R Root2 Tax Ltd v First-Tier Tribunal (Tax Chamber)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Whipple |
| Judgment Date | 03 May 2018 |
| Neutral Citation | [2018] EWHC 1254 (Admin) |
| Docket Number | CO/5314/2017 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 03 May 2018 |
[2018] EWHC 1254 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Mrs Justice Whipple
CO/5314/2017
and
APPEARANCES
Mr S Grodzinski QC and Mr J BremnerQC (instructed by Fieldfisher) appeared on behalf of the Claimant.
Ms A Nathan and Ms S Choudhury (instructed by the Solicitor's Office and Legal Services) appeared on behalf of the Interested Party.
THE DEFENDANT did not attend and was not represented
Hearing date: 2 May 2018
(No attendance by counsel at read-out judgment)
Introduction
This is the applicant's renewed application for permission for judicial review of the decision of the FTT (Judge Bishopp). That decision was released on 11 September 2017.
Permission was refused on the papers by Laing J. She indicated in her reasons that she thought the applicant's procedural points were arguable (I shall call this the “Procedural Ground”), but that the applicant's points of legal challenge to the underlying decision were not arguable (these I will call the “Substantive Grounds”).
As I told the parties at the outset of the renewal hearing, for present purposes I am prepared to take Laing J's order as read on the Procedural Ground. If she thought the Procedural Ground was arguable, then I should respect that. I invited the parties to focus their submissions on the Substantive Grounds instead.
Laing J approached the Substantive Grounds on the basis, as she was invited to do, that the threshold question for her was whether the FTT had erred in law. At the hearing, I raised the possibility that the threshold for permission should be higher than error of law, by analogy with R (Cart) v Upper Tribunal [2012] 1 AC 663, that too being a case where the Administrative Court was being invited to adjudicate the merits of a tribunal's determination in circumstances where the statute excluded the possibility of an onward appeal. The point was not argued before me and I simply record it here. I confirm that for present purposes, I have approached this application on the common basis adopted by the parties and Laing J, namely whether the FTT has arguably made an error of law.
Conclusion
I conclude that the FTT has not, even arguably, erred in law. Accordingly, I refuse permission for judicial review.
Reasons
There are three Substantive Grounds advanced by the applicant:
i. Misinterpretation of s.306(1)(b) of the Finance Act;
ii. Misinterpretation of reg.10(3);
iii. Misinterpretation of “standardised tax product” in reg.10.
Ground 1: Misinterpretation of s.306(1)(b)
Section 306(1) defines notifiable arrangements for the purposes of DOTAS. There are three conditions which must be met. The first of those is that the arrangements fall within any description prescribed in regulations. The relevant regulations are the Tax Avoidance (Prescribed Descriptions of Arrangements) Regulations 2006/1543. It is common ground that reg.10 is relevant to this case. It provides that arrangements are prescribed if they are a standardised tax product. That term is defined at reg.10(2) and (3) of the regulations. Specifically, reg. 10(3) provides, so far as the term “tax product” is concerned:
“Arrangements are a tax product if it would be reasonable for an informed observer (having studied the arrangements) to conclude that the main purpose of the arrangements was to enable a client to obtain a tax advantage.”
The FTT decided that reg.10(3) was met on the facts. At [45] the FTT stated that:
“… it does not seem to me to be seriously arguable that the arrangements in this case do not meet that description. The only reasonable conclusion to which the hypothetical informed observer could come is that the purpose of the scheme is to extract money from a company or EBT without incurring the tax charge which would be incurred were that money to be paid as employment income, and thereby to secure a tax advantage…”
By this finding at [45], the FTT confirmed that, adopting an objective viewpoint, being that of the hypothetical informed observer, the purpose of the scheme was to secure a tax advantage.
Mr Grodzinski QC, who appeared before me for the applicant, argues that nowhere does the FTT address in terms whether the arrangements satisfy the test in s.306(1), and that, he says, is a clear error of law such as to justify permission being given.
The short answer to Mr Grodzinski's point is that the FTT has, by its conclusions at [45], and indeed elsewhere in its judgment, found the s.306(1) test to be met. The FTT treated the s.306(1) test as coextensive with the reg.10(3) test. In my judgment, it was entitled to do so on the facts of this case. I reject Mr Grodzinski's submission that the conflation of the two tests is necessarily wrong or constitutes an error of law. Regulation 10(3) defines “tax product” by reference to various factors, which I would separate out in the following way: whether (i) on an objective approach (i.e. to the reasonable eye of the informed observer having studied the arrangements) (ii) the main purpose of the arrangements (iii) was to obtain a tax advantage. If those factors or features are present, the arrangements are a tax product.
Section 306(1) requires what are, in essence, the same three features to be present (see s.306(1)(b) and (c)). Those features are explained in different words, in a different order and with difference of emphasis; I accept that, but there is much common ground. Specifically, s.306(1)(b) contains (i) the objective approach (i.e. “might be expected to…”) and (iii) the obtaining of a tax advantage;...
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