BN66 - Round 2 (Court of Appeal)

[PlaneSailing]

House of Commons Written Answers 24 June 2010

Double Taxation

Question

Zac Goldsmith: To ask the Chancellor of the Exchequer

(1) what his policy is on continuing the provisions of Section 58 of the Finance Act 2008 in respect of UK residents and foreign partnerships; and if he will make a statement;

(2) whether he plans to introduce proposals to repeal legislative provisions that ensure UK residents retrospectively pay UK tax on their profits from foreign partnerships; and if he will make a statement.

Answer

Mr Gauke: UK residents are taxable on their worldwide income wherever it arises—including situations where it arises by way of foreign partnerships. Section 58 of Finance Act 2008 was enacted to help put that beyond doubt. The Government are, in general, opposed to retrospective legislation. However, the retrospective element of section 58 is currently the subject of judicial review by the courts and the Government's view is that it is best dealt with there.

The first part of this quote is straight from the HMRC handbook. Who is in charge of Treasury?
If it's Hector we may as well pack up and go home now.
Is Mr Gauke showing his true colours?

[IH8GordonB]

DR, Im not completely convinced HMRC would appeal, someone in HMG might have a quiet word in their shell like. I sort of get the impression the govt want to be rid of this, but without looking to condone avoidance. The easiest way to do this without any ramifications would be to let the court rule in our favour in Nov and for HMRC not to appeal.

Smalldog, exactly my feelings, I think they want the courts to make it go away. As per my post a few days back, if they allow HMRC to appeal or defend in Europe then HMG are implicitly supporting the retrospective measures. Whilst I'm sure judges are not influenced by polititians, it would be very convenient for Mr Gauke if they find in our favour. We can but hope.

[SleepingFireman]

[QUOTE=P.S. Well done, whoever wrote to Zac Goldsmith; and well done to Zac for at least representing his constituents' views in the house. Better than the response from my own MP who still hasn't replied to any of my letters. I name and shame you, Philip Hollobone.[/QUOTE]

I got a response from Mr. Hollobone unfortunalty it was the standard template from the Treasury with a compliments slip from Philip Holobone. He didn't offer any comments of his own. But if you've gone from a ~200 majority to 18,000 I'm sure he's to still to busy congratulating himself to offer any kind of opinion.

[TAF4]

The trouble is the legal process could go on for another 5 years or more until it reaches Europe.

From experience within the first JR, it is clear the judiciary see this as a hot potato with political as well as case law implications. That is why it got kicked upstairs.

With the change in government there has already been a radical change in the prevailing political climate. I am optimistic that this will be recognised by the Appeal Court judges and that they might find themselves able to support the Human Rights argument.

That would still leave Hector able to pursue the planning arrangement according to the laws that prevailed at the time.

[centurian]

The ConDems probably would like to ditch the legislation, but they know if they do - Labour will be all over them about it... "teachers and police officers being laid off to pay for rich tax dodgers"... doesn't matter if it's true or false - the headline is damaging enough.

However, if it gets knocked back in court, HMG can jump in and blame Labour for all of it - saying that s58 was clearly unenforceable in the first place and that they don't want to waste more money on the case.

However, given the ConDems previous objection to s58, I can understand some of your frustrations that you have to use the courts to knock it down, before they will step in and do something about it.

[DonkeyRhubarb]

That would still leave Hector able to pursue the planning arrangement according to the laws that prevailed at the time.

Fine, where do I sign up to be a test case.

[Emigre]

The ConDems probably would like to ditch the legislation, but they know if they do - Labour will be all over them about it... "teachers and police officers being laid off to pay for rich tax dodgers"... doesn't matter if it's true or false - the headline is damaging enough.

However, if it gets knocked back in court, HMG can jump in and blame Labour for all of it - saying that s58 was clearly unenforceable in the first place and that they don't want to waste more money on the case.

However, given the ConDems previous objection to s58, I can understand some of your frustrations that you have to use the courts to knock it down, before they will step in and do something about it.

But, as TAF4 just implied, we are in the wrong courts. The irony here is that if we win the Human Rights angle, all we will have won is the right to have our case heard in a tax court. Guess what? The appeal process on that could potentially go all the way to the Supreme Court too! All we are really advocating is that our case goes straight to the Tax Courts now. That would be proper process the rights to which S58 has deprived us. It would save up to 5 years of litigation.

If HMRC genuinely believe that our arrangements never worked then that is the right and proper place for it to be challenged. David Gauke is a lawyer. He should understand that.

[Emigre]

Fine, where do I sign up to be a test case.

Its an interesting one. Why do there need to be any test cases? Shouldn't HMRC be made to take each and every one of us to Court? I'm sure that most of our circumstances are slightly different..They singled people out for IR35.

[DonkeyRhubarb]

The ConDems probably would like to ditch the legislation, but they know if they do - Labour will be all over them about it... "teachers and police officers being laid off to pay for rich tax dodgers"... doesn't matter if it's true or false - the headline is damaging enough.

However, if it gets knocked back in court, HMG can jump in and blame Labour for all of it - saying that s58 was clearly unenforceable in the first place and that they don't want to waste more money on the case.

However, given the ConDems previous objection to s58, I can understand some of your frustrations that you have to use the courts to knock it down, before they will step in and do something about it.

I am of the same opinion. If the courts rule against it then the government can safely intervene without handing Labour a big stick to beat them with.

[DonkeyRhubarb]

But, as TAF4 just implied, we are in the wrong courts. The irony here is that if we win the Human Rights angle, all we will have won is the right to have our case heard in a tax court. Guess what? The appeal process on that could potentially go all the way to the Supreme Court too! All we are really advocating is that our case goes straight to the Tax Courts now. That would be proper process the rights to which S58 has deprived us. It would save up to 5 years of litigation.

If HMRC genuinely believe that our arrangements never worked then that is the right and proper place for it to be challenged. David Gauke is a lawyer. He should understand that.

The problem is anything they do with this, even the tiniest concession, would be seen as giving ground on tax avoidance, which would be pounced on by Labour.