BN66 - JR Judgement Day

[RingStinger]

In particular, the potential distortion of competition should not be overlooked. It is one thing to try to compete with, say, an IT consultant who is perhaps more experienced, efficient or skilled: it is entirely a different matter to seek to match a competitor who has the advantage of an effective income tax rate of 3.5 per cent. In my view, for various reasons, including the pressure of competitive disadvantage, such a tax avoidance scheme could be expected to have a very significant "bandwagon" effect, and, as I have stated, this is corroborated by the figures produced by HMRC.

The "bandwagon" effect comes about from 8 years of doing nothing to address the issue well known to HMRC during that time your Honour.

Where is the evidence that the scheme gave an advantage based on a tax rate of 3.5%? Oh, I forgot, no impact assessment was ever done to demonstrate this. If the Judge knows the IT contract industry, then he will also know there is a "going rate" for certain services. This argument does not wash. This is about minimising tax, not minimising your fees. Sorry your Honour, but you got this one wrong.

If you want to consult with our legal team, please do. Your knowledge and insight in to this has me convinced.

[SantaClaus]

Thought I'd pen a reply to the BBC:


Dear sir/madam

I am writing to complain about Mr Pollock's article "Offshore tax dodgers face £100m tax bill " and in addition, his sarcastic reply to another complainant.

Predictably, your "guardianista" reporter's slant on the Judicial Review was that we got our just deserts and the financial loss we face should be a lesson to us.

What he fails to mention is that this is a landmark case that will change British tax law for good. The failure of our legal challenge means that HMRC can now change tax laws retrospectively.

I will put this in simplistic terms, so even the Eastenders cast will be able to understand: Imagine driving on a 30mph road and the speed limit gets changed to 20mph retrospectively for the past 7 years. Now what would you say, if you were then fined for the past 7 years even though you obeyed the 30mph law that was in force at the time?

Never before has retrospection been applied in British tax law, and what this does is remove certainty of an individual or businesses tax position. It is no longer safe to run a business in the UK.

I note that the BBC were equaly unsympathetic when the IR35 tax was introduced. It later emerged that journalists were using the same personal service companies and also affected by IR35.

How long will it be until your expense claims, maybe 10 years down the line are suddenly taxed retrospectively?

Finally, I note your reporters sarcasm in a reply to one of my fellow IT consultants. All I can say, is watch your back.

First they came for the Jews
and I did not speak out - because I was not a Jew.

Then they came for the communists
and I did not speak out - because I was not a communist.

Then they came for the trade unionists
and I did not speak out - because I was not a trade unionist.

Then they came for me -
and by then there was no one left to speak out for me.

[RockTheBoat]

Will the last taxpayer left please pay the lighting bill!

Looks like our wonderful tax system just lost another source of revenue thanks to their clear and precise legislation...

http://blogs.news.sky.com/kleinman/P...f-7a4ed5002ce9

Brewing Boss Launches Tax Attack

The head of SAB Miller, the FTSE 100 brewing giant, has told me that Britain's uncertain tax environment has driven him to locate a key division of the company in Switzerland rather than the UK.

In a series of outspoken comments to me at the World Economic Forum, Graham Mackay, SAB's chief executive, said that Britain had become an illiberal and unpredictable place to do business. And he said that that had been a primary factor in the brewer's decision to situate its global procurement function in the Swiss canton of Zug rather than in the UK.

"One of the things that attracted SAB Miller to move its HQ to London and to list on the LSE in 1999 was the liberal and predictable tax regime.......

[bananarepublic]

Where is the evidence that the scheme gave an advantage based on a tax rate of 3.5%? Oh, I forgot, no impact assessment was ever done to demonstrate this. If the Judge knows the IT contract industry, then he will also know there is a "going rate" for certain services. This argument does not wash. This is about minimising tax, not minimising your fees. Sorry your Honour, but you got this one wrong.

If I remember correctly the IR35 JR was all about a differential tax rate between IT contractors and their larger competitors being anti-competitive. That argument was thrown out then so why is it being regurgitated now?

Sorry the learned judge doesn't seem too learned to me !!!

[SantaClaus]

With all these articles flying around, now is the time to put pen to paper.

Come on, lets see at least 2000 letters written to:

BBC
Sky
Daily Mail
The Times
The Telegraph
Your MP
Stephen Timms

There is a lot at stake here. I really appreciate everyone who has helped, especially DR, TSBT, the people who turned up at the JR, etc, but sorry to be blunt, anyone who is just lurking and not taking part, it's time to stop pressing F5 on this forum and expend a little effort.

[Tax_shouldnt_be_taxing]

Put it in perspective

I can see why HMRC want the coffers to be added to:

http://www.ukpublicspending.co.uk/budget_ukgs.php

The Government spends more on Welfare (57.7 BILLION quid) than Education or Defence and only Healthcare (probably for those on Welfare) and Pensions come higher.

The one I really like is the "Other Spending". Expand it down and you find 12.8 BILLION quid spent on "Accounting Adjustments". What the Hell are those?

Oh and 27.2 BILLION quid on interest payments.

Makes 100M seem like small change. I think they may need to revise the Welfare figures upwards if this farce gets the "green light".

Makes the Judges comments seem a little shallow when you tot this lot up.

And just to help you sleep tonight, look at the graph at the top "UK Net Public Debt". Can't be precise, but it looks like about 1 TRILLION quid this year going up to about 1.3 TRILLION quid in a couple of years time.

And the Government talk about "fair and proportionate"? Seems to me that they really need 100M extra to support Welfare and fund the National Debt. Thanks Labour, you've done a sterling [sic] job over the last 13 years. The country is going to hell in a handcart and you think retrospection is the way to cover your debts and past failings? No way chief. May 6 - You're out.

[SantaClaus]

I can see why HMRC want the coffers to be added to:

http://www.ukpublicspending.co.uk/budget_ukgs.php

The Government spends more on Welfare (57.7 BILLION quid) than Education or Defence and only Healthcare (probably for those on Welfare) and Pensions come higher.

The one I really like is the "Other Spending". Expand it down and you find 12.8 BILLION quid spent on "Accounting Adjustments". What the Hell are those?

Oh and 27.2 BILLION quid on interest payments.

Makes 100M seem like small change. I think they may need to revise the Welfare figures upwards if this farce gets the "green light".

Makes the Judges comments seem a little shallow when you tot this lot up.

And just to help you sleep tonight, look at the graph at the top "UK Net Public Debt". Can't be precise, but it looks like about 1 TRILLION quid this year going up to about 1.3 TRILLION quid in a couple of years time.

And the Government talk about "fair and proportionate"? Seems to me that they really need 100M extra to support Welfare and fund the National Debt. Thanks Labour, you've done a sterling [sic] job over the last 13 years. The country is going to hell in a handcart and you think retrospection is the way to cover your debts and past failings? No way chief. May 6 - You're out.

Yep, the UK is bankrupt, they need more of your money.
The printing presses are going flat out with quantative easing and still they cant prop up the economy.

Banks and hedge funds are deserting this harsh tax regime for Switzerland. Who can blame them?
The only people who are staying are benefit scroungers and migrants bleeding the NHS and our schools to death.

And today, the British banking system is branded "unstable":

http://www.thisislondon.co.uk/standa...most-stable.do

Go figure!

[doodab]

Folks,

Focus, read and re-read this key extract (my emphasis):

Mr Elvin QC rightly pointed out that section 2(3) reflected established case law, in particular, Badeley v Consolidated Bank (1888) 38 Ch D 238 especially at 258-259 by Lindley LJ (as he then was). He also referred to the modern classic description of the "characteristics of an ordinary English partnership" by Peter Gibson LJ in Memec v IRC [1998] STC 754:

"(1) the partnership is not a legal entity; (2) the partners carry on the business of the partnership in common with a view to a profit …(3) each does so both as principal and (see s.5 of the 1890 Act) as agent for each other, binding the firm and his partners in all matters within his authority; (4) every partner is liable jointly with the other partners for all the debts and other obligations of the firm (see s.9 of the 1890 Act); and (5) the partners own the business, having a beneficial interest in the form of an undivided share in the partnership assets…including any profits of the business."
Although, argued Mr Elvin QC, the absence of any one of these indicia may not negate the existence of a partnership, the absence of four of the five must be taken as (at least) strong evidence that no partnership existed: the trustees were the partners as a matter of law and the Claimant was no more than a beneficiary of the Trust which received income from the Partnership.

This appeared to me to be a formidable argument. In response Mr Singh QC suggested that the rule in Archer-Shee could be taken to its logical limit: in effect the trustee simply drops out of the picture; everything being done by the trustee is deemed to be done by the owner of the interest in possession. At first impression, this struck me as a fiction too far, and I note that Viscount Sumner in Archer-Shee implicitly considered that the notion that the life tenant could be treated as carrying on a business in fact carried on by the trustees would be, to put the matter at its lowest, somewhat difficult to square with orthodox principles.

The point is of some significance because, according to the evidence, it was the one upon which HMRC relied (from the end of 2007); and the Explanatory Notes to the relevant provisions of the Finance Bill (Clause 55: Double Taxation Arrangements: UK Residents and Foreign Partnerships) stated at paragraphs 16-17:

"The Government believes that a partner for the purposes of that legislation has always included all those persons entitled to a share of income or capital gains of the partnership. As such, the UK individuals remain liable to UK tax despite the elaborate, artificial structure designed to exempt them. This clause will put it beyond doubt that the legislation has always had that effect."
It is on this basis that Mr Singh QC submits that the challenged retrospective legislation does no more than make clear what the earlier legislation meant in any event (see paragraph 75(vii) below). HMRC did not waive any legal professional privilege that attached to any advice that they might have received from counsel on this issue. As I have said, on the material put before me, I have significant doubts whether "member of a firm" could extend to a person in the Claimant's position but, given the background, and the need to interpret anti-avoidance legislation in a strongly purposive manner, I could not rule out the possibility that, if the point had been litigated, HMRC might have succeeded in persuading the courts that its interpretation was correct.

So what was the evidence before the end of 2007? Technical Exchange 63 where HMRC state that it would be extremely unlikely to claim the tax. Hmm, consistent then?

The author of "Technical Exchange" – Issue 63 of 31 July 2002 (a HMRC document) thought that "for technical reasons" it was extremely unlikely that HMRC could apply section 739 to the arrangements.

The "technical exchange" quote refers to the applicability of section 739 of the income tax act 1988, which is a different matter than how section 112 (or 858 of the 2005 act) ought to be interpreted.

[Tax_shouldnt_be_taxing]

And they're off!

http://forums.contractoruk.com/1059387-post321.html

The first of many I assume...

RocktheBoat put this out but thought to emphasis the point.

[ROBIN REDBREAST]

1987 Willoughby

Has anyone heard of a case Willoughby brought up around 1987? I have canvassed the opinions of some of my people who are now on various other "loan" schemes and one of their parent companies sent out an email update today basically stating "do not worry, the resuly of Huitson v HMRC has no impact on our system" In their opinion, the MP scheme never worked and this was based on a case brought up in 1987...Willoughby?????

Perhaps they mistook this for Padmore and indeed it may well be corporate waffle to reassure their current client base.

Personally, I'm thinking getting out of all this DTA / Loans etc and doing the extreme of limited company but taking it all as salary and taking the full tax hit on the lot...this really appears to be the only safe way not to get attacked in the future.