“where the issue being disclosed has already been subject to an intervention that started more than three months before the date of application”
“D. HMRC will make available a special disclosure facility to each person who notifies HMRC pursuant to the taxpayer assistance and compliance programme. Where it is determined that the person is liable to taxation in the United Kingdom, the basis for assessment will be on the terms of the special disclosure facility limiting the penalty and the applicable period of assessment and offering a composite rate in certain defined circumstances. E. The special disclosure facility will be available to all persons with new or existing fiduciary, company or other holding structures or financial accounts in Liechtenstein during the five-year period subject to the following:- (a) any person already under investigation by HMRC as of the date of signing of this MOU cannot participate in the disclosure facility; … G. It is the parties’ intention that by the conclusion of the five-year taxpayer assistance and compliance programme under this MOU, there will, as a result of the procedures contemplated by this MOU, be no relevant persons with a beneficial interest in relevant property who are liable to taxation in one party but are using the laws of the other party to disguise such liability without paying appropriate tax in the manner contemplated by this MOU. The measures which the parties intend to take and which are described in this MOU are intended to achieve that objective.”
“the purpose of the LDF, at the outset at least, was to bring into tax in the UK liabilities which were “disguised” by the laws of Liechtenstein. These would, by their nature, be liabilities of which [HMRC] were not aware, unless and until they were disclosed under the LDF.”
“The EBTSO did not offer any shortened limitation period, fixed penalty or composite rate option as an incentive to settle, and was very different in character from the LDF.”
“1.10 I want to use the Liechtenstein Disclosure Facility (LDF) to settle my EBT liabilities – what should I do? If you think your case meets the criteria you should contact the LDF Helpdesk in the normal way and they can discuss the appropriate terms of settlement with you.”
“In this case, by contrast, the Commissioners provided a full and frank account of their internal discussion leading up to the change of policy in 2014, on which revised policy they relied in making the Decisions under challenge, and so I had a clear view of the underlying policy and the reasons for changing it. This evidence was important to both parties’ arguments, and to my overall evaluation of the merits of the case. Where comparative unfairness is alleged, the Court is likely to be heavily dependent on the evidence provided by the Commissioners. The evidence provided in this case provides the better working model.”
“Lobby in HMRC keen to develop enquiries through EBT process & aghast that LDF available. But it is available. Entirely possible that could be changed in the future …” (6) Following the submission of four further cases on a no-names basis, and further discussions, agreement was reached in November 2012 that BDO could now proceed to submit clients’ reports on an agreed basis. Later in her judgment, at [77], the judge referred to this as “the November 2012 green light”
“We are currently reviewing if the CRO [composite rate option] is allowable as a CT [corporation tax] deduction within the LDF terms. Other issues are also under review. In view of this we are not in a position to advise on these issues or further cases registering in LDF.”
“What concerns me most is the possibility of having to back track on the BDO cases, although I remain hopeful we won’t have to do that.” (2) When the first two of the claimants’ applications were submitted by BDO on30 August 2013 , Mr Barlow gave this advice to the relevant team leader: “Hold fire please. This is tricky. I imagine BDO are looking to come in because of the treatment we have previously indicated they would get in the cases that are already in. I thought they were aware that recent developments have thrown that treatment into doubt but by the sound of it we need to have another conversation with them…” (3) It was then decided that the matter should be considered at a meeting of the Business Tax Contentious Issues Panel and the Personal Tax Contentious Issues Panel. Mr Barlow prepared a paper for the meeting, which took place on6 November 2013 , in which he maintained his recommendation that the full benefits under the LDF should be available for EBT users. The judge (at [39]) quoted this extract from his paper: “… the fact is that since the LDF commenced in September 2009 we have accepted that when an existing enquiry case enters the LDF, all open issues can be settled via the LDF disclosure and our internal guidance and procedures have been predicated on that basis. If we seek to treat EBT cases differently we will be open to challenge.”
“Mr Troup and his colleagues decided that the tax liabilities of EBTs should not be settled under the LDF and that no further EBT users should be permitted to register. The Commissioners were aware that this represented a change in practice, and they identified four categories of EBT users requiring consideration in the face of such changed practice: (1) EBT users who had registered under the LDF and whose liabilities had been finalised. It was agreed that no change would apply retrospectively, and that therefore any EBT user in this category would be permitted to retain the full benefits of the LDF. (As it turned out, there were no taxpayers in this category.) (2) EBT users who had already registered to use the LDF but whose affairs were not yet settled. The Commissioners were aware at the time that there were 13 such taxpayers. (3) EBT users who had applied for registration but whose applications were currently “stockpiled”
“22. I understand it to have been suggested, and it now to be the claimants’ case, that it was unfair for HMRC to have withdrawn the LDF from EBT scheme users without warning or notice. It was, and is, my view that it was inappropriate for taxpayers in the position of the claimants to be given access to the LDF. Having formed that view, I do not consider that fairness dictated that those taxpayers should be given a further period in which to avail themselves of an unjustified benefit, to the detriment of the general body of taxpayers. On the contrary, HMRC’s duty to the general body of taxpayers meant that the availability of the LDF to these taxpayers in these circumstances should be curtailed immediately. 23. We recognised that, in some circumstances, it could be unfair for HMRC to act in such a way as to defeat a legitimate expectation. It was for that reason, as explained above, that we decided not to reverse the settlements of those users of marketed avoidance schemes who had already settled through LDF or to alter the position of those EBT users who had had their applications for registration in the LDF accepted. However, it was our view and conclusion that the present claimants (who had their applications for registration put on hold pending our consideration of the availability of the LDF for EBT users) were in a materially different position and that it would not be unfair or improper, nor would it defeat any legitimate expectation, to refuse their applications to register for the favourable terms of the LDF. Like all other EBT users they would, of course, still be able to avail themselves of the settlement opportunity under the EBTSO, or to litigate their positions before the Tax Chamber of the First-tier Tribunal in the ordinary way.”
“The courts have not previously had occasion to consider facts analogous to those here. The categories of unfairness are not closed, and precedent should act as a guide not as a cage. Each case must be judged on its own facts, bearing in mind the Revenue’s unqualified acceptance of a duty to act fairly and in accordance with the highest public standards.”
“The threshold of public law irrationality is notoriously high. It is to be remembered that what may seem fair treatment of one taxpayer may be unfair if other taxpayers similarly placed have been treated differently. And in all save exceptional circumstances the Revenue is the best judge of what is fair. It has not, however, been suggested that the detailed history described above has any parallel. The circumstances are, literally, exceptional. I cannot conceive that any decision-maker fully and fairly applying his mind to this history…could have concluded that the legitimate interests of the public were advanced, or that the Revenue’s acknowledged duty to act fairly and in accordance with the highest public standards was vindicated, by a refusal to exercise discretion in favour of Unilever. I share the Judge’s conclusion that this refusal, if fully informed, was so unreasonable as to be in public law terms irrational.”
“ “unfairness amounting to an abuse of power” as envisaged in Preston and the other Revenue cases is unlawful not because it involves conduct such as would offend some equivalent private law principle, not principally indeed because it breaches a legitimate expectation that some different substantive decision will be taken, but rather because either it is illogical or immoral or both for a public authority to act with conspicuous unfairness and in that sense abuse its power. As Lord Donaldson M.R., said in Regina v Independent Television Commission ex parte TSW Broadcasting Ltd: “The test in public law is fairness, not an adaptation of the law of contract or estoppel”
“the border between on the one hand mere unfairness - conduct which may be characterised as “a bit rich” but nevertheless understandable - and on the other hand a decision so outrageously unfair that it should not be allowed to stand.”
“But I do not believe that Unilever has formulated a fresh head of review conferring on the court a wide discretion to substitute its view of the substantive merits for the decision-maker. In order to constitute conspicuous unfairness, the decision must be immoral or illogical or attract similar opprobrium, and it necessarily follows that it will be irrational. I would treat this concept of conspicuous unfairness as a particular and distinct form of irrationality, which in essence is how it was viewed by Sir Thomas Bingham in Unilever. There are no doubt cases, of which Unilever is one, where the concept of fairness, and an allegation of conspicuous unfairness, better captures the particular nuance of the complaint being advanced than the concept of irrationality. Indeed, I think that is typically so in any case where the alleged unreasonable behaviour involves a sudden change of policy or inconsistent treatment. It is more natural and appropriate to describe such conduct as unfair rather than unreasonable. But in my view it is only if a reasonable body could not fairly have acted as the defendants have that their conduct trespasses into the area of conspicuous unfairness amounting to abuse of power. The court's role remains supervisory.”
“there is nothing inherently unfair in putting right earlier errors rather than compounding them, even if this involves creating a disparity between similarly placed individuals.”
“I consider that on principle it is not enough to say that the persons to be treated in the same way were in the same cohort originally. It is necessary to look at the time when the decision is made, that is, when the decision-maker is called upon to assess whether they should be treated as being in the same position. In the present case taxpayers with Mansworth v Jelley losses were not in the same position if they were in open years as opposed to closed years. For the latter group, HMRC had no power to reopen their affairs and to remove the ability to utilise the Mansworth v Jelley loss. The position was entirely different for those whose years were open, including the respondent. Therefore this ground of unfairness was not available to the judge,”
“…the LDF is an invitation to taxpayers to apply for registration; it offers no promise that the application will be accepted. It is only if the relevant taxpayer is granted a registration certificate by [HMRC] that the taxpayer might have any expectation of entitlement to the benefits described within the LDF. This has two consequences, which are important for the determination of this case: first, a taxpayer who does not have a registration certificate does not have any legitimate - or other - expectation of any benefits at all under the LDF; this is so whether the taxpayer has applied for a registration certificate (but not heard back from [HMRC]) or has not yet made an application. Secondly, there is a material difference between taxpayers who have been registered under the LDF, who have applied and who have had their applications accepted-they do (at least arguably) have a legitimate expectation that the substantive benefits of the LDF will be extended to them-and those who have not been registered, who have no such expectation at all.”
“The failure to respond within the promised time is, at its highest, an administrative default by [HMRC], which does not have any consequence which is relevant to this claim for [judicial review].”
“But the abandonment of legitimate expectation gives rise to a problem for the Claimants: the doctrine of legitimate expectation has developed to address complaints of unfairness in the State's refusal to confer promised benefits… Once the Claimants have accepted, as they must, that they had no legitimate expectation arising out of the LDF, they will inevitably struggle to show conspicuous unfairness in the refusal to bestow the LDF benefits, because they had no expectation (of a “legitimate” sort, giving rise to a right protected in law) that they would get those benefits in the first place. ”
“Although BDO were encouraged to think that the LDF would be available to their clients, no guarantee or promise to that effect was given, at any time, to BDO or to any named Claimant. There was not even any guarantee that the terms of the LDF would remain unaltered, or would remain available to the BDO clients. [HMRC] were at liberty to withdraw the benefits at any time, because the Claimants had no legitimate expectation of any substantive benefit under the LDF (see above).”
“Perhaps the real complaint which underpins the second and third arguments is not so much that [HMRC] refused to confer the full benefits of the LDF on the Claimants (who were unregistered at the time), but rather that [HMRC] failed to process the applications for registration more quickly, so as to secure the full LDF benefits for the Claimants before the August 2014 changes. But for reasons set out above, this complaint, if this is how the Claimants’ case is put, is not a valid basis on which to challenge the Decisions. The 60 day promised turnaround time was a procedural or administrative matter; failure to comply with it does not result in the Claimants being able to claim a substantive benefit (or otherwise to complain of conspicuous unfairness).”
“…the Category 2 taxpayers were, in fact and law, in a different position, not because of the timing of their applications, but because [HMRC] had accepted their applications and issued registration certificates to them. It was not the date of application which divided them, but the fact of registration within the LDF. This was a difference of fact, certainly. But it was more: it meant that Category 2 taxpayers did have a legitimate expectation of receiving the full benefits set out in the LDF in its unaltered state, because their applications had been accepted and their eligibility for those benefits had been confirmed. ”
“88. …Amongst the many factors considered by Mr Troup and his colleagues, were: (i) the significant adverse tax yield implications of permitting any of the EBT users to settle by means of the LDF; (ii) the interests of taxpayers generally, that tax will be collected in accordance with the statute, noting that if tax is not collected, then the burden of making up any deficit in collection will rest on the shoulders of other taxpayers; (iii) the purpose of the LDF, which was to enable [HMRC] to reach settlements and realise tax from taxpayers whose liabilities had previously been unknown to [HMRC], noting that [HMRC] were already well aware of the EBT liabilities of the Claimants and other EBT users; (iv) the possible reputational damage to [HMRC], and the possibility of legal action, if [they] permitted the LDF to be used for EBT settlements; (v) [HMRC’s] litigation and settlement strategy, which set out [their] policy on reaching settlements with taxpayers, amongst other things; (vi) the comparatively less advantageous terms of the EBTSO, through which many EBT users had already settled; (vii) the non-availability of the LDF to those EBT users who did not have any foreign assets at the relevant date. These were powerful factors in favour of limiting the LDF benefits to the Claimants and other registered EBT users. [HMRC] were well aware of the overtures which had been made by the LDF unit to BDO, and that any refusal to confer the full LDF terms would constitute a change in policy: these were factors taken into account which tended in the opposite direction. 89. In light of the full analysis undertaken by [HMRC] and evidenced in this case, I am unable to conclude that any material consideration was left out or given any inappropriate weight. This was a difficult decision for [HMRC]. They undertook a careful review of the many public interest and private interest factors engaged. I cannot identify any fault in their approach or evaluation.”
“If that is the argument advanced: (a) it is a new argument – or at least not the way the case was put before me; and, anyway, (b) it surely fails for the same reasons as apply in the context of comparison with category 2 taxpayers…, namely that non-EBT taxpayers are in a materially different position from EBT taxpayers.”
“being arbitrarily treated more harshly than comparable taxpayers and more harshly than those whose conduct (marketed avoidance schemes and evasion) is more worthy of opprobrium.”
“I think you are going to have to tread very carefully, Mr Gordon, because that’s not….I require things to be properly pleaded before me and at the moment your claim is not pleaded on the basis that there was a legitimate expectation arising out of the published policy. You, on the basis of what Collins J said, stepped back from that and deliberately amended your case into a case of Unilever unfairness and certainly you are perfectly entitled to run that argument, but on the basis that the unfairness was not in the form of legitimate expectation based on the published policy, but on other circumstances and factors, for instance the unfairness by comparison with others. That is how your case is currently pleaded.”
“74. But Mr Gordon argues that conspicuous unfairness can be found even where there is no legitimate expectation (Unilever being just such a case). He is right, at least in principle, so I move on to address his arguments.”
“Whatever decision is taken by the Commissioners, do the Commissioners want it applied to all Marketed Avoidance Scheme cases or restricted to EBT cases or would they want to consider each scheme separately?”
“Logically whatever decision is taken on this issue by the Commissioners should be applied across all MAS cases. At present the interest in settling MAS liabilities via the LDF is restricted to EBT cases and the central LDF team are not aware of any attempt to settle any other such liabilities via the LDF. Notwithstanding this, the potential remains and should users of other MAS seek to enter the LDF the potential impacts are increased.”