BN66 - Round 2 (Court of Appeal)

[PlaneSailing]

BBC News - Tax system 'to be simplified to encourage investment'

Lead by John Whitting who was very scathing of BN66 when he was brought in as an expert in
the Treasury Committee in 2008

[smalldog]

Lead by John Whitting who was very scathing of BN66 when he was brought in as an expert in
the Treasury Committee in 2008

arent PWC also part of the COA process, dont they have a case or am I getting confused? Whitting is ex PWC

[DonkeyRhubarb]

arent PWC also part of the COA process, dont they have a case or am I getting confused? Whitting is ex PWC

Yes, Whiting is ex-PwC. He was peripherally involved with their BN66 case while he was still there, and I exchanged a few emails with him at the time.

He retired from PwC and is now working for the Chartered Institute of Taxation.

The bottom line is he knows the ins and out of BN66 as well as anyone.

[Ninja]

Padmore relevance

[QUOTE=Toocan;1171684]…and you must have asked yourself why? Why did HMRC sit on their hands for so long while the tax they could be collecting seeped away?

There are some aspects of the handling of the DTA scheme that are surprising – even in the hands of an organisation such as HMRC.

I’m starting this analysis with Mr Padmore. For some reason, HMRC did not mention Padmore to us until the retrospection was announced......... [QUOTE]

Didn't Lord Justice Parker establish that Padmore wasn't relevant? Or did I imagine that?

[kbob]

contingency planing.

My BN66 liability is some what smaller than many here having only been in the scheme a couple of years. It is however enough to mean I have contingency plans in place. I now have no assets or interests left in the UK not a penny.

Tax debts are civil. There are cross border agreements in place and HMRC have a team pursuing cross border enforcement. Leaving the UK is not a complete solution.

However if you are based outside the EU you have three years to declare bankruptcy in the UK where it's much less onerous than many countries. There are specialist consultancies that can help UK expats bankrupt protecting offshore assets.

Why all this talk of suicide and loosing everything? Make plans! There is at least a year to liquidate and emigrate. What is keeping you on that miserable grey island?

- Regards kbob

[johnnyguitar]

Didn't Lord Justice Parker establish that Padmore wasn't relevant? Or did I imagine that?

That's what I understood. He sais that the language in the Padmore ruling was quite specific and if it had been meant to apply over a 'broader range' the language used would have been written so.

So, as he basically said Padmore never applied until the change, it rules out HMRCs argument for interest on the basis that it was always so.
It then comes down to a pure case of retrospective law-change. The 'clarification' issue is thrown out.
I beleive there is a case for a seperate course of legal action against HMRC on this alone. It really highlights how they misled parliament at the time.

[DonkeyRhubarb]

Didn't Lord Justice Parker establish that Padmore wasn't relevant?

A minor point but you have raised him well above his seniority.

He is just "plain" Justice Parker and he's only been a high court judge for less than a year. Prior to that he spent most of his career as a barrister representing HMRC in VAT cases. In other words, he was in with the uber-thugs (Customs) in HMRC.

The 3 judges we'll be in front of in the Court of Appeal are Lord Justices.

[SantaClaus]

This is not as far fetched as you might imagine. There was a case recently in the USA were a man went on the rampage after a dispute with the IRS (American equivalent of HMRC)

And in the UK was'nt one of the reasons why Derrick Bird wen on his killing spree was becuase of a disput with HMRC.

Anyone remember this story?
Search for missing millionaire family 'could take days' as police finally enter burnt-out mansion| News | This is London

HMRC wanted £800,000 from him, but he was forbidden to sell his house by the liquidator. He shot himself, his family and dogs. Then he burnt down the house and his prestigious cars.

Net result: HMRC have blood on their hands and stand to gain nothing.

[ChimpMaster]

<snip>

Net result: HMRC have blood on their hands and stand to gain nothing.

Yes but as per DR's quote above, HMRC don't care, they still blame the scheme users. They couldn't give a toss if we all jumped to a mass suicide.... they would just lay claim to our inheritance, even if it's just the smouldering ground where your house used to stand.

[Tax_shouldnt_be_taxing]

What Parker said

[/QUOTE]Didn't Lord Justice Parker establish that Padmore wasn't relevant? Or did I imagine that?[/QUOTE]

In his summary he states that HMRC had always maintained that the scheme didn't work. However, when he explains HMRC's view, he says that HMRC applied section 739 ICTA 1988 to the scheme as a reason for it failing. However, Parker then states:
"The application of section 739 is highly contentious. 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."

He then goes on to refer to HMRC's claim that section 858 of the 2005 Act applied to the scheme users - "member of a firm". He notes that on both these points that:

"I do not believe that the outcome of any legal proceedings in respect of the arrangements would have been a foregone conclusion. They would, I believe, have been complex, protracted and costly."

So in short, before BN66, HMRC claimed the scheme failed by the two sections referenced above. TE 63 doubts this as noted by Parker. Parker believes litigation on these 2 points is contentious and could go either way. Not a word that Padmore had EVER been referenced by HMRC prior to BN66. And this is - because it hadn't.

He notes that BN66 includes reference to ammendments to section 858 of ITTOIA 2005 to now include all recipients of income, thus changing the definition of this section whuch by his own words could have been defeated in court.

Critically he quotes the legislation in 2008 as:

"(4) The amendments made by subsections (1) to (3) are treated as always having had effect." - Retrospection.

BUT, this is text direct from the Act and ammedment = CHANGE.

So, the basis on which HMRC claimed the scheme failed against was not Padmore. The provisions of BN66 include ammendments (changes) to the legislation that could have failed litigation and then extended to include Finance Act 1987 (2).

It is quite clear from Parkers commentary that HMRC never applied Padmore only the 2 sections mentioned above and that both sections could fail to apply to the scheme. So by taking one of these sections and ammend (change) it in BN66 then hook it into 1987 (2), Padmore is now linked and applies.

BUT, the link in BN66 required the law to be changed to do so. And that change is therefore not a clarification. Rather ladies and gents, it is a retrospective CHANGE.

Extract from Parker on BN66 text:
"(4) The amendments made by subsections (1) to (3) are treated as always having had effect.
(5) For the purposes of the predecessor provisions, the members of a partnership are to be treated as having included, at all times to which those provisions applied, a person entitled to a share of income or capital gains of the partnership.
(6) "The predecessor provisions" means -
(a) Section 153(4) and (5) of the Income and Corporation Taxes Act 1970 (c.10) (as it had effect under section 62(2) of F (No 2) A 1987, and
(b) Section 112(4) to (6) and 115(5) of ICTA"

These changes and the reference to 1987 (2) nail the case closed for HMRC. Padmore always applied since the changes to the existing law now say so. Forget that Padmore was never referenced before BN66.