BN66 - the road to Judicial Review

[OnYourBikeGB]

I was hoping to fly over tomorrow, but still not sure if I can.

A very big thank-you to all those in court today for reporting back. Interesting about Alan Jones. I'd loved to have seen his face (both of them) when the judge used the 'rolled over' phrase. It's funny about him passing notes to HMRC blokes, made me think of Sid The Snitch from Hill Street Blues.

What surprises me so far is that they have nothing new, and trying to attack us on the lines that the courts do not have the right to interfere with the will of parliament sounds like a bit of a risky fallback. I'd imagine the judge may have a view on that himself.

Like many others, I remember the PCG battle over IR35, and the case they fought, I was certain we would win, so we can't take anything for granted. I don't like the sound of such a technical argument from Hector either. Very difficult to interpret. That said, we seem to have got our case across, clearly and concisely. Padmore being excluded, if that is the case, is good news too. If that has been ruled out, and we win, how are HMRC going to be able to attack us under the legislation that stood before BN66? Not with Padmore anyway, back to the drawing board, Hector!

Thank-you again to all.

[silver_lining]

[QUOTE=bollox;1050092]thought our boy mullered the HMRC case, and as far as I can tell the judge is pretty convinced that padmore has got nothing to do with us at all..

I was in the front row of spectators for the morning session, right beside the two HMRC chappies, who were muttering fervently at some of the things our QC was saying (I was right in front of Alan Jones who at one point passed a note thru to one of the HMRC guys)....

anyway thought mr Singh's line of attack was a bit weak, however I was up in the gods at this point and couldnt hear properly, so i may have missed some damning attacks..

Think he'll get the bovver boots out tomorrow when he atacks the scheme itself etc...[/QUOTE

so I guess any talk of Mr Jones somehow supporting our cause dies with the fact he is passing notes to HMRC....

He also has some summing up thing tomorrow, I believe?

Anyhow hopefully it won't matter too much in the scheme if things, but must admit does concern me.

On the hole sounds not too bad today; just need Elvin to tie the Singh argument back to his own, which hopefully he will think of something this evening

Elvin, just to let you know you are not lonesome tonight

[bananarepublic]

Just to say a big thank you to everybody who has contributed to the case - especially DR.

There are a few things that strike me-
1) My understanding is that there was previously some kind of convention that retrospection by statute for taxation would only take place where a warning had been given. HMRC's contention is that Padmore was our warning. Surely this has now been blown out of the water. So if this had been established at an earlier point the retrospection should not have been countenanced. [ Did our brief mention that Padmore retrospection didn't result in a single extra tax bill for anyone? ]

2) HMRC's line that the courts have no business interferring in the will of parliament is worrying, but inevitable as this is surely the only string to their bow. I agree with the IR35 argument, although to be fair the arguments presented at that JR seemed to be a bit of stretch for me - our case seems much stronger this time. As far as HR legislation goes, surely you can't then pass laws that goes against these rules?

3) Whatever the outcome it is vaguely reassuring that despite the best efforts of HMRC/HMT we got our day in court and further to this we have the best representation that is possible on our behalf.

4) If we win the JR then surely HMRC have severely compromised their case at any future special commissioners (etc) hearing?

5) One more point. There have been lots of other so called "artificial schemes" that have been shut down prospectively (& have been at least as aggressive as ours). And anyway HMRC's argument on this is b*llsh*t as there is already plenty of legislation and case law to deploy against "artificial" schemes.

I am not setting my hopes very high, but at least we are beginning the process that will finally set some closure over this ....

[SantaClaus]

Notes from the Court

Thanks so much to everyone who attended, it was really nice meeting you all. Specialy thanksto DR who flew in to Gatwick amidst fog delays and others who stayed overnight in hotels. There must have been at least 40-50 of us there.

Myself and two others spotted Vince Cable outside the court (he was there for a different case) and managed to put some points across to him. He gave us a non-committal answer as any politician would do, but wished us good luck.

I managed to scribble down some notes whilst in the courtroom today. They are far from complete as it was a job to keep up, especially from the upper gallery, but here is what I gained:

The case started around 11:00 due to a previous case being heard.

The Judge appeared good natured to both our QC, Mr Elvin and HMRC’s QC Mr Singh, although as someone pointed out, he did frown at Singh after a number of irrelevant points were discussed.

Our QC, Mr Elvin, argued that the case is not about doubting the operation of the tax scheme, but that HMRC didn’t do anything for 7 years.

He made the following points confirming that the Revenue knew about the scheme since 2001/2002.

• The Revenue was fully appraised of the scheme since 2001/2002.
• A “technical exchange” took place in 2002.
• The position of the Revenue was highly uncertain. HMRC said they disputed the tax scheme from 2002, yet did not come up with an argument until 2008.
• There was no referral to the Special Commisioners. If they had a case in 2002, then there would have been a challenge by the Special Commissioners in 2002.
• Revenue had a lack of confidence in taking the case to the commissioners because of current tax law.

The Huitson case was discussed. Mr Elvin went through Huitson’s Self Assesment return and all correspondence with the Inland Revenue in chronological order to prove the above points. He stated:

The scheme was declared on Mr Huitson’s 2002 tax return.
There was no question of the taxpayer concealing anything. The answers to letters from the Revenue were provided “clearly and swiftly”.
The Revenue correspondence stated the tax scheme was likely to be challenged over the years, yet what is not stated is why it is likely to be challenged.
There were letters from HMRC asking for payments on account but no explanation as to why the scheme may not work.
Repeated that the Revenue knew full well how the scheme operated since 2002.
HMRC wrote to Huitson and others stating “we are now considering taking a number of representative cases forward”, which is something they didn’t do.

Mr Elvin concluded the only solution the Revenue could come up with at the end of the day was retrospective legislation.

There was a discussion of the Padmore case and how it didn’t apply. Our QC went over various additions through the years and proved they didn’t apply.
I’m a bit sketchy on the details, but he went on to say Parliament was seeking to address the Padmore problem, but there was no indication that Parliament intended anything other than to deal with the Padmore case.
The Judge agreed with Elvin that the Padmore legislation did not have a wider reach, i.e. our scheme.

There was a lot of talk about the Archer vs Shee principal. Initially the Revenue had said that Archer vs Shee had applied. Elvin explained this was successfully contested in writing by Montpelier during the early stages of correspondence and HMRC dropped the reference after they did not have a clear argument.

The Chartered Institute of Taxation was mentioned and their view that retrospective tax is “fundamentally wrong”.

Mr Elvin stated that taxpayers had no warning of this legislation. The terminology “clarifying Padmore legislation” only appears at the time of the 2008 Finance Bill.

He mentioned that only the Suo Motu users who settled at a lower rate of tax had “rolled over” and had no bearing on the Revenue stating we knew the scheme didn’t work. Most of us had decided to fight the decision.

Mr Elvin then went on to discuss the terms of the trust agreement, in particular the consultant does not have the authority to be agent to the partnership or an employee of the partnership.

It was stated that Montpelier had obtained from Revenue Council an opinion that showed the tax scheme applies and is effective. He then went on to dismiss the opinion provided to the Revenue by their QC.

He again dismissed claims that HMRC did not know about the scheme and refers back to the Huitson correspondence. He also dismisses the Revenue’s statement “identifying schemes in all cases wasn’t easy for HMRC” concluding they had plenty of information to be aware, e.g. Mr Huitson’s case.

Mr Elvin said the “Revenue do not delay if they have a clear cut and reasonable position to take.” Schemes were known as a matter of fact, whether or not they were quoted on the Self Assessment.

Then there was discussion of a case involving Lord Justice Peter Gibson. Lord Gibson defines a partnership with 5 points. Mr Elvin proved they were not the same as our arrangements.

1hr Break for lunch at 13:00

14:00 Back in the courtroom.

Mr Elvin continued with his statement. There was an explanation of Double Taxation Law and that the DTA agreement was not an instrument of tax avoidance but that of avoiding being taxed twice.
Elvin mentioned “Pirelli” case, but couldn’t get the details down quick enough.

Then followed talk of Human Rights issues, namely retrospectivity and proportionality. Also whether undue delay on the part of HMRC has caused excessive burden on ourselves.

Elvin argued that the legislation was not a corrective provision to put right what should have been and that the proportionate response would have been to only legislate only for the future. He then gave an example of a case where the authority did act quickly in order to show it can be done. He argued that the Revenues response was not “proportionate” and that is the element associated with the Human Rights that applies.


15:00 Mr Singh started his defense for HMRC

He seemed to do a complete U-turn from the originall defense provided to the court and Montpelier before the case, and suddenly the case was no longer so much about Padmore, claims that the scheme was not disclosed etc., but instead the basis of their case was that the Human Rights legislation allows this type of retrospection.

His main points were:

• Europe does not prohibit retrospection
• Proportionality – has there been an excessive burden on an individual?
• Nature of Strasbourg Convention is a set of principals for guidance, not rules.
• Claims that UK legislature has rights over European legislation and Parliament overrides the courts.
• Questioning whether fair balance has been struck.

Singh claimed the scheme was a tax avoidance device and an artificial way to get around IR35. He backed up his claim that our Human Rights were not being infringed by a disjointed mix of quotes from various cases heard in Strasbourg.

He mentioned that there were concerns that members of society should pay their “fair share” of tax. He claimed tax avoidance was a loss to the state and impacted on public service. At this point the Judge mentioned Quantative Easing as a much bigger loss!

Singh talked about the spirit of the law rather than the letter of the law, claiming Padmore was interpreted within the spirit of the law.

He also made mention to the OECD (a regulatory body) which was not submitted in the original evidence before the case. Singh agreed to provide Elvin with details before continuation of the case tomorrow.

Singh said his question to the court was to assess compatibility with Human Rights Legislation, not the length of time involved in pursuing taxpayers. Also whether “fair balance” has been struck even though they didn’t go to the Special Commisioners.

There were a couple of references to cases made by Singh that the Judge dismissed as irrelevant. Others that he took great interest in, so hard to gauge the Judges impression.

On the subject of whether the legislative effect was proportional, Singh said “proportionality requires a sociological assesment”. He also made claims that the will of parliament could override the court.

There were many Human Rights cases mentioned involving that of a Tour Operator and the flight tax. I don’t have the full details, but they may be covered again tomorrow.

That’s all the notes I have. Sorry they are a bit sketchy. It was hard to hear in the upper gallery.

Tomorrow will be a continuation of the Revenue’s case as Singh only spoke for just over an hour. So we're looking for a replacement scribe for me as I could only make it for today.

[Toocan]

Like many others, I remember the PCG battle over IR35, and the case they fought, I was certain we would win, so we can't take anything for granted. I don't like the sound of such a technical argument from Hector either. Very difficult to interpret. That said, we seem to have got our case across, clearly and concisely. Padmore being excluded, if that is the case, is good news too. If that has been ruled out, and we win, how are HMRC going to be able to attack us under the legislation that stood before BN66? Not with Padmore anyway, back to the drawing board, Hector!

IR35 was not retrospective, where as s.58 is - that is a huge difference. I think HMRC have to prove (or defend) the proportionality of s.58 and right now that looks like a mountain to climb.

[BolshieBastard]

Thanks so much to everyone who attended, it was really nice meeting you all. Specialy thanksto DR who flew in to Gatwick amidst fog delays and others who stayed overnight in hotels. There must have been at least 40-50 of us there.

Myself and two others spotted Vince Cable outside the court (he was there for a different case) and managed to put some points across to him. He gave us a non-committal answer as any politician would do, but wished us good luck.

I managed to scribble down some notes whilst in the courtroom today. They are far from complete as it was a job to keep up, especially from the upper gallery, but here is what I gained:

The case started around 11:00 due to a previous case being heard.

The Judge appeared good natured to both our QC, Mr Elvin and HMRC’s QC Mr Singh, although as someone pointed out, he did frown at Singh after a number of irrelevant points were discussed.

Our QC, Mr Elvin, argued that the case is not about doubting the operation of the tax scheme, but that HMRC didn’t do anything for 7 years.

He made the following points confirming that the Revenue knew about the scheme since 2001/2002.

• The Revenue was fully appraised of the scheme since 2001/2002.
• A “technical exchange” took place in 2002.
• The position of the Revenue was highly uncertain. HMRC said they disputed the tax scheme from 2002, yet did not come up with an argument until 2008.
• There was no referral to the Special Commisioners. If they had a case in 2002, then there would have been a challenge by the Special Commissioners in 2002.
• Revenue had a lack of confidence in taking the case to the commissioners because of current tax law.

The Huitson case was discussed. Mr Elvin went through Huitson’s Self Assesment return and all correspondence with the Inland Revenue in chronological order to prove the above points. He stated:

The scheme was declared on Mr Huitson’s 2002 tax return.
There was no question of the taxpayer concealing anything. The answers to letters from the Revenue were provided “clearly and swiftly”.
The Revenue correspondence stated the tax scheme was likely to be challenged over the years, yet what is not stated is why it is likely to be challenged.
There were letters from HMRC asking for payments on account but no explanation as to why the scheme may not work.
Repeated that the Revenue knew full well how the scheme operated since 2002.
HMRC wrote to Huitson and others stating “we are now considering taking a number of representative cases forward”, which is something they didn’t do.

Mr Elvin concluded the only solution the Revenue could come up with at the end of the day was retrospective legislation.

There was a discussion of the Padmore case and how it didn’t apply. Our QC went over various additions through the years and proved they didn’t apply.
I’m a bit sketchy on the details, but he went on to say Parliament was seeking to address the Padmore problem, but there was no indication that Parliament intended anything other than to deal with the Padmore case.
The Judge agreed with Elvin that the Padmore legislation did not have a wider reach, i.e. our scheme.

There was a lot of talk about the Archer vs Shee principal. Initially the Revenue had said that Archer vs Shee had applied. Elvin explained this was successfully contested in writing by Montpelier during the early stages of correspondence and HMRC dropped the reference after they did not have a clear argument.

The Chartered Institute of Taxation was mentioned and their view that retrospective tax is “fundamentally wrong”.

Mr Elvin stated that taxpayers had no warning of this legislation. The terminology “clarifying Padmore legislation” only appears at the time of the 2008 Finance Bill.

He mentioned that only the Suo Motu users who settled at a lower rate of tax had “rolled over” and had no bearing on the Revenue stating we knew the scheme didn’t work. Most of us had decided to fight the decision.

Mr Elvin then went on to discuss the terms of the trust agreement, in particular the consultant does not have the authority to be agent to the partnership or an employee of the partnership.

It was stated that Montpelier had obtained from Revenue Council an opinion that showed the tax scheme applies and is effective. He then went on to dismiss the opinion provided to the Revenue by Alan Milne QC.

He again dismissed claims that HMRC did not know about the scheme and refers back to the Huitson correspondence. He also dismisses the Revenue’s statement “identifying schemes in all cases wasn’t easy for HMRC” concluding they had plenty of information to be aware, e.g. Mr Huitson’s case.

Mr Elvin said the “Revenue do not delay if they have a clear cut and reasonable position to take.” Schemes were known as a matter of fact, whether or not they were quoted on the Self Assessment.

Then there was discussion of a case involving Lord Justice Peter Gibson. Lord Gibson defines a partnership with 5 points. Mr Elvin proved they were not the same as our arrangements.

1hr Break for lunch at 13:00

14:00 Back in the courtroom.

Mr Elvin continued with his statement. There was an explanation of Double Taxation Law and that the DTA agreement was not an instrument of tax avoidance but that of avoiding being taxed twice.
Elvin mentioned “Pirelli” case, but couldn’t get the details down quick enough.

Then followed talk of Human Rights issues, namely retrospectivity and proportionality. Also whether undue delay on the part of HMRC has caused excessive burden on ourselves.

Elvin argued that the legislation was not a corrective provision to put right what should have been and that the proportionate response would have been to only legislate only for the future. He then gave an example of a case where the authority did act quickly in order to show it can be done. He argued that the Revenues response was not “proportionate” and that is the element associated with the Human Rights that applies.


15:00 Mr Singh started his defense for HMRC

He seemed to do a complete U-turn from the originall defense provided to the court and Montpelier before the case, and suddenly the case was no longer so much about Padmore, claims that the scheme was not disclosed etc., but instead the basis of their case was that the Human Rights legislation allows this type of retrospection.

His main points were:

• Europe does not prohibit retrospection
• Proportionality – has there been an excessive burden on an individual?
• Nature of Strasbourg Convention is a set of principals for guidance, not rules.
• Claims that UK legislature has rights over European legislation and Parliament overrides the courts.
• Questioning whether fair balance has been struck.

Singh claimed the scheme was a tax avoidance device and an artificial way to get around IR35. He backed up his claim that our Human Rights were not being infringed by a disjointed mix of quotes from various cases heard in Strasbourg.

He mentioned that there were concerns that members of society should pay their “fair share” of tax. He claimed tax avoidance was a loss to the state and impacted on public service. At this point the Judge mentioned Quantative Easing as a much bigger loss!

Singh talked about the spirit of the law rather than the letter of the law, claiming Padmore was interpreted within the spirit of the law.

He also made mention to the OECD (a regulatory body) which was not submitted in the original evidence before the case. Singh agreed to provide Elvin with details before continuation of the case tomorrow.

Singh said his question to the court was to assess compatibility with Human Rights Legislation, not the length of time involved in pursuing taxpayers. Also whether “fair balance” has been struck even though they didn’t go to the Special Commisioners.

There were a couple of references to cases made by Singh that the Judge dismissed as irrelevant. Others that he took great interest in, so hard to gauge the Judges impression.

On the subject of whether the legislative effect was proportional, Singh said “proportionality requires a sociological assesment”. He also made claims that the will of parliament could override the court.

There were many Human Rights cases mentioned involving that of a Tour Operator and the flight tax. I don’t have the full details, but they may be covered again tomorrow.

That’s all the notes I have. Sorry they are a bit sketchy. It was hard to hear in the upper gallery.

Tomorrow will be a continuation of the Revenue’s case as Singh only spoke for just over an hour. So we're looking for a replacement scribe for me as I could only make it for today.

Top job by a Top Man (and counsel) there. Those notes are very infomative. Thank you!

[bananarepublic]

He seemed to do a complete U-turn from the originall defense provided to the court and Montpelier before the case, and suddenly the case was no longer so much about Padmore, claims that the scheme was not disclosed etc., but instead the basis of their case was that the Human Rights legislation allows this type of retrospection.

This is worrying.

Sounds like our brief spent 3 hours demolishing an argument HMRC weren't even going to make. He will have to up his game tomorrow and argue why the courts should have jurisdiction over this case.

Having said that "sociological assesment" seems like an argument against the retrospection not for it.

[swede]

Santa, thanks for your time and stirling efforts.

[SantaClaus]

This is worrying.

Sounds like our brief spent 3 hours demolishing an argument HMRC weren't even going to make. He will have to up his game tomorrow and argue why the courts should have jurisdiction over this case.

Having said that "sociological assesment" seems like an argument against the retrospection not for it.

I think more like HMRC didnt make the points because their argument had been demolished.
That would also explain why they added stuff about the OECD when it wasnt in the original evidence. I'm suprised the Judge didnt object.

[ContractIn]

Thanks so much to everyone who attended, it was really nice meeting you all. Specialy thanksto DR who flew in to Gatwick amidst fog delays and others who stayed overnight in hotels. There must have been at least 40-50 of us there......
[/U]

Many Thanks Santa and those who have been supplying snippets through out the day.

I'm not counting my chickens just yet, but at least it appears we have started off on a good footing.

Will the JCHR issue be used at any point?

Cheers
CI