made it obsolete. Even without the retrospective part of BN66, there was a second measure passed at the time preventing these types of scheme working in the future, so the guidance is no longer relevant.

[GottaBeOptimistic]

New lurker !

Hi and thanks to DR and co for your relentless fight and support of this case.

I've been an avid watcher of the posts for a couple of years now and take great comfort in the information and comments put forward on this thread.

Could somebody confirm what the likely timeline is going to be after the 19th should we win or lose ? Will there be a verdict that day or is it just a hearing ? Once a decision is known, how long would an appeal take ? What other course of action is likely ?

Keep up the fight - great job !!!