R (Huitson) v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 28 January 2010 |
| Neutral Citation | [2009] EWHC 2092 (Admin),[2010] EWHC 97 (Admin) |
| Docket Number | Case No: CO/10012/2008,CO/10012/2008 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 28 January 2010 |
[2009] EWHC 2092 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Kenneth Parker Qc
(sitting As A Deputy High Court Judge)
CO/10012/2008
David Elvin QC and James Ramsden (instructed by Hextalls) appeared on behalf of the Claimant
Rabinder Singh QC and Clive Sheldon (instructed by HM Revenue & Customs) appeared on behalf of the Defendant
(Approved by the court)
THE DEPUTY HIGH COURT JUDGE: I am going to grant permission in this case. I should make some very brief observations, because I am differing from the decision of Beatson J given on paper.
Essentially Beatson J's reasons in respect of the Article 1 Protocol 1 point were that retrospectivity has been held to be justified where the legislation is directed at a specific form of tax avoidance, the effectiveness of which is already in doubt, with a reference to A, B, C and D v United Kingdom [1981] (a case to which I have been referred now in some detail), and where Parliament is concerned to reassert its original intention, National and Provincial Building Society v United Kingdom [1997]; and that the present case is such a case
That, of course, was the final disposition of the issue by Beatson J on the papers. However, I have now had the advantage of much more extensive argument in relation to those two criteria, and I have been persuaded by Mr Elvin QC that it is arguable, having regard to the specific circumstances of this case, in contrast to those two authorities, that the legislation was not aimed at a specific form of tax avoidance, the effectiveness of which is already in doubt, or that Parliament was concerned to reassert its original intention.
I am going to say nothing about the merits of such an argument. I am simply reminding myself that at this stage I have to be satisfied that it is arguable. My view as to the ultimate fate of those arguments is not the correct approach.
I fully understand the submission by Mr Rabinder Singh QC that those criteria that are referred to by Beatson J in his decision refusing permission are no more than specific expressions, in those cases, of a wider principle, namely that the retrospective tax legislation should not impose an unreasonable burden and therefore fail to strike a fair balance. I certainly understand the force of his submissions that, when looked at in the round, this legislation may not do that. However, I do believe that it is fair to allow this particular claimant to argue that issue at a substantive hearing, rather than have what is a relatively important and significant issue dealt with summarily on a permission application.
As to delay, again it seems to me arguable on the authority of Dodds v Walker that this application was made in time, even on the footing that time began to run with the coming into force of the legislation. However, I say, by way of avoidance of doubt, that if that is strictly wrong, then this is a case where I would have been prepared to extend the period by 1 day. That is on the basis that the closure notice was not issued in relation to the specific applicant until August, and then, in my judgement, expeditious steps, including the sending of the pre-action protocol and so on, were taken. I do not think that the public interest would be served by denying the claimant the right to continue with this claim by reference to the time that it has taken to bring the matter before this court.
MR ELVIN: My Lord, I am obliged.
MR SINGH: My Lord, can I take it that costs are in the case?
MR ELVIN: Yes, costs in the case.
THE DEPUTY HIGH COURT JUDGE: Yes. Are there any more directions?
MR SINGH: My Lord, I would not have thought so because the normal timetable should apply.
MR ELVIN: There are clearly documents that need to be put in, which are not in, but I think that is between the parties.
MR SINGH: Yes.
THE DEPUTY HIGH COURT JUDGE: Thank you very much for your helpful submissions.
[2010] EWHC 97 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Before: Mr. Justice Kenneth Parker
Case No: CO/10012/2008
David Elvin QC and James Ramsden, (instructed by Hextalls Limited) for the Claimant
Rabinder Singh QC and Clive Sheldon (instructed by Her Majesty's Revenue and Customs) for the Defendant
Hearing dates: 19 & 20 January 2010
The Hon Mr Justice Kenneth Parker :
This is a claim for judicial review brought by Mr Robert Huitson (“the Claimant”), who seeks to challenge under the Human Rights Act 1998 (“the HRA”) sections 58(4) and (5) of the Finance Act 2008 (“the 2008 Act”). The Claimant contends that these sections of the 2008 Act are incompatible with Article 1 of the First Protocol (“A1P1”) to the European Convention of Human Rights (“the ECHR”). The Defendant is Her Majesty's Revenue and Customs (“HMRC”).
The ground of challenge, which I shall later explain more fully, is that the relevant sections of the 2008 Act changed fiscal legislation regarding double taxation relief (“DTR”) with retrospective effect, and that such retrospective amendment did not strike a fair balance as required by A1P1 of the ECHR and the material jurisprudence of the European Court of Human Rights (“the European Court”) in relation to A1P1.
Mr. Justice Beatson refused permission for this claim on the papers, but, after hearing oral argument on the renewed application, I granted permission, stating my reasons why I thought that the claim should be allowed to proceed.
The Background
The Claimant is a self-employed IT consultant. He is, and has at all material times been, a resident of the United Kingdom for the purposes of taxation. As such, he would ordinarily account for income tax on the taxable profits of his trade or profession, and would claim any appropriate deductions, allowances or reliefs provided by the domestic legislation applicable to UK residents. The end users of the Claimant's services are all based in the UK.
Until 2000 he might have sought to gain a tax advantage by supplying his services to end users through an intermediary (such as a company of which he was a majority shareholder and director). However the Finance Act 2000, Schedule 12, provided that workers supplying services through an intermediary should be treated “as if they were employees rather than self-employed persons for income tax and National Insurance contributions purposes”. This legislation (known as the IR35 legislation from the name of the Budget Press Release in which the provisions were announced) was thought to have substantially reduced, if not eliminated, the tax advantages to self-employed persons of operating through intermediaries.
On 20 June 2001 the Claimant became a client of Montpelier Tax Consultants (Isle of Man) Limited (“Montpelier”). Montpelier provided advice to the Claimant (and many other UK residents) with respect to a tax avoidance scheme centred on the Isle of Man, seeking to take advantage of the United Kingdom – Isle of Man Double Taxation Arrangement (“the DTA”). I shall briefly explain the tax avoidance arrangements in question.
The Arrangements
The arrangements comprise three elements, the Partnership, the Trust and the Consultancy Agreement. The Partnership, called the Allenby Partnership, is constituted by five companies (one of which is Crackington Limited) known as “Ordinary Partners”, and a “Managing Partner”. The Ordinary Partners (and the Managing Partner) are companies within the Montpelier Group, and are incorporated and resident in the Isle of Man. Each of the Ordinary Partners is trustee of a trust established in the Isle of Man. Crackington Limited is the trustee of the Robert Huitson Family Settlement (“the Trust”), the trust relevant to the Claimant. The Ordinary Partners, as trustees, agree to enter into partnership with the Managing Partner. Under Clause 8 of the Allenby Partnership the Managing Partner may engage any independent contractor as an adviser or consultant and may enter into any arrangements for the payment of any fees or other sums to such person. The Managing Partner also determines the distribution of partnership profits.
The Allenby Partnership entered into a contract for services with the Claimant under which he agreed to provide electrical engineering consultancy services and advice, and to develop electrical engineering IT. Under that contract the Claimant received a fixed fee of £15,000 per annum, or such lesser sum as might be generated by his work for the Partnership.
The Trust, of which the Claimant is the settlor, allows the trustee to carry on any trade or business, and Clause 5 provides that the trustee stands possessed of the income of the trust fund upon trust to pay the income to the settlor (the Claimant) during his lifetime.
HMRC does not allege that these arrangements are a sham, that is, that they do not truly reflect the legal rights and obligations of the respective parties to them. In that sense the arrangements have genuine business efficacy. The Claimant could not, for example, claim that he was entitled to his...
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