BN66 - the road to Judicial Review

[Tax_shouldnt_be_taxing]

You're welcome

Thanks Emigre. Wanted to start off as I aim to continue. BTW, does anyone know if MontP has an SRN (Scheme Reference Number) from HMRC and when they got it?

I was looking to see if HMRC had conducted an Impact Assessment of BN66 and they have not. They did however conduct an initial one in May 2008 to Identify Users of Tax Avoidance Schemes and to get the SRN added to SA's from 30th Sept 2008.

Go dig around:

http://www.ialibrary.berr.gov.uk/sea...15&SortOrder=1

And specifically for this IA:

http://www.ialibrary.berr.gov.uk/Imp...e2516ef8d787e4

Plenty of Impact Assessments but nowt for BN66. I wonder why?

It appears that this IA which I believe also relates to BN67 is to clarify (again) the SRN system via a Consultation Document a number of issues including s.311 of the Finance Act 2004. The CD (para 25) recognises that when a scheme provider receives an SRN that they believe that they have fulfilled all their obligations to disclose all required details to HMRC. Now if that is the case and MontP have an SRN, then by implication, this IA and BN67 together with para 25 of the CD acknowledge that once you have an SRN HMRC are satisfied you have provided all required information. Therefore, why would HMRC take so long to then say that this Scheme breaches leglislation?

Interesting path to go down this one me thinks. Like most good case law, historical evidence that is not apparently connected can be combined to provide fact that ownership of fault is with the prosecutor not the defendant.

[orientalist]

Welcome Thankfully, the only historical memories of Gordon Brown that will exist in 200 years time will be being the most unpopular PM ever and the Chancellor/PM that took the UK into the third world.

Great first post-well done- as an asid DR- given the importance a precedent that could be set here, should we canvass other tax planners for support/advice?

[DonkeyRhubarb]

DR- given the importance a precedent that could be set here, should we canvass other tax planners for support/advice?

I suspect a lot of tax planners are watching from the sidelines. One of the reasons we are looking into setting up a dedicated website is to provide a more formal focal point for the campaign, and help raise awareness of the case, which as you say raises serious precedents.

I have tried to engage the CIOT on a number of occasions but, despite the fact that they opposed the legislation when it was introduced, they don't seem very interested. Again the website might help in this respect.

[Lazylobster]

Thanks Emigre. Wanted to start off as I aim to continue. BTW, does anyone know if MontP has an SRN (Scheme Reference Number) from HMRC and when they got it?

I was looking to see if HMRC had conducted an Impact Assessment of BN66 and they have not. They did however conduct an initial one in May 2008 to Identify Users of Tax Avoidance Schemes and to get the SRN added to SA's from 30th Sept 2008.

Go dig around:

http://www.ialibrary.berr.gov.uk/sea...15&SortOrder=1

And specifically for this IA:

http://www.ialibrary.berr.gov.uk/Imp...e2516ef8d787e4

Plenty of Impact Assessments but nowt for BN66. I wonder why?

It appears that this IA which I believe also relates to BN67 is to clarify (again) the SRN system via a Consultation Document a number of issues including s.311 of the Finance Act 2004. The CD (para 25) recognises that when a scheme provider receives an SRN that they believe that they have fulfilled all their obligations to disclose all required details to HMRC. Now if that is the case and MontP have an SRN, then by implication, this IA and BN67 together with para 25 of the CD acknowledge that once you have an SRN HMRC are satisfied you have provided all required information. Therefore, why would HMRC take so long to then say that this Scheme breaches leglislation?

Interesting path to go down this one me thinks. Like most good case law, historical evidence that is not apparently connected can be combined to provide fact that ownership of fault is with the prosecutor not the defendant.

Welcome to the thread and a very interesting post. I'm sure DR and others will find this of importance.

LL

[DonkeyRhubarb]

I was looking to see if HMRC had conducted an Impact Assessment of BN66 and they have not.

We also know this from Timms' commons statement referred to in the JCHR report, and from an earlier FOI request.

I think this was another serious mistake by the Government and HMRC. Of course, no-one would argue that it is reasonable to forgo impact assessments in the vast majority of cases where anti-avoidance legislation is prospective.

But is it acceptable to introduce a retrospective tax when no assessment has been made of the impact on the people it applies to? The JCHR certainly doesn't seem to think so.

Also, to quote Jane Kennedy in her recent email:

"I remember the debate and was content that, having questioned officials closely on the impact of this proposal, very few would be affected, certainly not in the way that your attachment is suggesting."

How did the officials know? Were they making this up by any chance?

[seadog]

Thanks Emigre. Wanted to start off as I aim to continue. BTW, does anyone know if MontP has an SRN (Scheme Reference Number) from HMRC and when they got it?

I was looking to see if HMRC had conducted an Impact Assessment of BN66 and they have not. They did however conduct an initial one in May 2008 to Identify Users of Tax Avoidance Schemes and to get the SRN added to SA's from 30th Sept 2008.

Go dig around:

http://www.ialibrary.berr.gov.uk/sea...15&SortOrder=1

And specifically for this IA:

http://www.ialibrary.berr.gov.uk/Imp...e2516ef8d787e4

Plenty of Impact Assessments but nowt for BN66. I wonder why?

It appears that this IA which I believe also relates to BN67 is to clarify (again) the SRN system via a Consultation Document a number of issues including s.311 of the Finance Act 2004. The CD (para 25) recognises that when a scheme provider receives an SRN that they believe that they have fulfilled all their obligations to disclose all required details to HMRC. Now if that is the case and MontP have an SRN, then by implication, this IA and BN67 together with para 25 of the CD acknowledge that once you have an SRN HMRC are satisfied you have provided all required information. Therefore, why would HMRC take so long to then say that this Scheme breaches leglislation?

Interesting path to go down this one me thinks. Like most good case law, historical evidence that is not apparently connected can be combined to provide fact that ownership of fault is with the prosecutor not the defendant.

The more of us who keep digging around the more we will uncover.

Reading through the imapct assessments you quote it is clear that a lot of thought and paperwork goes into the preparation of legislation and I have no doubt that s58 was the subject of a great deal of discusion and debate.

Dont forget it is quite rare to pass retrospective legislation so it will have received a lot of careful scrunity by officials before getting to the statue book

Our task is to get all the documents relating to how and why the decision was taken to withdraw the 4 cases going through the normal commissioner channels and for Treasury to change course and go for this retrospective legislation.

Hopefully the JCHR will have the authority to demand this information.

On the question of "clarification" I note today that the Gov have taken a case to the appeal court to "clarify" some legislation affecting compension payments to injured servicemen.

If they need the appeal court to "clarify" that recent legislation how come they did not let the courts "clarify" the legislation in BN66.

[ASB]

But is it acceptable to introduce a retrospective tax when no assessment has been made of the impact on the people it applies to? The JCHR certainly doesn't seem to think so.

At the risk of wandering off topic - possibly. However it is only, in my view, acceptable to do this to move a presumption of guilt to a presumption of innocence.

Let's say you were, say, a rapist 30 years ago. DNA etc has advanced to an extent that physical evidence that existed may now enable DNA matching and you can now be convicted. General population would largely think of this as a good thing. I'm not so sure. At the time the evidence was collected the conditions it was kept in etc do certainly have the scope to produce tainted results when the scientific advances are applied (and the CPS recognises this). It is perfectly acceptable to acquit somebody on appeal based on DNA advances. It is not acceptable to convict them. [What was that film with Tom Cruise?].

To move this to BN66, users of the schemes - who in my view at least knew they were playing a bit "fast and loose" with the rules (or should have) now end up in the invidious position where they have kept all the records they are required by law to do, but have no defence should they end at the commissioners - they can and do go back beyond the obligation of record keeping.

Hector (thanks Emigre saves me typing ) is quite right to quote Adam Smith. Unfortunately goverments (and it's not just the current one) cannot subject its citizens to taxation by terrorism if there is certainly.

[Tax_shouldnt_be_taxing]

We also know this from Timms' commons statement referred to in the JCHR report, and from an earlier FOI request.

I think this was another serious mistake by the Government and HMRC. Of course, no-one would argue that it is reasonable to forgo impact assessments in the vast majority of cases where anti-avoidance legislation is prospective.

But is it acceptable to introduce a retrospective tax when no assessment has been made of the impact on the people it applies to? The JCHR certainly doesn't seem to think so.

Also, to quote Jane Kennedy in her recent email:

"I remember the debate and was content that, having questioned officials closely on the impact of this proposal, very few would be affected, certainly not in the way that your attachment is suggesting."

How did the officials know? Were they making this up by any chance?

Good point DR. BTW, my current thinking is this:

If HMRC gave an SRN to MontP in say Aug 2004 then the comments by HMRC in BN67 and the Consulatation Doc (CD) para 25 infers that there are grounds that s.311 of FA 2004 leaves doubt about the reason for issuing an SRN. The subsequent IA and comments by the CIOT implies that the FA 2004 leglislation was poor and incomplete and at least confusing.

So here it is:

FA 2004 did not require the SRN to be on a persons SA for a given year. This in turn leads HMRC to issues on closing aviodance loopholes or efficient investigation of potential breaches with the disclosed Scheme. BN67 and the IA deals with this. So, if existing leglislation (1987) was already law but HMRC had poor practices to relate a Scheme to any given SA (as per BN67) then it is incumbent on HMRC to rectify this (which they have done via BN67 and the CD para 25 comments). However, the poor administration of code and law by HMRC following FA 2004 and the subsequent BN67 and related IA plus the CD clearly shows that HMRC did not have the facility to relate an SA to an SRN Scheme and that this is rectified from Sept 2008 and the IA recommends that this will help alleviate the issue.

Therefore, a Scheme which was known to HMRC in Aug 2004 in compliance with FA 2004 could not be looked into efficiently by HMRC due to issues in s.311 of FA 2004 and related SA investigations can be equally impacted. BN67 attempts to resolve this even though CIOT have reservations. From all the evidence I can find thus far, there is implication that HMRC did not have its house in order in the FA 2004 leglislation and are seeking to resolve this via BN67 through an IA and CD. Why does BN66 (clearly associated) not warrent such due diligence and how can someone's SA be now looked at retrospectively if the FA 2004 was found wanting by admission of BN67? Basically, HMRC lacked proper protocol to address SRN's and Scheme investigations by way of SA's as of the FA 2004 and HMRC recognise this via BN67, the IA and the CD which followed (para 25), and the comments of CIOT. BTW, BN67 is not retrospective as it only came into play from Sept 2008 although passed in FA 2008. Yet it deals with problems with SA's and SRN's from FA 2004 onwards (not before).

I plan to look into the relationship and timelines between BN66 and BN67 further and will post findings as I get them (quoting relavant sources, mainly Hector) to show that HMRC lacked / ignored due diligence.

[Emigre]

Scheme Registration

This is interesting. I guess its obvious really but I had not focused on the fact that HMRC had no ability to relate an SA declaring use of a tax shelter to any particular SRN. ie the SAs required us to tick the box to say we used a registered shelter but not which one!

Yet another poorly drafted piece of legislation. This actually goes some way to explaining Jane Kennedy's somewhat vague comments at the Treasury Sub-Committee about HMRC and them not being aware of the scale of use of the scheme. That said it does not take much of a process to identify, say all of the MontP clients since the wording on the SA, at least in respect of the scheme element, will have been identical.

One would assume that since FA2004 HMRC will have opened an investigation into every SA that ticked the tax shelter box, and that they then would have had a team trying to establish which one. The strange thing here is that they opened investigations into all my returns but never asked me a single question about which scheme I was using - in essence whilst they formally opened an investigation into my various tax years they actually did no real investigation whatsoever.

[DonkeyRhubarb]

how can someone's SA be now looked at retrospectively if the FA 2004 was found wanting by admission of BN67?

I'm not sure how this relates to the angle you are looking at, but here are a few things to bear in mind.

1) HMRC opened enquiries into most SAs before the Jan31 deadline for the given tax year. They didn't need the disclosure regime to identify the scheme, since the wording on the SA made it obvious that we were claiming exemption under the DTA. For example, they opened enquiries into my 2001/2 tax return in November 2003.

2) There were a few SAs where they opened enquiries past the deadline using discovery assessments. For example, a mate of mine had his 2001/2 tax return re-opened in mid-2004.

3) The disclosure regime may have made it easier for HMRC to identify users of the scheme but it wouldn't have made much difference, since from the very start they had no trouble catching people. For example, all but a very small number of the first years (2001/2) SAs were placed under enquiry by 31st Jan 2003.

4) If you look at the following figures, most of these SAs were caught long before the disclosure regime came into force. Aside from a few discover assessments, the vast majority were also opened prior to the corresponding Jan31 deadline.

Year..........Number of scheme returns under enquiry by HMRC
2001/02........................229
2002/03........................428
2003/04........................759
2004/05........................838
2005/06........................935

EDIT - one thing I didn't mention is that in the first few years, all enquiries into the above SAs were opened by a single Special Compliance office, and handled by the same lead officer. Intitally this was Liverpool (Garnett) and later Salford (Brannigan). In other words, they treated all the SAs as part of a "scheme", even though there was no scheme registration in place at the time.