BN66 - Court of Appeal and beyond

[seadog]

Here's what the current issue of Private Eye (issue 1295, pages 30-31) has to say on a recent HMRC brush with the judiciary:

While waving through the big tax avoiders, HM Revenue & Customs is taking its usual aggressive line with far lesser issues, such as the late filing of tax returns. It has recently received a severe drubbing from Geraint Jones QC, however, in an appeal against such hardline action. Its unjustified "high-handed, threatening" behaviour, the first-tier tribunal judge said, "smacks more of the conduct of a disreputable debt collector than of responsible conduct by an organ of the state.

The article goes on to describe HMRC's actions against a small charity for failing to file a P35, and then:

Jones was also highly critical of the HMRC tactic of deliberately waiting until the penalties for late filing had rolled up before notifying the taxpayer that its return had not been received and as a result a much bigger penalty incurred.

"HMRC is a manifestation of the State," declared Jones. "It is no function of the State to use the penalty system as a cash-generating scheme [...] it is inexplicable why HMRC deliberately delays sending out a penalty notice for four months, with the result that a penalty for five months becomes payable."

"It has long been part of the common law of this country that manifestations of the State must act fairly and in good conscience with its citizens. In our judgement there is nothing fair or reasonable in setting a computer system so that it does not generate a penalty notice until four months have gone by from the date of default..."

Now I know this isn't the same sort of case we are up against - but I was most interested in the bit about "...[it is] part of the common law of this country that manifestations of the State must act fairly and in good conscience with its citizens".

HMRC waited years to issue closure notices to MP scheme members, together with final bills of tax owed, allowing many of us to accrue, in some cases, 6 figures of interest payments in a scheme which, from the off, was declared fully to HMRC, and never attacked until the law was conveniently amended.

How can HMRC be said to have acted "fairly and in good conscience" in our case?

There is little doubt that HMRC have acted very badly in this matter.

1:- They did not act quickly to close of the loophole when they first knew about it in 2001

2:- They deliberately misled taxpayers when they opened up enquiries after 2001 using Archer Shee and when they had completed an internal report (TN63) which acknowledged the scheme worked.

3:- Rather than have the mater tested in court they pulled the four test cases and instead pushed through retrospective legislation by presenting a misleading argument to Parliament.

Our principle gripe is that HMRC did not follow their own protocol in taking us to the Tax Court. If we lost in the tax court then we have to accept that we pay the back tax. But if we won we should get the same carve out as Padmore if they introduce legislation.

My concern about the current legal action does not deal with HMRC’s conduct. Perhaps we should ask Mont P to instigate consider a class action complaint about HMRC conduct.

[swede]

There is little doubt that HMRC have acted very badly in this matter.

1:- They did not act quickly to close of the loophole when they first knew about it in 2001

2:- They deliberately misled taxpayers when they opened up enquiries after 2001 using Archer Shee and when they had completed an internal report (TN63) which acknowledged the scheme worked.

3:- Rather than have the mater tested in court they pulled the four test cases and instead pushed through retrospective legislation by presenting a misleading argument to Parliament.

Our principle gripe is that HMRC did not follow their own protocol in taking us to the Tax Court. If we lost in the tax court then we have to accept that we pay the back tax. But if we won we should get the same carve out as Padmore if they introduce legislation.

My concern about the current legal action does not deal with HMRC’s conduct. Perhaps we should ask Mont P to instigate consider a class action complaint about HMRC conduct.

I agree, It would be interesting to at least get their thoughts on this.... and other options that are not based on human rights issues.

If I'm going down, Id like to know that *all* other avenues (including camping in Parliament Square) have been exhausted first!

[Donnie Darko]

Exhausting all possible avenues

Montpelier are doing what they contracted to do - take it as far as House or Lords/Supreme Court. They've even muted going to Strasbourg which would be above and beyond. Can anyone really expect any more than that? They never said they would exhaust all possible avenues.

I do wonder though if they realise it's a lost cause, and they're only plodding on to fulfil contractual obligations and keep their existing punters sweet, but there ain't nowt we can do about that.

You can ask them to do more if you want but I reckon you're wasting your time. You are assuming that this is as important to them as it is to us and I'm pretty damn sure it ain't.

At the end of the day, if they take it up to the SC and we lose then they can just say - sorry folks we did what we said we would and took it to the highest court in the land but it just didn't work out.

[seadog]

Montpelier are doing what they contracted to do - take it as far as House or Lords/Supreme Court. They've even muted going to Strasbourg which would be above and beyond. Can anyone really expect any more than that? They never said they would exhaust all possible avenues.

I do wonder though if they realise it's a lost cause, and they're only plodding on to fulfil contractual obligations and keep their existing punters sweet, but there ain't nowt we can do about that.

You can ask them to do more if you want but I reckon you're wasting your time. You are assuming that this is as important to them as it is to us and I'm pretty damn sure it ain't.

At the end of the day, if they take it up to the SC and we lose then they can just say - sorry folks we did what we said we would and took it to the highest court in the land but it just didn't work out.

I think you will find the wider picture is quite important to Montpelier and the wider professional Tax Planning industry.

If HMRC can establish a precedent in implementing retrospective legislation such as the Huitson case then it will open up the opportunity for them to do the same in all sorts of other cases where they think there is legal tax planning which they disagree but cannot win in the tax courts.

for example they could alter the meaning of "self employment" to catch all self employed consultants and then just reclaim back tax for 6 years.

So Donnie I think on reflection you will see there is a major issue at stake here.

[Donnie Darko]

I think you will find the wider picture is quite important to Montpelier and the wider professional Tax Planning industry.

If it so important to Montpelier why aren't they doing more off their own bat? Why would we need to prompt them? Why aren't the rest of the industry getting up in arms about it?

I think the answer is obvious. These companies already got what they wanted in the new protocol announced in the budget and it no longer matters what happens in our case.

BN66 was an aberration which is unlikely to be repeated, and it was just our misfortune to be on the receiving end.

It doesn't feel right or fair but I'm coming to terms with the fact I might just have to live with it.

[DownButNotOut]

If it so important to Montpelier why aren't they doing more off their own bat? Why would we need to prompt them? Why aren't the rest of the industry getting up in arms about it?

I think the answer is obvious. These companies already got what they wanted in the new protocol announced in the budget and it no longer matters what happens in our case.

BN66 was an aberration which is unlikely to be repeated, and it was just our misfortune to be on the receiving end.

It doesn't feel right or fair but I'm coming to terms with the fact I might just have to live with it.

I totally agree with you. It seems highly unlikely this will end well for us.

The only positive is the time we've been given to save while this winds it way through the courts.

As much as I'm not keen on AtW reasons for posting. The points made although painful, were accurate.

[geoff from contracta IOM]

The wider industry and BN66

At the invitation of DR to comment on this thread. In my opinion the overwhelming majority of the tax planning industry see BN66 for what it was , a cynical backdoor attempt at trying to get retrospective legislation onto the statute books. I think they have realised that in MP and those affected they have picked an expensive and reputation damaging fight ( which I still believe they will lose ultimately in the SC ) their credability has taken a severe battering over BN66 and they have lost the moral high ground thus polarising taxpayers into those who still agree with paying their fair share , whatever that is , and those who now take a firm, them and us mentality and view HMRC as the enemy. A situation they have only themselves to blame for. There is a lot said about the potential of retrospective legislation but not penalising an individual retrospectively is an underpinning principle of our legal system and unlikely even in the face of an HMRC victory in the BN66 case to be attempted again, the damage to the percieved morality of a state body was in my opinion too severe to endure a second time without serious questions being asked of their integrity. As a company I know we for one would not be rolling over if we were to face a challenge and would commit considerable resource to defending our position and our clients but as I have said previously it would be much less painless for HMRC to just inact new legislation to stop us rather than have a 6 or 7 year fight. There are also some slightly unique points in the BN66 case with regard to the legislation being exploited and HMRC's previous communications. Another point being our clients are in no way visible to HMRC and they would have a hell of a job trying to identify them in any sort of number, we have structured our scheme deliberately in this way there is no reporting requirement on tax returns. Small consilation for those hanging in limbo over BN66 but I hope justice will prevail for all those whose lives have been put on hold over this malicious attack from HMRC and they have achieved what I think was part of their objective, which was to make people fearful of potential retrospection.

[geoff from contracta IOM]

PR campaign

In response to the poll as a company we would be more than happy to support a campaign financially

[DonkeyRhubarb]

In response to the poll as a company we would be more than happy to support a campaign financially

Thank you very much for the kind offer. At the moment there's still some debate as to whether this would be a good thing to do or not.

[PlaneSailing]

If it so important to Montpelier why aren't they doing more off their own bat? Why would we need to prompt them? Why aren't the rest of the industry getting up in arms about it?

I think the answer is obvious. These companies already got what they wanted in the new protocol announced in the budget and it no longer matters what happens in our case.

BN66 was an aberration which is unlikely to be repeated, and it was just our misfortune to be on the receiving end.

It doesn't feel right or fair but I'm coming to terms with the fact I might just have to live with it.

I don't see this as an aberration. This new protocol has only be wheeled out as HMRC want to
creep to the current Government. When or if Labour get back in, this will return, make no mistake.

Timms is in a safe seat, and relatively young for a politician. If he gets back into power, do you think the architect of both IR35 and BN66 is going to stop there?