BN66 - JR Judgement Day

[Maddog]

I am considering adding a Poll to this thread. I want to keep it very simple so it can't be misinterpretted/misconstrued.

What do people think?

Not sure how relevant this is when considering impact, but I, like a number of contractors I know, have steered clear of standard pensions, and have managed my own saving for my pending retirement via ISA's / Premium Bonds etc.

Where I wouldn't lose my home, I would have to put my mortgage back to the levels it was 5 years ago, and would be left with no savings, which equates to zero pension provision.

I am the wrong side of 45 in a age-ist industry. Luckily, I never p155ed my "hard earned" up the wall. But having to build the required level of old age provision is going to be next to impossible.

Well I could start fiddling my expenses I suppose.....


Mad

[silver_lining]

Knowing what we know now...

Could this lower Court have ever ruled primary legislation incompatible with A1P1?

I wouldn't be surprised if the Court of Appeal also passes the buck.

To be honest DR, I was split on how it would turn out... but was certainly feeling positive on our delivery and legal arguments... my thoughts were even if it goes against us, I hope we at least receive a legal objective judgement..... and not, in my opinion an extension of Parliaments view.... a weak cop out by the HC.

But hopefully COA will go ahead and probably convince those interested in interpretation and application of the law.

Onwards and upwards !

[DonkeyRhubarb]

The fact of retrospection almost doesn't matter, reading the JR judgement, and comments posted on other sites, the issue isn't so much retrospection as how little tax we actually paid for those years. 3.65%?? Who were we kidding?

Don't worry, I'm not going to flame you. I think it's healthy to be sceptical, and I like a challenge.

Legal Precedent

If we lose in the end this becomes legal precedent (case law). Agreed?

Now think about what this would mean.

It would basically be saying that in the case of aggressive tax avoidance, notwithstanding the legality of any arrangement, it is permissible to impose retrospective taxes. There are many people who currently employ perfectly legal means to avoid tax altogether (eg. inheritance tax "planning"). They don't even pay 3.5%.

Is there a legal definition of "aggressive tax avoidance"? No!

So who decides what is aggressive?

Another way of looking at it

Now consider this. Would it have been as acceptable to impose this retrospective tax if just ONE person had used the scheme on £300k of income?

Well, that's what I did. My affairs have nothing to do with Huitson, you or anyone else. This is "personal taxation" after all.

Why should the outcome of what I did depend on the actions of other people? I joined the scheme right at the start. Why should I be penalised because the rest of you jumped on the bandwagon?

So the Judgement also says it's permissible to retrospectively tax an individual in the case where enough other people did the same thing, or the total tax loss reaches a certain threshold (£200M).

Conclusion

For the above reasons, I do not believe this judgment will stand.

The law is the law.
It does not depend on how many people are involved.
It does not depend on the total amount of tax at stake.
It does not depend on whether people paid 20% tax, 3.5% tax, or 0% tax.

Either it was legal or it wasn't.

[DonkeyRhubarb]

If the principal of retrospectivity is admitted then it would surely be prudent of HMRC to open an enquiry into everyones tax return. A speculative scrutiny if you will, serving to hold the door of investigation ajar in anticipation of favourable retrospective legislation. Indeed, to do otherwise might be considered negligent.

This is what they are doing. Since the introduction of the disclosure regime, any SA which contains a scheme reference number, is now automatically placed under enquiry.

They are probably sitting on hundreds of thousands of tax returns, with little hope of ever being able to investigate them.

If Justice Parker's judgment were allowed to stand, then they could cherry pick the schemes with the highest combined monetary value and clobber them retrospectively.

This would be HMRC's perfect dream scenario.

Checklist
Was the scheme legal? (Doesn't matter. See Huitson v HMRC)
Was it aggressive? (We certainly think so.)
Did a lot of people use it? Check.
Will it raise c. £200M? Check.

OK boys, bring out the retrospection.

[FUD]

Interesting read...make your own deduction

http://www.contractoruk.com/news/003862.html

“For too long HMRC has been free to trample all over the businesses of innocent and law-abiding taxpayers,” said John Brazier, the group’s managing director

“We are hopeful that this exercise will finally allow them to obtain proper redress for the harm HMRC inflicts.”

The commission’s paper, which asks - “what mechanisms should be available for citizens to receive redress against public sector bodies?” - is open to the public until November.

It argues that the duty of care between individuals and public bodies has developed, in “a haphazard and complicated fashion” and that “the current system is plainly unsatisfactory”.

“[In] certain situations individuals are unable to retain redress where they have been subject to administrative behaviour that falls far below that expected of a public body,” the paper states.

However, Kenneth Parker QC, who is heading the debate, said that the legal rules on liability should not “impede the activities of public bodies or impose
unacceptable burdens on public funds.”
--------
http://www.taxbar.com/documents/abbey_chdiv_000.pdf

[Cantthinkof1]

Another very informative set of postings from DR - thank you!

Re the poll on whether people would loose their house - This is a real difficult 1 for me, as I have NEVER been issued with a closure notice! - If I chose to remortgage, I would end up with the same mortgage I had 10 years ago!! - and as I am coming up to 60 years of age, that is NOT good!

To be honest, if this Judgement is allowed to stand, then I think that all rule books can be thrown out the window - it undermines the whole legal process, and the term Fair and Justice can be removed from the Dictionary!!! - While talking about the word 'Fair', I am at a loss as to what the Judge would reply as to the definition of the word 'Fair'.
On one hand the Judge referred to 'fair tax', but then allows retrospective introdution of a law to stand - still trying to get my head around where the fairness lies in retrospective taxation????
As an earlier posting read - this is NOT the country that I grew up in, and just shows that the Government will go to all lengths to bring in money, no matter what the consequences qre to the individual ...

[OnYourBikeGB]

Folks, I'm going to get flamed for this, I know, but after a couple of weeks in which I've veered between shock, despair, anger, renewed hope, bullishness and finally acceptance, I've reached an epiphany. We will in the end have to pay this tax...

I don't think anyone is going to flame you. I, like all of us, was hoping that HMRC were going to get a right battering by the judge, but in the back of my mind I knew there has been some pretty bizarre decisions in the courts over the years. I think the judge's mind was already set at the JR application ('how did your clients think they were going to get away with that' is an approximate if not exact quote). It took him a week to produce his ruling, it could take a week to construct the document, so there clearly wasn't accepting our version at all. That said, this is wrong. And in making the ruling, a lot more people must be worried about this. We are actually seeing some debate in the media, and now that its other peoples skins involved its actually not negative. If we'd won, we'd have had a lot of negative press.

This isn't over. I think it was in some ways a healthy reality shock, we know we are in a deep fight. Personally, I think that even the Government must be slightly uneasy know. It's a Pandora's box if ever there was one. Can you imagine going how Peter Mandelson would feel when having to fend of questions from international trade federations on the retrospective nature of the UKs tax system?

Fair share of tax? What about all those huge corporations operating in the UK that pay no corporation tax?

And here's something that really bugs me, in the IR35 battle, the PCG complained that it would lead to unfair competition as lone contractors would have to charge more to offset the tax and big organisations, who made a fortune from the secondment etc would not. This was all but ignored. Yet this judge used the same reasons to hammer us!

Anyway, I have digressed into a rant. But I think realising that there is indeed a chance we could lose is in someways healthy. You can prepare your mind, and plan for the worst. But this ruling is wrong. It should and must be fought. There is nothing to be gained by paying up now, and no-one has yet asked for the money. So, while I understand how you must feel, it's time for us to do what we can to get ourselves prepared, and it's time to fight, because that gives us a chance, maybe even a good one.

[smalldog]

behaviours

actually preparing to lose is actually a good influence on me. It is making me save for the first since I cant remember when.....!! So if we eventually win I will have a nice pot stashed away..

[Buzby]

Timing

as how little tax we actually paid for those years. 3.65%?? Who were we kidding

I have been in the scheme from the start - forced into it because of IR35. If HMRC had closed it down in the first few years, then could accept that. I would then have consider doing something else, maybe going permanent. But to allow us to continue for 7 years thinking all was OK is just wrong.

I agree with DR in that because so many people joined the scheme we are now all being punished, that cannot be right.

If this goes on for more years, I can add to my savings and if we lose will either have to remortgage myself up for another 20 years or downsize house - doesn't really seem fair to wife and kids!

[OldITGitWife]

What you say is correct DR

Don't worry, I'm not going to flame you. I think it's healthy to be sceptical, and I like a challenge.

Legal Precedent

If we lose in the end this becomes legal precedent (case law). Agreed?

Now think about what this would mean.

It would basically be saying that in the case of aggressive tax avoidance, notwithstanding the legality of any arrangement, it is permissible to impose retrospective taxes. There are many people who currently employ perfectly legal means to avoid tax altogether (eg. inheritance tax "planning"). They don't even pay 3.5%.

Is there a legal definition of "aggressive tax avoidance"? No!

So who decides what is aggressive?

Another way of looking at it

Now consider this. Would it have been as acceptable to impose this retrospective tax if just ONE person had used the scheme on £300k of income?

Well, that's what I did. My affairs have nothing to do with Huitson, you or anyone else. This is "personal taxation" after all.

Why should the outcome of what I did depend on the actions of other people? I joined the scheme right at the start. Why should I be penalised because the rest of you jumped on the bandwagon?

So the Judgement also says it's permissible to retrospectively tax an individual in the case where enough other people did the same thing, or the total tax loss reaches a certain threshold (£200M).

Conclusion

For the above reasons, I do not believe this judgment will stand.

The law is the law.
It does not depend on how many people are involved.
It does not depend on the total amount of tax at stake.
It does not depend on whether people paid 20% tax, 3.5% tax, or 0% tax.

Either it was legal or it wasn't.

However this Judged overlooled all your points and didnt worry too much about legalities. Maybe the next Judge will behave the same