Many countries operate a system of ‘rulings’ whereby taxpayers can approach the revenue authority of that country and ask for a determination in relation to particular elements of their tax affairs or in relation to specific transactions. Some countries have a comprehensive system for regulating rulings (as in Australia). Others like the UK offer formal rulings in specific circumstances. In situations where a formal ruling has been provided, the revenue authority will generally be precluded from going back on its word.
At other points, taxpayers receive informal rulings from the revenue authority. Such a situation arose in the recent case of Gulliver v HMRC, concerning the Group Chief Executive of HSBC Stuart Gulliver. In a case of this kind, the taxpayer may be surprised to learn that the dispute in relation to the ruling can result in two parallel proceedings, one before the tax tribunals and another before the High Court.
Gulliver had obtained an informal ruling from an officer of the Inland Revenue in 2002 to the effect that Gulliver was not domiciled in the United Kingdom (having moved to Hong Kong). The First tier Tribunal found that nevertheless, HMRC was not precluded from enquiring into Gulliver’s domicile in the tax year 2013-14, even if the effect would be that the tax authority would be looking comprehensively at Gulliver’s circumstances (including whether he had actually shed his domicile of origin in 2002). The Tribunal rejected the idea that HMRC was “stuck with” the consequences of the 2002 ruling for the simple reason that a “determination of fact made in relation to one tax year is not binding in relation to a later tax year” (para 8). The Tribunal noted in fact that even where there is a formal agreement reached between the taxpayer and HMRC by reason of section 54 of the Taxes Management Act 1970, it is open to both parties in an appeal to diverge from such an agreement. Thus Gulliver’s application for a closure notice was refused by the Tribunal.
What the Tribunal could not determine however was whether as a matter of public law, HMRC would be precluded from departing from the position set out in the ruling. That is a matter which can only be determined by the Administrative Court in a judicial review, as the First tier Tribunal is not granted the authority generally to hear public law matters. That is strictly the legal position, although in two upcoming conferences in April (at the SLSA Annual Conference and at the Annual TARC Workshop) I shall argue that this situation is totally obtuse. Consider for a moment the consequences of this bifurcation between issues of appeal and review in this instance. The taxpayer will likely seek judicial review claiming a legitimate expectation that HMRC cannot go back on the terms of its earlier ruling. At the same time, the taxpayer is likely going to appeal any substantive assessment which HMRC produces. Then, there will be two parallel sets of proceedings determination in one of which may render the other redundant and vice versa. In such a case, why should the expertly constituted First tier Tax Tribunal not have the capacity to resolve both disputes?