Reply to: LCAG - JR decision

[webberg]

Rory Mullan comments on Loan Charge decision | Tax Chambers

Bear in mind that the QC here, Rory Mullan, was the advocate in Hoey.

In that case (in my opinion) the presentation of the tax arguments was at once very precise but at the same time ignored some very obvious targets and helpful arguments.

I'll not speculate as to why as the QC will ultimately be guided by his clients.

useful thoughts anyway.

[BrilloPad]

I think part of the problem in these is that the judge too a subjective approach rather than a law approach. Some of her judgements flew completely in the face of legal precedent. She simply made up her own interpretation. I think RVQC, from what I can tell, was underprepared but hard to fight against someone who just makes stuff up on a whim.

In terms of the DTA precedent, she was spot on. Sadly.

[webberg]

Thanks for the explanation. Conceptually I understand. But from the uneducated in Tax Law it seems we are chucking good money at these JRs and keep losing. RVQC by all accounts got smashed in this case. He's supposed to one the best but he didnt even get close.

Seems to me only a technicality will win this like something being out of time or stale but that is not going to affect everyone but just just specfic people. The LC is never going to be defeated. Its law. Only the MPs who might decide it was a bit too aggressive can change it not a JR.

As I have said time and time again, the loan charge is a distraction from the key task of agreeing the final liability.

It may be seen as intimidatory or bullying or coercive but at the end of the day, it's a Government making law that it is entitled to make.

SO you are correct in that many JR's are hopeless cases. They serve as a useful focus for groups looking to make a point and as part of a wider strategy they have a part to play. But as a stand alone single use defence against the tax charge, it was always a long shot.

We have not and with one exception may never use JR in our strategy.

That exception is not relevant here.

I do though wonder why the following arguments have not been used:

1. The loan charge is seeking to tax something that is already taxable - what is the justification for that?
2. The loan charge could mean that a taxpayer is "out of the money" until the final position on liability is known. Why is that fair?
3. What happens if the loan charge exceeds the final liability and is not repaid. A tax charge that cannot be repaid is not tax, it's a fine or penalty.
4. In many cases it is debatable as to whether a loan ever existed. The definition of loan is so wide as to be unusable?
5. How can justice be served if a loan charge can be raised by HMRC and the taxpayer has no recourse?

I'm sure better minds than mine have considered (and rejected) these points, and certainly we will not be running them.

[dammit chloe]

Horses for courses. He's a tax barrister. If you're challenging the law (tax or otherwise) on human rights grounds then you should really use a public law barrister.

I think part of the problem in these is that the judge too a subjective approach rather than a law approach. Some of her judgements flew completely in the face of legal precedent. She simply made up her own interpretation. I think RVQC, from what I can tell, was underprepared but hard to fight against someone who just makes stuff up on a whim.

[DealorNoDeal]

RVQC by all accounts got smashed in this case. He's supposed to one the best but he didnt even get close.

Horses for courses. He's a tax barrister. If you're challenging the law (tax or otherwise) on human rights grounds then you should really use a public law barrister.

[lowpaidworker]

Don't get confused between a JR - which is really testing whether a piece of legislation is legal and whether the chosen authority wielding it is competent - and a legal dispute over the tax analysis.

Winning a JR is difficult. Winning one in the tax arena where even EU law recognises the sovereign right of each nation to determine its own tax policy, is even more difficult.

You need to be very sure of your ground before spending money on a tax JR especially if yours follows a number of similar cases making similar points.

Testing how the law applies to a set of circumstances is for the Tribunals. This if you like is the nitty gritty of not what is intended but what actually happens. these can be easier to "win" although the FTT record shows a definite bias toward HMRC wins.

That may be because they have made a better case or it may be because HMRC is folding on cases that they may lose, before the FTT. (No taxpayer is going to go to FTT if HMRC has conceded prior to the hearing). Either way the impression that HMRC wants to achieve (i.e. we win xx% of cases) is established and the intimidation begins.

Thanks for the explanation. Conceptually I understand. But from the uneducated in Tax Law it seems we are chucking good money at these JRs and keep losing. RVQC by all accounts got smashed in this case. He's supposed to one the best but he didnt even get close.

Seems to me only a technicality will win this like something being out of time or stale but that is not going to affect everyone but just just specfic people. The LC is never going to be defeated. Its law. Only the MPs who might decide it was a bit too aggressive can change it not a JR.

[lowpaidworker]

They already have all the power. What more can they get?

I mean they will be all the more aggressive and all the good work done during the SAM review will shortly be forgotten.

[webberg]

Don't get confused between a JR - which is really testing whether a piece of legislation is legal and whether the chosen authority wielding it is competent - and a legal dispute over the tax analysis.

Winning a JR is difficult. Winning one in the tax arena where even EU law recognises the sovereign right of each nation to determine its own tax policy, is even more difficult.

You need to be very sure of your ground before spending money on a tax JR especially if yours follows a number of similar cases making similar points.

Testing how the law applies to a set of circumstances is for the Tribunals. This if you like is the nitty gritty of not what is intended but what actually happens. these can be easier to "win" although the FTT record shows a definite bias toward HMRC wins.

That may be because they have made a better case or it may be because HMRC is folding on cases that they may lose, before the FTT. (No taxpayer is going to go to FTT if HMRC has conceded prior to the hearing). Either way the impression that HMRC wants to achieve (i.e. we win xx% of cases) is established and the intimidation begins.

[DealorNoDeal]

I'm with this anove. Seems every JR reverts back parliamanet intended quote or comon sense says this money is payment for work.

Not just JRs. It's incredibly difficult to persuade a tax tribunal that scheme users aren't liable.

Advisors and counsel go to tribunal with what they genuinely believe to be decent arguments but the reality is often disappointment.

Sadly, I think this is going to start to sink in over the next year or so as more decisions are handed down.

[BrilloPad]

I'm with this anove. Seems every JR reverts back parliamanet intended quote or comon sense says this money is payment for work.

I think post COVID19 HMRC will be given more power to collect taxes.

They already have all the power. What more can they get?

[lowpaidworker]

I can imagine there may be technical arguments, specific to some schemes, which may have some legs eg. the loan wasn't made by a 3rd party.

But I can't see many appeals, against the LC, succeeding at tribunal when the intent of Parliament couldn't be clearer.

I'm with this anove. Seems every JR reverts back parliamanet intended quote or comon sense says this money is payment for work.

I think post COVID19 HMRC will be given more power to collect taxes.

[DealorNoDeal]

Out of curiosity, how do you actually appeal against LC19?

Do you still have to file a 2018/19 SATR declaring the outstanding loans? If so, then what? Put nil for the tax, and include an explanatory note?

[webberg]

But I can't see many appeals, against the LC, succeeding at tribunal when the intent of Parliament couldn't be clearer.

We'll have to see.

Anti avoidance legislation always starts with an attempt to outlaw one or a few schemes but then HMRC and the draughtsman panic and try to make it apply to EVERY instance. This usually creates weaknesses and we believe that it has here as well.


The "purposive" test is that the legislation has to be applied as intended by Parliament, but with due credence to the words used.

We're well aware that many "defenders" of schemes have already thrown in the towel for a number of reasons. We're not ready to do that just yet. In fact we think we have a better case now than we did.

Time will tell if I have to regret those words or can roll into smug retirement having proven them correct.

I do know though that unless you try to win the argument, you will lose.

[DealorNoDeal]

If you are litigating now, you need a reason why the loan charge will NOT apply.

If you are of the view it does, then settle.

We're not and we carry on.

I can imagine there may be technical arguments, specific to some schemes, which may have some legs eg. the loan wasn't made by a 3rd party.

But I can't see many appeals, against the LC, succeeding at tribunal when the intent of Parliament couldn't be clearer.

[lowpaidworker]

I think the only way the LC will be resolved is through Parliament and what the LCAG and APPG are doing. However as Webberg has pointed out (many a time) this does not resolve the tax dispute. Might make the LC perspective from roughly 2017.

I think if that happens then maybe HMRC will come to a negotiating table of sort or even maybe the Govt will pressure them too.

However that opinion was pre COVID19.... this lockdown will have done irreparable damage to the economy that is going to require some considerable tax raising.