BN66 - Round 2 (Court of Appeal)

[Buzby]

Next Step

I have been getting quite a few questions by email and thought this might be helpful.

1. When are we likely to get a decision from the CoA?
December or January.

2. If we lose, will HMRC enforce collection?
No way of knowing but it’s possible.

3. What happens if they do try to collect?
Montpelier have a back-up plan involving the Tax Courts (Tribunal).

4. Where would we go next with the main case?
UK Supreme Court or possibly European Court of Human Rights (ECtHR).

5. What about PwC?
Since their argument concerns the EU Treaty (not human rights) their case could get referred by the CoA to the European Court of Justice (ECJ).

If the PwC case is going to Europe, and if they win, we win does that mean HMRC cannot try to collect until that legal process is complete?

[DonkeyRhubarb]

If the PwC case is going to Europe, and if they win, we win does that mean HMRC cannot try to collect until that legal process is complete?

It's not a case of "cannot", this is discretionary. In theory they could have tried to collect after the HC.

If the CoA refer PwC's case to the ECJ then I think it's very unlikely HMRC would attempt collection, since the case would automatically return to the CoA once the ECJ had ruled. In effect, the CoA hearing would be adjourned awaiting the decision of the ECJ.

[DonkeyRhubarb]

Hi All,

With the quickly approaching appeal date, what are the expectations around this? (1)

After the initial hearing, and many hopes riding quite high going in, it was fairly rough landing for most of us, and a lot of what came out after was that the court really didn’t have the appropriate authority to make the judgement we had hoped, so it had to move on up the courts. (“part of the process”) (2)

Logic, emotion, justice, all that aside(yes, of course retrospection is wrong, but it was made law by BN66, wasn’t it?), here is my question:

Does the court of appeal have the power to rule on the validity of the retrospection? Is there any precedent for a ruling of this type at this level of the “Justice” system? Or, what is the next step? (3)

On that topic, of the 3 that we’re aware of(MTM, PwC, Steed/KPMG), looking at similar cases, IF any of them are to find in favour, which would be the most likely?
Given they are contesting different aspects of BN66, losing one does not affect any of the others, but we just need one to find in our favour. Is this correct? (4)

I don’t quite understand why PwC is being granted an appeal at the same time, or, is there something else? I understand they are contesting the same law change, but I don’t quite understand why they get lumped together, surely one couldn’t be deemed more appropriate. Or, is there a chance that the court could make a ruling against one that closes the door on the other? (5)

DR, cant say thanks enough for everything you’ve done, and are doing. (BTW, I’m sure many of the questions/answers on the next steps exist on one of the 2.5K replies, but maybe its worth putting it in the summary?)

clownfish

(1) Personally I have no expectations. I am hoping for justice but, after what happened last time, I'm not counting on it.

(2) Some of this may have been wishful thinking on our part. Only after the CoA will we know if the HC really did duck the central issue.

(3) These are very senior judges (Lord & Lady Justices) so, in theory, yes they have the authority and they should decide it purely in terms of convention rights. In practice I'm sceptical that this won't get proper scrutiny until it gets beyond the UK courts.

(4) Steed/KPMG's case is the same as ours (HR), except they've applied directly to Europe. However, you are right, if anyone wins we all win.

(5) PwC's argument is based on a completely different area of law than ours. Theirs relates to the European Treaty (free markets etc.) and has nothing to do with human rights. From a legal standpoint, the cases are entirely separate. The CoA only decided to hear both cases at the same time because it would make more efficient use of the Court's time.

[DonkeyRhubarb]

FOI response - 1987 legislation

See in particular 1st attachment "Finance Bill.1987.pdf"

Page 5, "Legislation should not be retrospective"

Points 13 & 14.

s62 Finance (No2) Act 1987 - WhatDoTheyKnow

[Buzby]

Interesting

See in particular 1st attachment "Finance Bill.1987.pdf"

Page 5, "Legislation should not be retrospective"

Points 13 & 14.

s62 Finance (No2) Act 1987 - WhatDoTheyKnow

worth a read - I love this part:

13. This is not a case where a taxpayer has arranged his affairs on the basis of existing las as generally understood and the law is then changed with retrospective effect so that he finds himself faced with unexpected and unprovided for liability for past years.

[helen7]

Hi All,
After the initial hearing, and many hopes riding quite high going in, it was fairly rough landing for most of us, and a lot of what came out after was that the court really didn’t have the appropriate authority to make the judgement we had hoped, so it had to move on up the courts. (“part of the process”)

That's not quite true. The judge ruled against us and very much in favour of HMRC.

The assumption that he was 'pushing it up' was suggested by posters here and is probably wishful thinking.

We have more senior judges (3 of them) at the appeal hearing so hopefully they will make a fair judgement this time exposing the lies and fraud commited by HMRC.

[DonkeyRhubarb]

worth a read - I love this part:

13. This is not a case where a taxpayer has arranged his affairs on the basis of existing las as generally understood and the law is then changed with retrospective effect so that he finds himself faced with unexpected and unprovided for liability for past years.

To paraphrase Spock...

The 1987 legislation is retrospective, Jim, but not as we know it.

[Morlock]

13. This is not a case where a taxpayer has arranged his affairs on the basis of existing law as generally understood and the law is then changed with retrospective effect so that he finds himself faced with unexpected and unprovided for liability for past years.

Correct me if I'm wrong: Our case hinges on the fact that the 2008 Finance Bill contained a "clarification" to the effect that "the members of a firm include any person entitled to a share of income of the firm". Hence the 1987 legislation could be applied.

So anybody who wasn't a member suddenly becomes a member. Isn't that, by definition, an "unexpected" change to "existing law as generally understood"?

And HMRC's defence in the current case is that Huitson had been warned enough, he should have seen this coming, hence retrospection is justified.

Well, I for one had no warning whatsoever. Not a single letter from HMRC - not one - until getting a closure notice. If Huitson is unsuccessful, I'll seriously consider taking this to court myself.

[TAF4]

Also the paragraph in column 1175 of the Finance Bill is particularly strong. Tony Blair seeking confirmation that this retrospection should not be treated as establishing a precedent!!

Parliament should oppose retrospective legislation for a number of reasons. The principal democratic reason is that people are perfectly entitled to do whatever the law permits them to do and that it is wrong afterwards to make it unlawful. The effect of the Padmore case was not intended by the Inland Revenue and the legislature. If people are able to do something that the Government do not wish them to do, it is their democratic right to go to law to have their rights properly assessed. If the courts find in their favour, as a matter of principle it is wrong that they should be deprived of the benefit of that decision. To introduce legislation to tighten up the future position is understandable, but it would not be understandable if the effect of a court decision were rendered nugatory.

All we are asking is our day in court to assess whether the tax planning arrangement we used was lawful at the time.

[DonkeyRhubarb]

13. This is not a case where a taxpayer has arranged his affairs on the basis of existing law as generally understood and the law is then changed with retrospective effect so that he finds himself faced with unexpected and unprovided for liability for past years.

Correct me if I'm wrong: Our case hinges on the fact that the 2008 Finance Bill contained a "clarification" to the effect that "the members of a firm include any person entitled to a share of income of the firm". Hence the 1987 legislation could be applied.

So anybody who wasn't a member suddenly becomes a member. Isn't that, by definition, an "unexpected" change to "existing law as generally understood"?

And HMRC's defence in the current case is that Huitson had been warned enough, he should have seen this coming, hence retrospection is justified.

Well, I for one had no warning whatsoever. Not a single letter from HMRC - not one - until getting a closure notice. If Huitson is unsuccessful, I'll seriously consider taking this to court myself.

Correct.

HMRC's main justification is that 1987 was retrospective so we should have seen more retro coming.

However, the notes from 1987 make it clear that this wasn't retrospective in the sense that anyone faced an "unexpected and unprovided for" liability.

1987 is nothing like s58 in it's effect.