Tax Exceptionalism – A UK perspective

In July 2016, I was tasked with responding to a presentation on “Trends in Tax Exceptionalism and Tax Litigation” by Professor Kristin Hickman of the University of Minnesota and Donald Korb of Sullivan and Cromwell. The event was organised jointly by the Journal of Tax Administration and the Centre for Tax Law, University of Cambridge. For those not aware of her work, Professor Hickman has established herself as the foremost academic commentator on matters of administrative law in US taxation, whilst Donald Korb was formerly Chief Counsel for the US Internal Revenue Service.

The forthcoming volume of the Journal of Tax Administration bears fruit from that workshop. Professor Hickman has produced a piece entitled “The growing influence of administrative law and judicial review on US tax administration” which explores recent litigation relating to idea of “tax exceptionalism”, namely the idea that tax deserves special treatment from administrative law. In response to themes from her paper, I make my own contribution with a piece entitled: “Tax exceptionalism: a UK perspective”. The introduction to my piece reads as follows:

“In her article in this issue, Professor Kristin Hickman explores the relationship between the US Treasury and Internal Revenue Service (‘IRS’), and exceptionalism to general administrative law principles, dubbed “tax exceptionalism”. It builds upon work that Hickman has produced in response to the 2011 case of Mayo Foundation for Medical Education and Research v. United States in which the Supreme Court is generally considered to have rejected the idea of tax exceptionalism. Indeed, Hickman’s article deals a decisive blow to the idea of tax exceptionalism by noting that the functions of the IRS are not dissimilar to those of other administrative agencies. Why then “should the IRS avoid general administrative law requirements when other agencies administering substantially similar programs must follow them?” But that does not mean that questions do not remain. Whilst it can be accepted easily that there should be no general exceptionalism, that tells us little about “which administrative practices are susceptible to legal challenge under general administrative law principles?” or whether provisions of the tax code might in fact “justify certain tax-specific departures from general administrative law requirements, doctrines, and norms.”

A similar dichotomy can be said to arise in the UK between on the one hand the idea that there are no special principles of public law which apply to tax law and on the other hand the fact that the application of general principles of law in respect of the tax administration, Her Majesty’s Revenue and Customs (‘HMRC’), will differ from treatment given to other administrative agencies. This article will explore this dichotomy by first exploring briefly the history of the prospect of tax exceptionalism in the UK, and thereafter looking in depth at instances where HMRC may be said in practice to benefit from distinct treatment. The article will further assess situations where greater tolerance was given to HMRC actions than ought to have been afforded.”

Both articles will be available to read on the JOTA website and an early draft of my article can be accessed on SSRN.

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Studies in the History of Tax Law

The Centre for Tax Law at the University of Cambridge hosts a biannual Tax History conference. Papers selected for the conference are reviewed, edited and later published in the collection “Studies in the History of Tax Law” (published by Bloomsbury) which is now on to its 8th Volume. I had the pleasure of presenting my paper “The Life and Times of ESCs: a defence?” at the conference in July 2016 and that will soon be published in the latest collection. The abstract for my chapter reads as follows:

“In 1897, the UK Public Accounts Committee became simultaneously both aware and alarmed at the practice of the then Inland Revenue providing extra-statutory dispensations to taxpayers. Despite criticisms in the interim, it was not until the judgment of Lord Hoffmann in Wilkinson that HMRC began to put the brakes on this practice. Almost 120 years since the Public Accounts Committee’s awakening to the Revenue’s habit and over a decade since Lord Hoffmann’s judgment, it is timely to reflect upon the life and times of ESCs.”

The book should soon be available in all good libraries and can be pre-ordered here. For those who cannot wait for their local library to obtain a copy, an early draft of the paper can be found on SSRN and also on the Tax History Conference 2016 webpage.

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Publication in the Bulletin for International Taxation

I have recently published a short article in the Bulletin for International Taxation entitled “The Relationship between Tax Authorities, Large Multinationals and the Public”, the abstract for which reads as follows:

In this article, the author explores accusations levelled at the revenue authorities of Ireland and the United Kingdom in response to their treatment of multinationals, analyses the statutory scheme underpinning the powers of those revenue authorities and provides a preliminary proposition as to why subsequent developments have been so distinct.

It was something I worked on tangentially to my doctoral work and explored the different reactions to accusations that revenue authorities in Ireland and the UK had gave preferential treatment to multinationals. Whilst in the UK, this caused much opprobrium, the reaction in Ireland has been much more muted. The paper was presented originally at the 2015 IBFD Doctoral Meeting of Researchers in International Taxation. The article can be accessed here, (although it is subscription only), whilst a very early version of the paper can be accessed here. If you’d like a copy of the Bulletin for International Taxation version, please Direct Message me on Twitter.

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Remember that Swiss/UK Tax Cooperation Agreement? Vrang v HMRC [2017] EWHC 1055

I have written previously about the 2011 Swiss/UK Tax Cooperation Agreement (‘the Agreement’), which provided for UK resident taxpayers with bank accounts in Switzerland:

  • to be subject to a one-off payment on 31 May 2013 to clear past unpaid tax liabilities and/or to be subject to a withholding tax on income and gains for the future from 1 January 2013 (between 27% and 48% annually); or
  • to authorise the Swiss bank or paying agent of the taxpayer to provide details of the Swiss assets to HMRC. This option does not provide relief from past or future tax liabilities.

The Swiss Account holders could remain anonymous if the first of the above two routes was chosen.

The claimant in a recent case before the Ouseley J in the Administrative Court (Vrang v HMRC [2017] EWHC 1055 (Admin)) was subjected to the full force of this Agreement. The Swedish claimant worked for Credit Suisse in Switzerland between 1988 and 2005, before moving to London. She amassed an amount of money in several bank accounts in Switzerland during that period which she intended for use when she would return to Sweden. In 2012, the bank warned her about the need to make a voluntary disclosure to HMRC pursuant to the Agreement and the possibility of a one-off lump sum being extracted. True to their word, a lump sum of £58,000 (ca.) was extracted in 2013.

The claimant sought the return of the bulk of the money from HMRC, claiming that something between £1,000 and £7,000 was in fact owed. HMRC refused the request on the basis that she did not qualify for a refund under the express terms of the Agreement (which provides for repayment where the amount was ‘wrongly levied’, Article 15(3) of the Agreement) or under HMRC’s managerial discretion which according to HMRC:

afforded to the Commissioners for HMRC enabled them, in exceptional cases, to offer repayment in cases of “hardship at the margins”, that is in “circumstances where keeping the charge in place would cause significant hardship and result in a situation which a court would view as grossly unfair to the individual paying the charge, as a result of actions entirely beyond that person’s control.

The sum, it was said by HMRC, was not wrongly levied as the extraction from the claimant’s accounts followed the letter of the Agreement, and hardship was not established (the personal hardship that the claimant had suffered at the time was insufficient to reach the threshold).

The judicial review sought to challenge HMRC’s refusal on the following grounds primarily (although other arguments relating to EU law and human rights were raised):

  1. that there is no Parliamentary authority for the levying of the sum, and so it cannot be levied, where there is no tax due in that amount;
  2. if there is legislative authority to that effect, it has been misconstrued in a number of respects by HMRC and
  3. that HMRC has not exercised its powers, notably its discretionary powers, lawfully.

Dealing with the first ground, it is a well-known aphorism that there must be Parliamentary authority for the levying of tax. However, the court held that it the payment was not a tax levied by HMRC, but rather a payment from a cooperating authority under an international agreement.

Dealing with the second ground, the judge noted that the phrase ‘wrongly levied’ in s. 15(3) of the Agreement was ‘clearly confined to an error in the interpretation or application of the Agreement by the paying agent or the Swiss Tax Authority’ and no such error arose in the case.

In relation to the final ground, the judge expressed ‘considerable sympathy’ for the claimant, but that aside, HMRC had formulated lawfully and rationally a policy on refunds whereby it would exercise its discretion in certain, limited circumstances. The claimant simply did not fall within a class of persons in favour of whom HMRC would exercise its discretion.

When previously writing about the Agreement, I had been sceptical about its merits. Here however is a cautionary tale about a person who negligently fell on the wrong side of the Agreement, failing to follow the steps that would have meant she had little tax to pay and in the end being subjected to a considerable extraction from her savings. It was a case of mala prohibita not mala in se. People researching, writing and working in the tax sphere understand only too well the sharp edges of taxing provisions and agreements. Ordinary citizens will not be so well informed and this is a case showing the severe consequences.

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Reflections on the Mansworth v Jelley hearing in the Court of Appeal

The author of this blog has written previously about the fabled ‘Mansworth v Jelley’ losses. It has been the feature of an extended published case note and two blogposts (here and here). The Court of Appeal heard the appeal in the Hely-Hutchinson case, which concerns these Mansworth v Jelley losses, two weeks ago (at which the author was present). It is not clear when judgment will be handed down, but it will likely be another few weeks (given that we are now in the Easter recess). This blogpost seeks to set out some thoughts on the oral hearing of the case.

The case essentially boils down to whether HMRC is permitted to “go back” on its published position. HMRC produced guidance in 2003 which provided that taxpayers who engaged in particular share loss schemes would be able to generate an artificial loss (by deducting both the market price of the shares and chargeable income tax from the proceeds from the sale of the shares). In 2009, the body changed its position such that the income tax element was no longer deductible. The taxpayer, Hely-Hutchinson, fell within the terms of the 2003 guidance when published, and sought to obtain the benefit of that treatment. Unfortunately, his case (for reasons not relevant for the purposes of this post) was still open in 2009 and HMRC sought to apply the new, less benevolent 2009 treatment.

The case has in essence turned on whether the taxpayer had a legitimate expectation to be treated in accordance with the 2003 guidance. The High Court found in favour of the taxpayer. HMRC fought this point quite hard in the Court of Appeal, noting that the taxpayer had been on notice effectively since he first sought to benefit of the 2003 treatment that the Commissioners were challenging his claims (albeit not in relation to the 2003 guidance treatment specifically, but the possibility was still open that they would challenge that too). A further, important point which HMRC stressed in the appeal was that the taxpayer did not rely upon the 2003 guidance when he exercised his share options. The 2003 guidance postdated the taxpayer’s actions. In fact the taxpayer had to retrospectively amend his tax claims in order to benefit from the 2003 guidance. In this sense, the case is peculiar in that he did not ‘expect’ any benevolent treatment when he undertook the action. It was only several years later when HMRC published its guidance that he had any expectation as to the particular benevolent treatment. HMRC’s guidance did not change the way that he organised his affairs.

For this reason, it does seem a perversion of the English language to say that the taxpayer did ‘expect’ anything at the relevant time.

And indeed, this reveals a tension in the doctrine of legitimate expectations. This case is a far cry from the most famous tax cases concerning legitimate expectations whereby taxpayers received advanced assurances from HMRC and sought to arrange their affairs in accordance with those assurances, as arose in the case of Gaines-Cooper, MFK Underwriting, Matrix Securities, GSTS Pathology, Cameron, Unilver (although that was a practice rather than assurance) even the recent Veolia case. The idea underpinning these types of cases is that it would be unfair for a public authority to resile from its previous position given that the relevant party has changed their position in reliance upon the assurance, particularly where the taxpayer has incurred expenses in reliance. These are ‘reliance’ cases, in which the relevant public authority will be bound to its assurance if it would be ‘conspicuously unfair’ not to be so bound.

But that does not mean that the present case does not come within the doctrine of legitimate expectations, as the doctrine also encompasses cases where a public body seeks to depart from its guidance. The idea is that it would be unfair for a public body to fail to act consistently towards citizens. For this reason, it does not matter in the class of ‘consistency’ cases that the particular citizen was aware that a public body had adopted a particular practice towards persons in their position (see: Scheimann LJ in Bibi at para 55). The question in such cases is whether the public body could rationally apply different treatment. This can be for two reasons. The first is that different treatment is being applied to different classes of persons. The second is that different treatment is being applied to the persons within the same class, but that there are rational reasons for doing so. In the oral hearing of the case, the justices kept coming back to this point about whether it was permissible for HMRC to apply the 2009 guidance to the taxpayer when it applied more benevolent treatment to other taxpayers. What was different about this taxpayer to those persons whose cases had closed before the 2009 guidance was published (and hence benefited from the 2003 treatment).

And this is where things get particularly interesting. HMRC claimed that the taxpayers whose cases were still open after the 2009 guidance had been published could still be entitled to the 2003 treatment if they could demonstrate ‘detrimental reliance’. Several taxpayers could demonstrate such detrimental reliance. Thus, the taxpayer in the case was given the same option as these taxpayers but simply could not demonstrate detrimental reliance. In this sense, HMRC argued that they acted consistently across this group of taxpayers by applying the same standard to all that fell within the group by reason of having their cases still open in 2009.

This is the issue that it is posited the appeal will turn on. What is the relevant comparator group – is it all those who fell within the terms of the 2003 guidance, or is it only those whose cases were still open in 2009? If it is the 2003 group, was it fair to distinguish between those persons either because of the effluxion of time or by use of the ‘detrimental reliance’ criterion.

I await the judgment with interest.

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Mansworth v Jelley revisited in the Court of Appeal

Listed for hearing before the Court of Appeal today is the case of R (Hely Hutchinson) v HMRC. The case revolves around the controversial Mansworth v Jelley claims. The taxpayer Ralph Hely-Hutchinson was successful before the High Court in this judicial review (which I reviewed in a lengthy case note for the British Tax Review which can be downloaded here), which HMRC are today appealing.

The Mansworth v Jelley (2003) case concerned an assessment to CGT. The taxpayer in this case was granted options to purchase shares in JP Morgan at the market price of those shares. He duly exercised the options and thereafter, promptly sold the shares. The issue in dispute, between the taxpayer and HMRC, was whether the chargeable gain or loss ought to be calculated by reference to the proceeds from the sale of the shares, (a) minus the market value of the options when originally granted (which was nil) or (b) minus the market value of the options when exercised. The Court of Appeal ultimately held in favour of the latter construction, in other words, in favour of the taxpayer.

Following the case, the Inland Revenue issued guidance on the matter in 2003 to the effect that the chargeable gain or loss in such circumstances should be calculated on the disposal of shares acquired by such options by deducting both: the market value of the shares at the time the option was exercised; [and (controversially)] any amount chargeable to income tax on the exercise of that option

In 2009, Dave Hartnett and HMRC acknowledged this to be incorrect. The guidance was revised to provide that all that would be deductible would be the market price of the shares and not, additionally, the income tax that would be paid. As regards closed cases in which the earlier guidance was relied upon, HMRC’s position was that the revised 2009 guidance could not be applied and thus that the position created by the 2003 guidance would not be revisited.

What about open cases (in order words, instances where there is an open enquiry)? Would those persons get the same treatment?

That is precisely the issue which arose for Ralph Hely-Hutchinson. The taxpayer relied upon the 2003 guidance, but the case was not closed by 2009 (owing to a dispute between HMRC and the applicant about the tax treatment of the scheme used to distribute the shares to him). Accordingly, the taxpayer was refused the 2003 guidance treatment, and subjected to the harsher (albeit correct) 2009 guidance. Whipple J in the High Court found that this breached the taxpayer’s legitimate expectation that he would obtain the treatment specified in the 2003 guidance. For Whipple J, it was ultimately a question of whether HMRC could frustrate a legitimate expectation in circumstances which would lead to significant unfairness to the taxpayer. The court balanced the duty of fairness against the duty to collect taxes and held in favour of the taxpayer. One significant component of Whipple J’s reasoning was that it was intrinsically unfair to provide differing treatment to persons who had their cases closed as against those whose cases were open. A problem with this approach however is that in situations where different treatment is provided to persons in similar legal and factual positions, the proper approach for the court is to ask if there are rational reasons for the distinction in treatment. The imposition of sections 9A and 29 TMA 1970 could arguably constitute a rational reason for distinguishing between the taxpayers, although this specific argument was not put to the judge.

The appeal will be heard by a strong bench: Sales LJ, Arden LJ and McCombe LJ and is scheduled to last for 10 hours, thus spanning two days. It is a finely balanced and important case which will illuminate further upon the relationship between the duty to act fairly towards taxpayers and HMRC’s primary duty to collect and manage taxes, as well as the effect of this interrelationship with regard to HMRC guidance. In particular, the assessment will concern how this interrelationship constrains HMRC from retroactively withdrawing treatment prescribed in a publication which is based upon an incorrect interpretation of the relevant law.

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Another ‘Accelerated Payment’ case, another loss for the taxpayers

Accelerated Payment Notices (‘APNs’) and Partner Payment Notices (‘PPNs’) have since 2014 been clogging up the Administrative Court. A rough estimate suggests that up to 87 cases have been petitioned for review.[1] In fact, there are currently 4,116 applicants or potential applicants seeking interim relief from APNs/PPNs which HMRC’s records show amount to a total sum in excess of £756m.

In order to understand why, one need simply to understand what an APN (or a PPN) does. It accelerates the payment of ‘disputed’ tax. The APN/PPN regime broadly requires that taxpayers pay disputed tax upfront, before being able to challenge HMRC’s assessment through the normal channels. APNs may be issued where the following conditions are present:

  1. Either an enquiry or appeal are in progress;
  2. A tax advantage accrues from the particular arrangements; and
  3. A follower notice has been issued; the arrangements are DOTAS notifiable (section 311 of the Finance Act 2004); or a GAAR counteraction notice has been issued (paragraph 12 of Schedule 43 of the Finance Act 2013).

Once an APN has been issued to the taxpayer, the money becomes payable within 90 days. There is no right of appeal against the APN, but merely the right to make representations to HMRC, as a means only of objecting to either the satisfaction of the conditions or to the amount submitted to be due. After taking into account the representations, HMRC may refuse to withdraw the APN. If an APN has been issued to a taxpayer who entered into the once seemingly popular film schemes, the amount due could well be into the hundreds of thousands. Taxpayers are left with little option but to fight the APN, but without any right of appeal against the APN available, the only route which can be taken is through the Administrative Court. PPNs are almost identical to APNs but apply to parties who have invested through partnerships.

This blog has covered the emergence of the APN/PPN regime and the cases concerned in several posts (see: here and here). To date, no taxpayer has been successful in the JR applications to have the APN/PPN set aside (the closest has been minor successes in acquiring interim relief).

It should come as little surprise then that the latest judgment to be produced from the Administrative Court concerning the APN/PPN regime also found against the taxpayers. In R (VVB Engineering Services) v HMRC, three cases were heard together in which the claimant taxpayers sought an interim injunction against HMRC enforcing APNs and PPNs. As the law currently stands, the claimants would be entitled to relief if they could establish “hardship” (ie that they would be unable to trade/run their businesses in the manner in which they ordinarily operate). The claimants however argued that they were entitled to relief without having to establish hardship on the basis of deleteriousness of HMRC’s part and the administrative burden which arises where conditions are attached. This argument was rejected by the Court on the basis that the balance of convenience lay in not granting the injunction having particular regard to the fact that Parliament purposefully enacted the APN/PPN regime and that the taxpayers themselves entered into tax schemes accepting the risk that tax could become payable in the future. The Court also rejected the argument that the hardship test created too high a burden, again having particular regard to Parliament’s intention in enacting the regime.

This case then will offer little comfort to the thousands seeking relief from APNs/PPNs. There are two cases that will be heard this year, Rowe and Walapu, by the Court of Appeal which are the ones to watch closely. The High Court judgments in those cases, from Simler J and Green J respectively, were so comprehensive and robust that they effectively closed off the possibility for a successful challenge at the High Court level (or at least created a significant hurdle for High Court judges to overcome if they choose to depart from these cases. None so far have chosen to do so).

However, with so many cases coming before the Administrative Court concerning APNs/PPNs where the taxpayers are seeking a judicial review in an instance where the substantive case will be heard by the Tribunals (recall that one condition of the APN being granted is that an enquiry and appeal are ongoing), one might query why there needs to be ongoing two parallel proceedings. Yes, there will need to be separate proceedings where taxpayers have sought interim relief (injunction applications can for the most part generally only be granted by the High Court), but the point is that each case for interim relief could go on to be a full judicial review. At the same time, the substantive dispute will be heard before the tribunals. With two parallel proceedings ongoing, I again ask the question why should the expertly constituted First tier Tax Tribunal not have the capacity to resolve both disputes?

[1] See the JR stats at this page, download the zip file (Civil Justice and Judicial Review data) and look for the “Tax Avoidance” JRs in the JR spreadsheet. All have been since 2014-the same time that the legislation for APNs/PPNs and Follower Notices was introduced. It is hypothesized that all those cases are concerned with APNs/PPNs rather than Follower Notices for the reason that Follower Notices themselves do not require taxpayers to pay the tax, but rather the later issuance of an APN/PPN. Of course, some could be JRs of Follower Notices pre-empting the later issuance of an APN/PPN, but there has yet to be an administrative court judgment concerning Follower Notices, but there are myriad concerning APNs/PPNs).
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The Good Law Project’s Uber case

Jolyon Maugham QC recently started the ‘Good Law Project’, which seeks to “use strategic legal cases both to change how the law works and to drive demand for further law change”. The first such case seeks to challenge the business model of Uber by questioning whether VAT ought to be charged by drivers. The case can be read about here and one can donate some money (it’s crowdfunded) here.

This is not the first time where there has been a third-party challenge to tax arrangements. Most famously, the National Federation of Self-Employed and Small Businesses challenged an apparent “tax amnesty” that was arrived at between the Fleet Street Casuals (casual printworkers on Fleet Street newspapers) and the then Inland Revenue. In more recent times, the tax advocacy group UK Uncut challenged an apparent “sweetheart deal” between Goldman Sachs and HMRC. In both instances the court found in favour of the revenue authority, but only after allowing the case to proceed to a full hearing.

In these cases, the challenge was by way of judicial review. What is interesting about Maugham’s case however is that it is not a judicial review. Instead, Maugham wants the “High Court to order Uber to provide him with a VAT receipt for a journey from his office to meet a client last week. He claims that the law gives him a right to a VAT receipt for that journey and that Uber cannot give him the receipt without accepting it is liable to charge VAT.”

That is an interesting approach which avoids having to demonstrate that there was some decision issued by HMRC which could be challenged by way of judicial review and further avoids issues in relation to standing. It is a development worth watching for that reason alone, but also given the significant amounts of tax that are at stake not just in the United Kingdom (20% on every ride), but across the EU (as VAT is levied in each Member State) and in the many other countries around the world where a value added tax is levied on the supply of services.

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Gulliver v HMRC and the appeal/review distinction

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?

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Case note in the British Tax Review


In a piece published in the March issue of the British Tax Review (available on Westlaw and here), I look at the recent case of Ingenious Media. This is a case I have blogged about on numerous occasions (here, here, here and here). The case note is lengthy as it deals with the decision not just of the Supreme Court in the case, but also the decisions in the Administrative Court and Court of Appeal. The reason for doing so is twofold. First, the case seemed to go under the radar in commentary prior to the Supreme Court and so I thought it would be useful to have a comprehensive critique filling that niche. Secondly, the Supreme Court judgment departed quite significantly from the earlier judgments and it pays in such circumstances to look closely at how it came to be that 5 Supreme Court justices unanimously reversed the conclusion of the lower courts (which themselves had unanimously found against the taxpayers). The abstract reads as follows:

“It is a rarity that the highest court in the UK will unanimously disagree with the unanimous decision of the highest court in England and Wales. But that is precisely what occurred in R. (on the application of Ingenious Media Holdings plc and another) v HMRC (Ingenious Media), a recent case concerning HMRC’s duty of confidentiality. The Supreme Court overturned the Court of Appeal decision, which in turn had followed the reasoning of Sales J in the High Court (who, as it happens, was elevated to the Court of Appeal before the appeal was heard). Thus, nine of the brightest minds fell into separate camps as regards the appropriate outcome of a legal dispute. This calls for a comprehensive exploration of the reasoning underpinning the judgments at each instance. Whilst this note will ultimately welcome the Supreme Court’s judgment in the respect that it overturns misconceptions in the decisions of the lower courts and clarifies the nature of the duty of confidentiality, the Supreme Court decision’s failure to clarify the scope of “confidentiality” is likely to have chilling effects on HMRC’s public engagement”

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