BN66 - the road to Judicial Review

[Emigre]

So DR, given that even a fraudulent investigation can only go back 20 years how come BN66 reckons it can apply to 21 years? Surely HMRC can't go even further back than their own rules? Yet another oversight / maladministration example of BN66??

Maybe HMRC can go back further than their own rules. S58 FA2008 is on the legislature and as such is dominant legislation. Are HMRC investigation powers set out in legislation? If not, then surely S58 potentially allows HMRC to reopen any return back to 1987 without discovery. Simple. It is quite obvious that HMRC do not have anyone's SAs open back as far as 1987 so they must believe that with the legislation they can reopen any year with impunity quoting no reason other than s58 FA2008.

So, if the above is true are those people really home and dry for the early years? Of course, it would still be extremely difficult for HMRC to identify early users unless they continued to use the scheme. Of course, if HMRC discovery powers are also written into statute then there is a clear conflict and its doubtful whether any Court would rule against a taxpayer's reliance on contemporaneous legislation.

[DonkeyRhubarb]

Evasion?

Maybe HMRC can go back further than their own rules. S58 FA2008 is on the legislature and as such is dominant legislation.

This is a very good point, which I hadn't considered.

This whole retrospective thing throws up all sorts of conundrums.

For example, could HMRC treat this as evasion? Now that the law has been changed, is there an onus on people to come forward and revise their SA?

If people continue to keep quiet, knowing that what is on their SA is wrong, could it be construed that they are deliberately trying to hide taxable income?

What a minefield.

[Emigre]

Thankfully not. Evasion is a criminal offence and as such is covered by Article 7 of the ECHR on retrospectivity.

Article 7 - retrospectivity
Prohibits the retrospective criminalisation of acts and omissions. No person may be punished for an act that was not a criminal offence at the time of its commission. The article states that a criminal offence is one under either national or international law, which would permit a party to prosecute someone for a crime which was not illegal under their domestic law at the time, so long as it was prohibited by international law. The Article also prohibits a heavier penalty being imposed than was applicable at the time when the criminal act was committed.

Perhaps the Government's "review" of Human Rights only went as far as determining that they would not be applying penalties. Shame then theat their punitive interest rates take on the aura of penalties.

[Tax_shouldnt_be_taxing]

Thankfully not. Evasion is a criminal offence and as such is covered by Article 7 of the ECHR on retrospectivity.

Article 7 - retrospectivity
Prohibits the retrospective criminalisation of acts and omissions. No person may be punished for an act that was not a criminal offence at the time of its commission. The article states that a criminal offence is one under either national or international law, which would permit a party to prosecute someone for a crime which was not illegal under their domestic law at the time, so long as it was prohibited by international law. The Article also prohibits a heavier penalty being imposed than was applicable at the time when the criminal act was committed.

Perhaps the Government's "review" of Human Rights only went as far as determining that they would not be applying penalties. Shame then theat their punitive interest rates take on the aura of penalties.

And it could even be covered by Article 6. If HMRC tried the evasion route, then Art 7 comes into play and Art 6 covers the process to be followed which is not what an investigation does. So HMRC would have to totally change their procedure on investigations. Also Art 6 states you're innocent till proved guilty. Anything other and it's a clear breach of Human Rights.

[DonkeyRhubarb]

Thankfully not. Evasion is a criminal offence and as such is covered by Article 7 of the ECHR on retrospectivity.

Ah yes, but if HMRC re-open an SA through discovery after the 5 years then surely they are, by their own rules, treating it as fraudulent or negligent behaviour as per:
http://www.hmrc.gov.uk/manuals/salfmanual/salf411.htm

I bet there is even a different type of discovery notice for this, and it would probably be handled by a separate fraud department.

I don't think HMRC's rules can handle retrospective legislation.

[Tax_shouldnt_be_taxing]

Ah yes, but if HMRC re-open an SA through discovery after the 5 years then surely they are, by their own rules, treating it as fraudulent or negligent behaviour as per:
http://www.hmrc.gov.uk/manuals/salfmanual/salf411.htm

I bet there is even a different type of discovery notice for this, and it would probably be handled by a separate fraud department.

I don't think HMRC's rules can handle retrospective legislation.

Wow! This could really kick things off. BN66 clearly states it refers to specific avoidance Schemes and therefore cannot be evasion and therefore not fraudulent. Yet BN66 also applies retrospectively for 21 years. Therefore BN66 considers this or other Schemes in play in the 90's could fall under BN66 and investigated. But, and it's a big but, how can a legal Scheme (i.e. avoidance) be treated as though it is fraudulent. Retro 5 years according to HMRC for avoidance and 20 years for evasion? BN66 is for legal avoidance Schemes but will apply as though it covers evasion Schemes. Which is it? It can't be both. Does this put BN66 on dodgy ground? Does it further breach ECHR? Is it by it's wording and conflicting retrospection, uncertain and confusing and lacking clarity and therefore against all the core principles of tax law and breaches my right to legitimate expectation. BTW, transparency is considered key in law to help clarify evasion versus avoidance and this Scheme is very transparent.

[Tax_shouldnt_be_taxing]

Avoidance versus evasion

Does anyone know if HMRC have been asked if they would consider opening an investigation into an SA from say 1995 under BN66?

If they would then it cannot be on the grounds of avoidance which BN66 relates to as HMRC's own rules stipulate only going back 5 years. So if they would then BN66 doesn't apply and some evasion law must apply instead. Adds to the confusion and uncertainty case and the right to legitimate expectation. BTW, full transparency on an SA is a steer towards lawful avoidance not evasion so there can be a conflict in the wording of BN66 and it's implementation.

I wonder if HMRC are treating this like light? On weekdays it's avoidance and on weekends it's evasion!

[BolshieBastard]

Just a thought but isnt too much info being made available to those lazy twats at hmrc?

[Emigre]

Does anyone know if HMRC have been asked if they would consider opening an investigation into an SA from say 1995 under BN66?

As I understand it HMRC are obligated to apply the law. The law is Section58 FA2008. I would expect primary legislation to rank above the HMRC manual.

Just a thought but isnt too much info being made available to those lazy twats at hmrc?

I can see where you are coming from. Yes, we're probably on the limit but so far I don't feel we have given them anything but have opened up a few potential angles for ourselves. Where there is conflict in the law, as may be the case here, it is up to the courts to resolve, and may give us another line of attack if the JR fails.

[Tax_shouldnt_be_taxing]

Oi Darling, can I have some of this?

You couldn't make this up:

http://waugh.standard.co.uk/2009/04/...s-50p-tax.html

The Darling giveth and the Darling taketh away. I'd wish he'd have the same "fair and balanced" take on BN66...