“(1) This paragraph applies where– 7 (a) a person becomes liable to a penalty under paragraph 39, (b) the failure or obstruction continues after a penalty is imposed under that paragraph, (c) an officer of Revenue and Customs has reason to believe that, as a result of the failure or obstruction, the amount of tax that the person has paid, or is likely to pay, is significantly less than it would otherwise have been, (d) before the end of the period of 12 months beginning with the relevant date, an officer of Revenue and Customs makes an application to the Upper Tribunal for an additional penalty to be imposed on the person, and (e) the Upper Tribunal decides that it is appropriate for an additional penalty to be imposed. (2) The person is liable to a penalty of an amount decided by the Upper Tribunal. (3) In deciding the amount of the penalty, the Upper Tribunal must have regard to the amount of tax which has not been, or is not likely to be, paid by the person. (4) Where a person becomes liable to a penalty under this paragraph, HMRC must notify the person. (5) Any penalty under this paragraph is in addition to the penalty or penalties under paragraph 39 or 40. … (7) In sub-paragraph (1)(d) “the relevant date” means— (a) in a case involving an information notice against which a person may appeal, the latest of— (i) the date on which the person became liable to the penalty under paragraph 39, (ii) the end of the period in which notice of an appeal against the information notice could have been given, and (iii) if notice of such an appeal is given, the date on which the appeal is determined or withdrawn, and (b) in any other case, the date on which the person became liable to the penalty under paragraph 39.”
“Paragraph 1 – Power to obtain information and documents from taxpayer (1) An officer of Revenue and Customs may by notice in writing require a person (“the taxpayer”) – (a) to provide information, or (b) to produce a document, if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position. (2) In this Schedule, “taxpayer notice” means a notice under this paragraph.”
“Paragraph 3 – Approval etc of taxpayer notices and third party notices … (2) An officer of Revenue and Customs may ask for the approval of the Tribunal to the giving of any taxpayer notice or third party notice (and for the effect of obtaining such approval see paragraphs 29, 30 and 53 (appeals against notices and offence)). (2A) An application for approval under this paragraph may be made without notice (except as required under sub-paragraph (3)). (3) The Tribunal may not approve the giving of a taxpayer notice or third party notice unless– (a) an application for approval is made by, or with the agreement of, an authorised officer of Revenue and Customs, (b) the Tribunal is satisfied that, in the circumstances, the officer giving the notice is justified in doing so, 11 (c) the person to whom the notice is to be addressed has been told that the information or documents referred to in the notice are required and given a reasonable opportunity to make representations to an officer of Revenue and Customs, (d) the Tribunal has been given a summary of any representations made by that person, and (e) in the case of a third party notice, the taxpayer has been given a summary of the reasons why an officer of Revenue and Customs requires the information and documents. …” “Paragraph 29 – Right to appeal against taxpayer notice (1) Where a taxpayer is given a taxpayer notice, the taxpayer may appeal against the notice or any requirement in the notice. … (3) Sub-paragraph (1) does not apply if the Tribunal approved the giving of the notice in accordance with paragraph 3.”
“Paragraph 7 – Complying with notices (1) Where a person is required by an information notice to provide information or produce a document, the person must do so– (a) within such period, and (b) at such time, by such means and in such form (if any), as is reasonably specified or described in the notice. …”
“Paragraph 18 – Documents not in person's possession or power An information notice only requires a person to produce a document if it is in the person's possession or power.”
“Paragraph 44 – Failure to comply with time limit A failure by a person to do anything required to be done within a limited period of time does not give rise to liability to a penalty under paragraph 39 or 40 if the person did it within such further time, if any, as an officer of Revenue and Customs may have allowed.”
“Paragraph 45 – Reasonable excuse (1) Liability to a penalty under paragraph 39 or 40 does not arise if the person satisfies HMRC or (on an appeal notified to the Tribunal) the Tribunal that there is a reasonable excuse for the failure or the obstruction of an officer of Revenue and Customs. (2) For the purposes of this paragraph– (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control, (b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure or obstruction, and (c) where the person had a reasonable excuse for the failure or obstruction but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied, or the obstruction stops, without unreasonable delay after the excuse ceased.”
“Paragraph 47 – Right to appeal against penalty A person may appeal against any of the following decisions of an officer of Revenue and Customs– (a) a decision that a penalty is payable by that person under paragraph 39, 40 or 40A, or (b) a decision as to the amount of such a penalty. Paragraph 48 – Procedure on appeal against penalty (1) Notice of an appeal under paragraph 47 must be given– (a) in writing, (b) before the end of the period of 30 days beginning with the date on which the notification under paragraph 46 was issued, and (c) to HMRC. (2) Notice of an appeal under paragraph 47 must state the grounds of appeal. (3) On an appeal under paragraph 47(a) that is notified to the Tribunal, the Tribunal may confirm or cancel the decision. 13 (4) On an appeal under paragraph 47(b) that is notified to the Tribunal, the Tribunal may– (a) confirm the decision, or (b) substitute for the decision another decision that the officer of Revenue and Customs had power to make. (5) Subject to this paragraph and paragraph 49, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to appeals under this Part of this Schedule as they have effect in relation to an appeal against an assessment to income tax.”
“Section 49F— Effect of conclusions of review (1) This section applies if HMRC give notice of the conclusions of a review (see section 49E(6) and (9)). (2) The conclusions are to be treated as if they were an agreement in writing under section 54(1) for the settlement of the matter in question. (3) The appellant may not give notice under section 54(2) (desire to repudiate or resile from agreement) in a case where subsection (2) applies. (4) Subsection (2) does not apply to the matter in question if, or to the extent that, the appellant notifies the appeal to the Tribunal under section 49G.”
“Section 54— Settling of appeals by agreement (1) Subject to the provisions of this section, where a person gives notice of appeal and, before the appeal is determined by the Tribunal, the inspector or other proper officer of the Crown and the appellant come to an agreement, whether in writing or otherwise, that the assessment or decision under appeal should be treated as upheld without variation, or as varied in a particular manner or as discharged or cancelled, the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the Tribunal had determined the appeal and had upheld the assessment or decision without variation, had varied it in that manner or had discharged or cancelled it, as the case may be. …”
“With regard to the notice dated the28 August 2019 ; we reiterate what we have told you in our letter of3 July 2018 , that any matter relating to the Taj Trust should be addressed to Nigel Carte of Landmark Management S.A, 6 Place des Eaux‐Vives, PO Box 3461, 1211 Geneva 3, Switzerland. Mr S Mattu does not hold any details relating to the Taj Trust.”
“We refer to your letter of24 October 2019 and reiterate what we have said in our letter of3 July 2018 and email of24 October 2019 . We again state that matters relating to the Taj Trust should be addressed to Nigel Carter of Landmark Management SA, 6 Place de EAUX- VIVES, PO Box 3461,1211 Geneva 3, Switzerland. Our client does not hold any copies of Trust Deeds etc mentioned in your letter. Please accept this letter a formal notice of appeal in regard to the penalty notice.”
“In your schedule 36 Notice you have requested specific information in relation to the TAJ Trust e.g. trust deeds, letter of wishes and accounts which our client Mr S. Mattu does not have. We do not understand how the two emails you have sent to us has any relevance to the specific information you have requested. 16 We have stated on numerous occasions dating back to3 July 2018 that the specific information you have requested should be requested and addressed to Mr Nigel Carter of Landmark Management.”
“Dear Mr Mattu Further to HMRC’s Review Conclusion Letter issued on16 January 2020 . I am writing to make you aware that as HMRC issued the Penalty Notice on24 October 2019 and the information and documents requested in the notice issued on28 August 2019 have yet to be provided. HMRC will be looking to issue daily penalties on05 March 2020 on the basis that you have failed to comply with an information notice.”
“We refer to your letter of the25 Feb 2020 and confirm that we have sent in a notice of appeal to the FTT.”
“As you were aware we did send in a notice of appeal in February regarding the Sch 36 penalty but yet have not received any reply by the FTT. As this forms the basis of your assessments dated13 March 2020 , we hereby make a formal appeal. With regard a response to your letter dated5 March 2020 , Mr Ralph de Souza is as you know had chronic issues with his health…. Under current advice from his Doctors and NHS Guidelines he is considered vulnerable and must be in self isolation for 12 weeks in this pandemic we are all experiencing. Therefore I would be grateful if you can give us an extension to the30 June 2020 to answer all your queries and questions.”
“Further to your email of the 15 May we appeal against the further daily penalties in regard to the information notice of the28 August 2019 . As mentioned to you previously we have sent a notice of an appeal to the First Tier Tribunal in the post in February. We have a copy of the Notice sent to the FTT but unfortunately my scanner at home does not work properly otherwise I would have scanned you a copy. Is there any way to contact FTT to see where they are at with it please? With regard to your letter of the 5 March, can we kindly seek an extension to the31 July 2020 . As you know Ralph de Souza is considered extremely vulnerable and has only just be allowed under Government Guidelines to leave his home after almost 12 weeks of isolation.”
“I have had a response from our Clearing House and have copied their response below in respect of your appeal to the Tribunal: The TC ref was TC/2020/01017 but was never served on HMRC as it had to be returned to the appellant as incomplete. It was received on 24/2/20 by Tribunal and returned on 6/3/20 to the appellant as the application was incomplete. It was out of time and they didn’t provide late reasons or notice of Appeal. Therefore, there is no live Appeal for this case.”
“Again we appeal on the grounds that The Respondent cannot obtain information in regard to the Taj Trust. As stated on page 7 of the Notice of Appeal to FTT, The Respondent is a businessman, he does not understand the technicalities of trust law and what they mean, referring to the email correspondence from the solicitor stating that there is an additions of beneficiaries document. Matters relating to the Trust should be referred to Nigel Carter of Landmark Management SA.”
“(1)This section applies if notice of appeal has been given to HMRC. (2)In such a case— (a)the appellant may notify HMRC that the appellant requires HMRC to review the matter in question (see section 49B), (b)HMRC may notify the appellant of an offer to review the matter in question (see section 49C), or (c)the appellant may notify the appeal to the Tribunal (see section 49D). (3)See sections 49G and 49H for provision about notifying appeals to the Tribunal after a review has been required by the appellant or offered by HMRC.”
“Where an Act authorises or requires any document be served by post… then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”
“Under our legal system, however, the courts as the judicial arm of government do not act on their own initiative. Their jurisdiction to determine that a statutory instrument is ultra vires does not arise until its validity is challenged in proceedings inter partes either brought by one party to enforce the law declared by the instrument against another party or brought by a party whose interests are affected by the law so declared sufficiently directly to give him locus standi to initiate proceedings to challenge the validity of the instrument. Unless there is such challenge and, if there is, until it has been upheld by a judgment of the court, the validity of the statutory instrument and the legality of acts done pursuant to the law declared by it are presumed.”
“The imposition of a penalty in accordance with para 50 is not dependent on the prior imposition of daily penalties, whether in accordance with para 40 or para 49A (and the wording of para 50(5) indicates that a person may not be subject to penalties under both para 49A and para 50), but only on the prior imposition of a 30 penalty in accordance with para 39—that is, the initial£300 penalty which is incurred for even a minor failure of compliance.”
“It seems to us that it is HMRC's application for a penalty and it is for them to satisfy us that the documents are in the respondents' possession or power. We bear in mind it is hard to prove a negative. But, we think, although HMRC must raise a prima facie case that the documents are in the respondents' possession or power then it is for the respondents to show that they are not.”
“[78] De facto or practical power did not arise in Lonrho as the defendants in that case had asked the owners of the documents sought for their production and been refused. The documents were not in Shell's de facto power. In any event, the Lords in Lonrho did not consider that being able in practice to obtain a document, perhaps by influence, was enough for it to be within the person's 'power'. Not only did the Lords require a presently enforceable legal right to the documents to exist but they said it must be exercisable without another person's consent. HMRC are asking us to find that a document may be within a person's power for s 20 purposes even if they do need the consent of another person. 'De facto' power would cover documents (1)–(7) in that the 27 trustee possesses them and (in HMRC's view) would produce them on request to the settlor and beneficiaries. [79] Could documents be within the respondents' power if they have to get the consent of another person (in this case the trustee) in order to obtain them? It costs very little to ask. We consider, in the context of information notices where the emphasis is on the present and future, and contrary to the conclusion reached in Lonrho in the context of disclosure for litigation where the emphasis was on the present and past, that documents are within a person's power if they can obtain them, by influence or otherwise, and without great expense, from another person even where that person has the legal right to refuse to produce them. [80] So the question is then is it for HMRC to show that the trustees certainly would hand over the documents if asked or for the respondents to demonstrate they have asked the trustees and been refused? [81] HMRC have raised a prima facie case that the respondents would be given the documents by the trustees: they are both settlors and beneficiaries. The respondents, we find, transferred some of their wealth to the trustee on trust for themselves. We find they were unlikely to do this if they did not believe that the trustee would act on their instructions. The trustee is a professional trust company and will have a reputation to maintain. The trustee has made loans to the beneficiary. From what little evidence we were given, we find the trustee co-operated in the sale of the business. Even if not obliged in the absence of a court order to provide documents (1)–(7), we find it is likely a trustee would choose, in the spirit of trusteeship, to provide copies of them to the settlors and beneficiaries. [82] HMRC have raised a prima facie case that the documents are within the power of the respondents and we therefore think it is for the respondents to show that they have asked the trustee for the documents and been refused. They have not done this. They are therefore liable to a penalty.”
“It is the bounden duty of a trustee to keep clear and distinct accounts of the property he administers, and to be constantly ready with his accounts”
“In other words, there needs to be a causal link between the taxpayer’s failure to comply with the notice and the loss of tax (whether in the past, or prospectively, but it is enough if the officer of HMRC has reason to believe in the existence of such a causal connection.”
“… a link has to be established between the taxpayer's failure to comply with the relevant notice and the amount of tax that he has paid or is likely to pay. An officer of HMRC must have "reason to believe" that, as a result of the failure, the amount of tax paid or likely to be paid "is significantly less than it would otherwise have been". The test of "reason to believe" is a subjective one, subject to a basic requirement of rationality…I would add that I see no harm in the use of the phrase "tax at risk"…as a convenient shorthand to describe the significant shortfall in tax paid or likely to be paid contemplated by sub-paragraph (1)(c), provided that it does not become a substitute for the statutory language, or divert attention away from the need to establish a causal link between the failure to comply with the notice and the tax unpaid.”
“There are some important things to note about this provision. In the first place, although it echoes the language of sub-paragraph (1)(c), it is not qualified by reference to the officer's "reason to believe". On the contrary, the language seems to me to require the Upper Tribunal itself to form a view on the amount of tax unpaid or likely to be unpaid. That view must be formed on the basis of the evidence before the Tribunal, and as a matter of general principle when penalties are in issue, the onus is firmly on HMRC to satisfy the Tribunal of its amount.”
“However, there was no Group bank account so the Respondent acted as their Nominee to accept any funds should the Administrators distribute. Accordingly, the monies received do not belong to The Respondent but to the Group – Normandy Limited. Please refer to out letter of8 November 2018 point 10xi where we state that Mr Mattu is not the beneficial owner of the money received from Thornton Rones.”
“Section 720 – Charge to tax on income treated as arising under section 721 (1) The charge under this section applies for the purpose of preventing the avoiding of liability to income tax by individuals who are UK resident by means of relevant transfers. (2) Income tax is charged on income treated as arising to such an individual under section 721 (individuals with power to enjoy income as a result of relevant transactions). (3) Tax is charged under this section on the amount of income treated as arising in the tax year. (4) But see section 724 (special rules where benefit provided out of income of person abroad) and section 726 (non-UK domiciled individuals to whom remittance basis applies). (5) The person liable for any tax charged under this section is the individual to whom the income is treated as arising. (6) For rules about the reduction in the amount charged in some circumstances and the availability of deductions and reliefs, see– 53 section 725 (reduction in amount charged where controlled foreign company involved), and section 746 (deductions and reliefs where individual charged under this section or section 727). (7) For exemptions from the charge under this section, see sections 736 to 742A (exemptions where no tax avoidance purpose or genuine commercial transaction, etc).”
“Section 721 – Individuals with power to enjoy income as a result of relevant transactions (1) Income is treated as arising to such an individual as is mentioned in section 720(1) in a tax year for income tax purposes if conditions A to C are met. (2) Condition A is that the individual has power in the tax year to enjoy income of a person abroad as a result of– (a) a relevant transfer, (b) one or more associated operations, or (c) a relevant transfer and one or more associated operations. (3) Condition B is that the income of the person abroad would be chargeable to income tax if it were the individual's and received by the individual in the United Kingdom. (3A) Condition C is that the individual is UK resident for the tax year. (3B) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to sections 724 and 725). (3C) Subsection (1) does not apply if— (a) the individual is liable for income tax charged on the income of the person abroad by virtue of a charge not contained in this Chapter, and (b) all that income tax has been paid. (4) For the purposes of subsection (2), it does not matter whether the income of the person abroad may be enjoyed immediately or only later. (5) It does not matter for the purposes of this section– (b) whether the individual is UK resident for the tax year in which the relevant transfer is made (if different from the tax year mentioned in subsection (1)), or (c) whether the avoiding of liability to income tax is a purpose for which the transfer is effected. (6) For the circumstances in which an individual is treated as having the power to enjoy income for the purposes of this section, see section 722.”
“Section 719 – Meaning of “associated operation” (1) In this Chapter “associated operation”, in relation to a transfer of assets, means an operation of any kind effected by any person in relation to— (a) any of the assets transferred, (b) any assets directly or indirectly representing any of the assets transferred, (c) the income arising from any assets within paragraph (a) or (b), or (d) any assets directly or indirectly representing the accumulations of income arising from any assets within paragraph (a) or (b). (2) It does not matter whether the operation is effected before, after or at the same time as the transfer.”
“Section 718 – Meaning of “person abroad” etc (1) In this Chapter “person abroad” means— (a) a person who is resident outside the United Kingdom, or (b) an individual who is domiciled outside the United Kingdom. (2) For the purposes of this Chapter, the following persons are treated as resident outside the United Kingdom— … (b) the person treated as non-UK resident under section 475(3) (trustees of settlements), and (c) persons treated as non-UK resident under section 834(4) (personal representatives).”
“Section 722 – When an individual has power to enjoy income of person abroad 55 (1) For the purposes of section 721, an individual is treated as having power to enjoy income of a person abroad if any of the enjoyment conditions are met. (2) In subsection (1) “the enjoyment conditions” means conditions A to E as specified in section 723. (3) In determining whether an individual has power to enjoy income for the purposes of section 721, regard must be had to the substantial result and effect of all the relevant transactions. (4) In making that determination all benefits which may at any time accrue to the individual as a result of the transfer and any associated operations must be taken into account, irrespective of– (a) the nature or form of the benefits, or (b) whether the individual has legal or equitable rights in respect of the benefits. Section 723 – The enjoyment conditions (1) Condition A is that the income is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of the individual, whether in the form of income or not. (2) Condition B is that the receipt or accrual of the income operates to increase the value to the individual– (a) of any assets the individual holds, or (b) of any assets held for the individual's benefit. 24 OFFICIAL (3) Condition C is that the individual receives or is entitled to receive at any time any benefit provided or to be provided out of the income or related money. (4) In subsection (3) “related money” means money which is or will be available for the purpose of providing the benefit as a result of the effect or successive effects– (a) on the income, and (b) on any assets which directly or indirectly represent the income, of the associated operations referred to in section 721(2). (5) Condition D is that the individual may become entitled to the beneficial enjoyment of the income if one or more powers are exercised or successively exercised. (6) For the purposes of subsection (5) it does not matter– (a) who may exercise the powers, or (b) whether they are exercisable with or without the consent of another person. (7) Condition E is that the individual is able in any manner to control directly or indirectly the application of the income.”
“Section 726 – Non-UK domiciled individuals to whom remittance basis applies (1) This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if section 809B, 809D or 809E (remittance basis) applies to the individual for that year. 56 (2) For the purposes of this section the deemed income is “foreign” if (and to the corresponding extent that) the income mentioned in section 721(2) would be relevant foreign income if it were the individual’s. (3) Treat the foreign deemed income as relevant foreign income of the individual. (4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 721(2) as would be relevant foreign income if it were the individual's as deriving from the foreign deemed income.
“Section 619 – Charge to tax under Chapter 5 (1) Income tax is charged on– (a) income which is treated as income of a settlor as a result of section 624 (income where settlor retains an interest), …”
“Section 620 – Meaning of “settlement” and “settlor” (1) In this Chapter– “settlement” includes any disposition, trust, covenant, agreement, arrangement or transfer of assets …, and “settlor”, in relation to a settlement, means any person by whom the settlement was made. (2) A person is treated for the purposes of this Chapter as having made a settlement if the person has made or entered into the settlement directly or indirectly. (3) A person is, in particular, treated as having made a settlement if the person– (a) has provided funds directly or indirectly for the purpose of the settlement, (b) has undertaken to provide funds directly or indirectly for the purpose of the settlement, or (c) has made a reciprocal arrangement with another person for the other person to make or enter into the settlement. 57 (4) This Chapter applies to settlements wherever made. (5) …”
“Section 624 – Income where settlor retains an interest (1) Income which arises under a settlement is treated for income tax purposes as the income of the settlor and of the settlor alone if it arises– (a) during the life of the settlor, and (b) from property in which the settlor has an interest. (1A) If the settlement is a trust, expenses of the trustees are not to be used to reduce the income of the settlor. (2) For more on a settlor having an interest in property, see section 625. (3) For exceptions to the rule in subsection (1), see– section 626 (exception for outright gifts between spouses or civil partners), section 627 (exceptions for certain types of income), and section 628 (exception for gifts to charities).”
“Section 625 - Settlor's retained interest (1) A settlor is treated for the purposes of section 624 as having an interest in property if there are any circumstances in which the property or any related property– (a) is payable to the settlor or the settlor's spouse or civil partner, (b) is applicable for the benefit of the settlor or the settlor's spouse or civil partner, or (c) will, or may, become so payable or applicable. … (5) In this section “related property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income from it.”
“Section 648 – Income arising under a settlement (1) References in this Chapter to income arising under a settlement include– (a) any income chargeable to income tax by deduction or otherwise, and (b) any income which would have been so chargeable if it had been received in the United Kingdom by a person domiciled and resident there. (2) But if, in a tax year, the settlor is not UK resident, references in this Chapter to income arising under a settlement do not include income arising 58 under the settlement in that tax year in respect of which the settlor, if actually entitled to 27 OFFICIAL it, would not be chargeable to income tax by deduction or otherwise because of not being UK resident. (3) And if, for a tax year, section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the settlor, references in this Chapter to income arising under a settlement include in relation to any relevant foreign income arising under the settlement in that tax year only such of it as is remitted to the United Kingdom (in that tax year or any subsequent tax year) in circumstances such that, if the settlor remitted it, the settlor would be chargeable to income tax.”
“Section 832 – Relevant foreign income charged on remittance basis (1) This section applies to an individual's relevant foreign income for a tax year (“the relevant foreign income”) if section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year. (2) For any tax year for which the individual is UK resident, income tax is charged on the full amount of so much (if any) of the relevant foreign income as is remitted to the United Kingdom— (a) in that year, or (b) in the UK part of that year, if that year is a split year as respects the individual. (3) Subsection (2) applies whether or not the source of the income exists when the income is remitted. (4) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.”
“Section 809L – Meaning of “remitted to the United Kingdom” 59 (1) An individual's income is, or chargeable gains are, “remitted to the United Kingdom” if– (a) conditions A and B are met, (b) condition C is met, or (c) condition D is met. (2) Condition A is that– (a) money or other property is brought to, or received or used in, the United Kingdom by or for the benefit of a relevant person, or 28 OFFICIAL (b) a service is provided in the United Kingdom to or for the benefit of a relevant person. (3) Condition B is that– (a) the property, service or consideration for the service is (wholly or in part) the income or chargeable gains, (b) the property, service or consideration– (i) derives (wholly or in part, and directly or indirectly) from the income or chargeable gains, and (ii) in the case of property or consideration, is property of or consideration given by a relevant person, (c) the income or chargeable gains are used outside the United Kingdom (directly or indirectly) in respect of a relevant debt, or (d) anything deriving (wholly or in part, and directly or indirectly) from the income or chargeable gains is used as mentioned in paragraph (c). (4) Condition C is that qualifying property of a gift recipient– (a) is brought to, or received or used in, the United Kingdom, and is enjoyed by a relevant person, (b) is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or (c) is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt. (5) Condition D is that property of a person other than a relevant person (apart from qualifying property of a gift recipient)– (a) is brought to, or received or used in, the United Kingdom, and is enjoyed by a relevant person, (b) is consideration for a service that is enjoyed in the United Kingdom by a relevant person, or (c) is used outside the United Kingdom (directly or indirectly) in respect of a relevant debt, in circumstances where there is a connected operation. … Section 809M – Meaning of “relevant person” (1) This section applies for the purposes of this Chapter. (2) A “relevant person” is– (a) the individual, (b) the individual's husband or wife, (c) the individual's civil partner, (d) a child or grandchild of a person falling within any of paragraphs (a) to (c), if the child or grandchild has not reached the age of 18, (e) a close company in which a person falling within any other paragraph of this subsection is a participator or a company which is a 51% subsidiary of such a close company, 29 OFFICIAL (f) a company in which a person falling within any other paragraph of this subsection is a participator, and which 60 would be a close company if it were resident in the United Kingdom, or a company which is a 51% subsidiary of such a company, (g) the trustees of a settlement of which a person falling within any other paragraph of this subsection is a beneficiary, or (h) a body connected with such a settlement. … (c) “close company” is to be read in accordance with Chapter 2 of Part 10 of CTA 2010 (see in particular section 439 of that Act), (ca) “participator”, in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 455 of CTA 2010 (see sections 454 and 455(5) of that Act) and, in relation to a company that would be a close company if it were resident in the United Kingdom, means a person who would be such a participator if it were a close company, (cb) “51% subsidiary” has the same meaning as in the Corporation Tax Acts (see Chapter 3 of Part 24 of CTA 2010), (d) “settlement” and “settlor” have the same meaning as in Chapter 2 of Part 9, (e) “beneficiary”, in relation to a settlement, means any person who receives, or may receive, any benefit under or by virtue of the settlement, (f) “trustee” has the same meaning as in section 993 (see, in particular, section 994(3)), and (g) a body is “connected with” a settlement if the body falls within section 993(3)(c), (d), (e) or (f) as regards the settlement.”
“Section 13 – Attribution of gains to members of non-resident companies. (1) This section applies as respects chargeable gains accruing to a company— (a) which is not resident in the United Kingdom, and (b) which would be a close company if it were resident in the United Kingdom. … (2) Subject to this section, every person who at the time when the chargeable gain accrues to the company is resident in the United Kingdom and is a participator in the company, shall be treated for the purposes of this Act as if a part of the chargeable gain had accrued to him. (3) That part shall be equal to the proportion of the gain that corresponds to the extent of the participator's interest as a participator in the company. … (5) This section shall not apply in relation to— (b) a chargeable gain accruing on the disposal of an asset used, and used only– 61 (i) for the purposes of a trade carried on by the company wholly outside the United Kingdom, or (ii) for the purposes of the part carried on outside the United Kingdom of a trade carried on by the company partly within and partly outside the United Kingdom, or (ca) a chargeable gain accruing on the disposal of an asset used, and used only, for the purposes of economically significant activities carried on by the company wholly or mainly outside the United Kingdom, or (cb) a chargeable gain accruing to the company on a disposal of an asset where it is shown that neither— (i) the disposal of the asset by the company, nor (ii) the acquisition or holding of the asset by the company, formed part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax, or (d) to a chargeable gain in respect of which the company is chargeable to tax by virtue of section 10B. … (9) If a person who is a participator in the company at the time when the chargeable gain accrues to the company is itself a company which is not resident in the United Kingdom but which would be a close company if it were resident in the United Kingdom, an amount equal to the amount apportioned under subsection (3) above out of the chargeable gain to the participating company's interest as a participator in the company to which the gain accrues shall be further apportioned among the participators in the participating company according to the extent of their respective interests as participators, and subsection (2) above shall apply to them accordingly in relation to the amounts further apportioned, and so on through any number of companies. (10) The persons treated by this section as if a part of a chargeable gain accruing to a company had accrued to them shall include the trustees of a settlement who are participators in the company, or in any company amongst the participators in which the gain is apportioned under subsection (9) above, if when the gain accrues to the company the trustees are not resident in the United Kingdom. … (12) In this section `participator', in relation to a company, has the same meaning given by section 454 of CTA 2010. (13) In this section— (a) references to a person's interest as a participator in a company are references to the interest in the company which is represented by all the factors by reference to which he falls to be treated as such a participator; and (b) references to the extent of such an interest are references to the proportion of the interests as participators of all the participators in the company (including any who are not resident in the United Kingdom) which on a just and reasonable apportionment is represented by that interest. (14) For the purposes of this section, where— (a) the interest of any person in a company is wholly or partly represented by an interest which he has under any settlement (`his beneficial interest'), and (b) his beneficial interest is the factor, or one of the factors, by reference to which that person would be treated (apart from this subsection) as having an interest as a participator in that company, the interest as a participator in that company which would be that person's shall be deemed, to the extent that it is 62 represented by his beneficial interest, to be an interest of the trustees of the settlement (and not of that person), and references in this section, in relation to a company, to a participator shall be construed accordingly.”
“Section 87 – Non-UK resident settlements: attribution of gains to beneficiaries (1) This section applies to a settlement for a tax year (“the relevant tax year”) if there is no time in that year when the trustees are resident in the United Kingdom. (2) Chargeable gains are treated as accruing in the relevant tax year to a beneficiary of the settlement who has received a capital payment from the trustees in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount for the relevant tax year or any earlier tax year. (3) The amount of chargeable gains treated as accruing is equal to– (a) the amount of the capital payment, or (b) if only part of the capital payment is matched, the amount of that part. (4) The section 2(2) amount for a settlement for a tax year for which this section applies to the settlement is– 32 OFFICIAL (a) the amount upon which the trustees of the settlement would be chargeable to tax under section 2(2) for that year if they were resident in the United Kingdom in that year, or (b) if section 86 applies to the settlement for that year, the amount mentioned in paragraph (a) minus the total amount of chargeable gains treated under that section as accruing in that year. (5) The section 2(2) amount for a settlement for a tax year for which this section does not apply to the settlement is nil. …”
“Section 87A – Section 87: matching (1) This section supplements section 87. (2) The following steps are to be taken for the purposes of matching capital payments with section 2(2) amounts. Step 1 Find the section 2(2) amount for the relevant tax year. Step 2 Find the total amount of capital payments received by the beneficiaries from the trustees in the relevant tax year. Step 3 The section 2(2) amount for the relevant tax year is matched with– (a) if the total amount of capital payments received in the relevant tax year does not exceed the section 2(2) amount for the relevant tax year, each capital payment so received, and (b) otherwise, the relevant proportion of each of those capital payments. 63 “The relevant proportion” is the section 2(2) amount for the relevant tax year divided by the total amount of capital payments received in the relevant tax year. Step 4 If paragraph (a) of Step 3 applies– (a) reduce the section 2(2) amount for the relevant tax year by the total amount of capital payments referred to there, and (b) reduce the amount of those capital payments to nil. If paragraph (b) of that Step applies– (a) reduce the section 2(2) amount for the relevant tax year to nil, and (b) reduce the amount of each of the capital payments referred to there by the relevant proportion of that capital payment. Step 5 Start again at Step 1 (unless subsection (3) applies). If the section 2(2) amount for the relevant tax year (as reduced under Step 4) is not nil, read references to capital payments received in the relevant tax year as references to capital payments received in the latest tax year which– (a) is before the last tax year for which Steps 1 to 4 have been undertaken, and (b) is a tax year in which capital payments (the amounts of which have not been reduced to nil) were received by beneficiaries. If the section 2(2) amount for the relevant tax year (as so reduced) is nil, read references to the section 2(2) amount for the relevant tax year as the section 2(2) amount for the latest tax year– (a) which is before the last tax year for which Steps 1 to 4 have been undertaken, and (b) for which the section 2(2) amount is not nil. (3) This subsection applies if– (a) all of the capital payments received by beneficiaries from the trustees in the relevant tax year or any earlier tax year have been reduced to nil, or (b) the section 2(2) amounts for the relevant tax year and all earlier tax years have been reduced to nil. (4) The effect of any reduction under Step 4 of subsection (2) is to be taken into account in any subsequent application of this section.”
“Section 96 — Payments by and to companies (1) Where a capital payment is received from a qualifying company which is controlled by the trustees of a settlement at the time it is received, for the purposes of sections 87 to 90 and Schedule 4C it shall be treated as received from the trustees. (2) Where a capital payment is received from the trustees of a settlement (or treated as so received by virtue of subsection (1) above) and it is received by a non-resident qualifying company, the rules in subsections (3) to (6) below shall apply for the purposes of sections 87 to 90 and Schedule 4C. (3) If the company is controlled by one person alone at the time the payment is received, and that person is then resident in the United Kingdom, it shall be treated as a capital payment received by that person. 64 (4) If the company is controlled by 2 or more persons (taking each one separately) at the time the payment is received, then— (a) if one of them is then resident in the United Kingdom, it shall be treated as a capital payment received by that person; (b) if 2 or more of them are then resident in the United Kingdom (“the residents”) it shall be treated as being as many equal capital payments as there are residents and each of them shall be treated as receiving one of the payments. (5) If the company is controlled by 2 or more persons (taking them together) at the time the payment is received — (a) it shall be treated as being as many capital payments as there are participators in the company at the time it is received, and (b) each such participator (whatever his residence) shall be treated as receiving one of the payments, quantified on the basis of a just and reasonable apportionment, but where (by virtue of the preceding provisions of this subsection and apart from this provision) a participator would be treated as receiving less than one-twentieth of the payment actually received by the company, he shall not be treated as receiving anything by virtue of this subsection. (6) For the purposes of subsection (1) above a qualifying company is a close company or a company which would be a close company if it were resident in the United Kingdom. (7) For the purposes of subsection (1) above a company is controlled by the trustees of a settlement if it is controlled by the trustees alone or by the trustees together with a person who (or persons each of whom) falls within subsection (8) below. (8) A person falls within this subsection if— (a) he is a settlor in relation to the settlement, or (b) he is connected with a person falling within paragraph (a) above. (9) For the purposes of subsection (2) above a non-resident qualifying company is a company which is not resident in the United Kingdom and would be a close company if it were so resident. … (10) For the purposes of this section— (a) the question whether a company is controlled by a person or persons shall be construed in accordance with sections 450 and 451 of CTA 2010, but in deciding that question for those purposes no rights or powers of (or attributed to) an associate or associates of a person shall be attributed to him under section 451(4) to (6) of CTA 2010]9 if he is not a participator in the company; (b) “participator” has the meaning given by section 454 of CTA 2010. (11) This section shall apply to payments received on or after19th March 1991 .”
“Section 42 — Part disposals (1) Where a person disposes of an interest or right in or over an asset, and generally wherever on the disposal of an asset any description of property derived from that asset remains undisposed of, the sums which under paragraphs (a) and (b) of section 38(1) are attributable to the asset shall, both 65 for the purposes of the computation of the gain accruing on the disposal and for the purpose of applying this Part in relation to the property which remains undisposed of, be apportioned. (2) The apportionment shall be made by reference— (a) to the amount or value of the consideration for the disposal on the one hand (call that amount or value A), and (b) to the market value of the property which remains undisposed of on the other hand (call that market value B), and accordingly the fraction of the said sums allowable as a deduction in the computation of the gain accruing on the disposal shall be— _A__ A + B and the remainder shall be attributed to the property which remains undisposed of. (3) Any apportionment to be made in pursuance of this section shall be made before operating the provisions of section 41 and if, after a part disposal, there is a subsequent disposal of an asset the capital allowances or renewals allowances to be taken into account in pursuance of that section in relation to the subsequent disposal shall, subject to subsection (4) below, be those referable to the sums which under paragraphs (a) and (b) of section 38(1) are attributable to the asset whether before or after the part disposal, but those allowances shall be reduced by the amount (if any) by which the loss on the earlier disposal was restricted under the provisions of section 41. (4) This section shall not be taken as requiring the apportionment of any expenditure which, on the facts, is wholly attributable to what is disposed of, or wholly attributable to what remains undisposed of. (5) It is hereby declared that this section, and all other provisions for apportioning on a part disposal expenditure which is deductible in computing a gain, are to be operated before the operation of, and without regard to, section 58(1), sections 152 to 158 (but without prejudice to section 152(10)), section 171(1) or any other enactment making an adjustment to secure that neither a gain nor a loss occurs on a disposal.”
“For completeness, there is no evidence the motive defence would apply in the present case. Absent any evidence, it is difficult to conclude that a structure that largely holds UK properties and businesses was established offshore for commercial/non-tax reasons. In addition, there is some direct evidence of tax motivation in the email from Steve Woolridge to George Colegate, John Prior and Ralph De Souza (of Leigh Carr) dated12 June 2014 “Sokhi [The Respondent] would like to buy this land in one of his offshore (Seychelles) companies Frisco Capital Limited due to the profits which will result and be retained offshore.”
“Section 736 – Exemptions: introduction (1) Sections 737 to 742A deal with exemptions from liability under this Chapter. (2) Some exemptions apply according to whether the relevant transactions are all pre-5 December 2005 transactions or all post-4 December 2005 transactions or include both (see sections 737, 739 and 740). (2A) The exemption given by section 742A applies only in the case of a relevant transaction effected on or after6 April 2012 . (3) In this section and sections 737 to 742– “post-4 December 2005 transaction” means a relevant transaction effected on or after5 December 2005 , and “pre-5 December 2005 transaction” means a relevant transaction effected before5 December 2005 . 70 Section 737 – Exemption: all relevant transactions post-4 December 2005 transactions (1) This section applies if all the relevant transactions are post-4 December 2005 transactions. (2) An individual is not liable to income tax under this Chapter for the tax year by reference to the relevant transactions if the individual satisfies an officer of Revenue and Customs– (a) that Condition A is met, or (b) in a case where Condition A is not met, that Condition B is met. (3) Condition A is that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that the purpose of avoiding liability to taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected. (4) Condition B is that– (a) all the relevant transactions were genuine commercial transactions (see section 738), and (b) it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation. (5) In determining the purposes for which the relevant transactions or any of them were effected, the intentions and purposes of any person within subsection (6) are to be taken into account. (6) A person is within this subsection if, whether or not for consideration, the person– (a) designs or effects, or (b) provides advice in relation to, the relevant transactions or any of them. (7) In this section– “revenue” includes taxes, duties and national insurance contributions, “taxation” includes any revenue for whose collection and management the Commissioners for Her Majesty's Revenue and Customs are responsible. (8) If– (a) apart from this subsection, an associated operation would not be taken into account for the purposes of this section, and (b) the conditions in subsections (2) to (4) are not met if it is taken into account, because of– (i) the associated operation, or (ii) the associated operation taken together with any other relevant transactions, it must be taken into account for those purposes. Section 738 – Meaning of “commercial transaction” (1) For the purposes of section 737, a relevant transaction is a commercial transaction only if it meets the conditions in subsections (2) and (3). (2) It must be effected– (a) in the course of a trade or business and for its purposes, or (b) with a view to setting up and commencing a trade or business and for its purposes. (3) It must not– (a) be on terms other than those that would have been made between persons not connected with each other dealing at arm's length, or 71 (b) be a transaction that would not have been entered into between such persons so dealing. (4) For the purposes of subsection (2), making investments, managing them or making and managing them is a trade or business only so far as– (a) the person by whom it is done, and (b) the person for whom it is done, are persons not connected with each other and are dealing at arm's length. Section 739 – Exemption: all relevant transactions pre-5 December 2005 transactions (1) This section applies if all the relevant transactions are pre-5 December 2005 transactions. (2) An individual is not liable for income tax under this Chapter for the tax year by reference to the relevant transactions if the individual satisfies an officer of Revenue and Customs that condition A or B is met. (3) Condition A is that the purpose of avoiding liability to taxation was not the purpose, or one of the purposes, for which the relevant transactions or any of them were effected. (4) Condition B is that the transfer and any associated operations– (a) were genuine commercial transactions, and (b) were not designed for the purpose of avoiding liability to taxation. Section 740 – Exemption: relevant transactions include both pre-5 December 2005 and post-4 December 2005 transactions (1) This section applies if the relevant transactions include both pre-5 December transactions and post-4 December transactions. (2) An individual is not liable to tax under this Chapter for the tax year by reference to the relevant transactions if– (a) the condition in section 737(2) (exemption where all relevant transactions are post-4 December 2005 transactions) is met by reference to the post-4 December 2005 transactions, and (b) the condition in section 739(2) (exemption where all relevant transactions are pre-5 December 2005 transactions) is met by reference to the pre-5 December transactions. (3) If subsection (2)(b) applies but subsection (2) (a) does not, this Chapter applies with the modifications in subsections (4) to (6). (4) For the purposes of sections 720 to 730, any income arising before5 December 2005 must not be brought into account as income of the person abroad. (5) In determining the relevant income of an earlier tax year for the purposes of section 733(1) (see Step 4), it does not matter whether that year was a year for which the individual was not liable under section 731 because of section 739 or this section. (6) For the purposes of Step 1 in section 733(1), a benefit received by the individual in or before the tax year 2005-06 is to be left out of account. (7) But, in the case of a benefit received in the tax year 2005-06, subsection (6) applies only so far as, on a time apportionment basis, the benefit fell to be enjoyed in any part of the year that fell before5 December 2005 .”
“What he did was as follows. He was the owner of 470£1 shares in a successful building company known as Commercial Structures, Ltd. Being minded to make a provision for his wife and four children, he formed an unlimited company which he named the Staffa Investment Trust, with an initial capital of£100,000 divided into 50,000 preference shares of 105. each and 7,500 ordinary shares of£10 each. The company was incorporated on 20th December, 1935. On 23rd December, 1935, the Appellant by a sale agreement of that date sold to the company his 470 shares in Commercial Structures, Ltd., the price being satisfied by the issue to him of 35,000 preference shares of the company and as to the balance of£82,500 in cash, which the Appellant left on loan to the company without interest. The 470 shares in Commercial Structures, Ltd. were the only assets of the Staffa Investment company, and its income consisted solely of the dividends received on these shares. The constitution of the company was so framed as to give the Appellant complete control over it.”
“For the purposes of this part of this Act ... 76 (b) the expression "settlement" includes any disposition, trust, covenant, agreement or arrangement, and the expression" settlor " in relation to a settlement means any person by whom the settlement was made; (c) a person shall be deemed to have made a settlement if he has made or entered into the settlement directly or indirectly, and in particular (but without prejudice to the generality of the foregoing words of this paragraph) if he has provided or undertaken to provide funds directly or indirectly for the purpose of the settlement, or has made with any ·other person a reciprocal arrangement for that other person to make or enter into the settlement”
“Did the property comprised in the settlement consist of the whole assets of Staffa, or is the property comprised in the settlement to be found separately comprised in each of the five deeds of settlement, the formation of Staffa being part of the arrangement conceived by the Appellant, whereby a convenient and profitable investment was made available for the moneys respectively settled under the five deeds of settlement?”
“My Lords, I am of opinion that the latter alternative provides the correct view of the arrangement made by the Appellant, with a view to making provision for his children. While the formation of Staffa provided an available investment for the sums settled under the five deeds of settlement, under which the children's provisions were actually constituted, the continuance of such investment was not essential to the continuance of the trusts under the deeds of settlement. In other words, the sums settled under these deeds were the funds provided for the purpose of the settlement within the meaning of Section 41(4) (c). Staffa, though controlled by the Appellant, did not, in my opinion, hold its assets as part of the provisions settled on the children. I am of opinion that the whole assets of Staffa did not constitute the property comprised in the settlement, and that the assessment cannot stand.”
“settlement” includes any disposition, trust, covenant, agreement, arrangement or transfer of assets”
“The principles that I draw from the case law authorities are, therefore, as follows: (1) The definition of 'settlement' in s 620 ITTOIA is very broad and can encompass any arrangements under which income on property becomes payable to others. However, it is limited to cases that involve an 'element of bounty' or, as Lord Hoffmann put it in Jones, the arrangement must involve the provision of a benefit, which would not have been provided in a transaction at arm's length. (2) It is possible to find the element of bounty in a future uncertain event, which is not part of the arrangements that form the settlement, but was within the contemplation of the parties at the time of the settlement. (3) Steps which form an integral part of the arrangements to create a structure under which the income of property becomes payable to others may be regarded as part of the 'settlement'. (4) It is important to identify the property comprised in the settlement as this will also define the income of the settlement, which is subject to tax under the settlements legislation.”
“Section 36 — Loss of tax brought about carelessly or deliberately etc (1) An assessment on a person in a case involving a loss of income tax or capital gains tax brought about carelessly by the person may be made at any time not more than 6 years after the end of the year of assessment to which it relates (subject to subsection (1A) and any other provision of the Taxes Acts allowing a longer period). (1A) An assessment on a person in a case involving a loss of income tax or capital gains tax– (a) brought about deliberately by the person, (b) attributable to a failure by the person to comply with an obligation under section 7, … may be made at any time not more than 20 years after the end of the year of assessment to which it relates (subject to any provision of the Taxes Acts allowing a longer period). (1B) In subsections (1) and (1A) references to a loss brought about by the person who is the subject of the assessment include a loss brought about by another person acting on behalf of that person. … (3) If the person on whom the assessment is made so requires, in determining the amount of the tax to be charged for any chargeable period in any assessment made in a case mentioned in subsection (1) or (1A) above, effect shall be given to any relief or allowance to which he would have been entitled for that chargeable period on a claim or application made within the time allowed by the Taxes Acts. (3A) In subsection (3) above, “claim or application” does not include an election under any of sections 47 to 49 of ITA 2007 (tax reductions for married couples and civil partners: elections to transfer relief). …”
“Section 809A – Overview of Chapter 79 This Chapter provides for an alternative basis of charge in the case of individuals who are not domiciled in the United Kingdom.”
“Section 809B – Claim for remittance basis to apply … (3) Sections 42 and 43 of TMA 1970 (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to a claim under this section as they apply in relation to a claim for relief.”
“Section 42 — Procedure for making claims etc. (1) Where any provision of the Taxes Acts provides for relief to be given, or any other thing to be done, on the making of a claim, this section shall, unless otherwise provided, have effect in relation to the claim. … Section 43 — Time limit for making claims (1) Subject to any provision of the Taxes Acts prescribing a longer or shorter period, no claim for relief in respect of income tax or capital gains tax may be made more than 4 years after the end of the year of assessment to which it relates. …”
“Section 43A — Further assessments: claims etc (1) This section applies where— (a) by virtue of section 29 of this Act an assessment to income tax or capital gains tax is made on any person for a year of assessment, and (b) the assessment is not made for the purpose of making good to the Crown any loss of tax brought about carelessly or deliberately by that person or by someone acting on behalf of that person. (2) Without prejudice to section 43(2) above but subject to section 43B below, where this section applies— (a) any relevant claim, election, application or notice which could have been made or given within the time allowed by the Taxes Acts may be made or given at any time within one year from the end of the year of assessment in which the assessment is made, and (b) any relevant claim, election, application or notice previously made or given may at any such time be revoked or varied— (i) in the same manner as it was made or given, and 80 (ii) by or with the consent of the same person or persons who made, gave or consented to it (or, in the case of any such person who has died, by or with the consent of his personal representatives), except where by virtue of any enactment it is irrevocable. (2A) In subsection (2) above, “claim, election, application or notice” does not include an election under— (a) any of sections 47 to 49 of ITA 2007 (tax reductions for married couples and civil partners: elections to transfer relief), (aa) section 55C of ITA 2007 (election to transfer allowance to spouse or civil partner), (c)section 35(5) of the Taxation of Chargeable Gains Act 1992 (election for assets to be re-based to 1982). (2B) For the purposes of this section and section 43B below, a claim under Schedule 1AB is relevant in relation to an assessment for a year of assessment if it relates to that year of assessment. (3) For the purposes of this section and section 43B below, any other claim, election, application or notice is relevant in relation to an assessment for a year of assessment if— (a) it relates to that year of assessment or is made or given by reference to an event occurring in that year of assessment, and (b) it or, as the case may be, its revocation or variation has or could have the effect of reducing any of the liabilities mentioned in subsection (4) below. (4) The liabilities referred to in subsection (3) above are— (a) the increased liability to tax resulting from the assessment, (b) any other liability to tax of the person concerned for— (i) the year of assessment to which the assessment relates, or (ii) any year of assessment which follows that year of assessment and ends not later than one year after the end of the year of assessment in which the assessment is made. (5) Where a claim, election, application or notice is made, given, revoked or varied by virtue of subsection (2) above, all such adjustments shall be made, whether by way of discharge or repayment of tax or the making of assessments or otherwise, as are required to take account of the effect of the taking of that action on any person's liability to tax for any year of assessment. (6) The provisions of this Act relating to appeals against decisions on claims shall apply with any necessary modifications to a decision on the revocation or variation of a claim by virtue of subsection (2) above.”
“(7) In sub-paragraph (1)(d) “the relevant date” means— (a) in a case involving an information notice against which a person may appeal, the latest of— (i) the date on which the person became liable to the penalty under paragraph 39, (ii) the end of the period in which notice of an appeal against the information notice could have been given, and (iii) if notice of such an appeal is given, the date on which the appeal is determined or withdrawn, and (b) in any other case, the date on which the person became liable to the penalty under paragraph 39.”
“The unnecessary diversion of HMRC's resources by an uncooperative taxpayer over a prolonged period such as has occurred in this case is wholly unacceptable. If all taxpayers behaved as Mr Tager has done the administration of tax would become impossible.”
“We can confirm that The Respondent is unable to incur further costs in regard to this matter and would like to withdraw from these proceedings.”
“The Applicant (HMRC) notes the Respondent’s below request to withdraw from these proceedings. HMRC further notes that the Respondent’s notice of withdrawal will not take effect unless the Upper Tribunal consents to the withdrawal (per rule 17(2)). HMRC does not object to the Respondent’s request that he does not participate any further in the proceedings. In the context of an application for a tax-related penalty under paragraph 50 of Schedule 36 toFinance Act 2008 , HMRC’s understanding is that the Respondent’s withdrawal from the proceedings would not conclude the application, as an application under paragraph 50 requires an exercise of 95 discretion by the Upper Tribunal and it is the Upper Tribunal that decides if it is appropriate to impose the penalty and that decides its amount (in contrast to an appeal against a penalty that has already been issued). Accordingly, even if the Respondent does not wish to participate in the proceedings (and the Upper Tribunal consents to his withdrawal), it appears to HMRC that the application must continue to a determination, either on paper or at a hearing (and the Respondent will remain a party to the proceedings even if he has indicated that he does not wish to participate). Given that the matter is relatively complex, HMRC submits that it is more appropriate for the matter to be dealt with at a hearing. On this basis, if the Upper Tribunal consents to the Respondent’s withdrawal, HMRC proposes that: (i) HMRC files its witness evidence (in compliance with paragraph 3 of the Directions dated12 November 2020 ) not later than 42 days after HMRC receives written notification of the Upper Tribunal’s consent to the Respondent’s withdrawal under rule 17(5); and then (ii) HMRC files its listing information for the hearing (in compliance with paragraph 7 of the Directions dated12 November 2020 ) not later than 14 days after HMRC files its above witness evidence. Notwithstanding that the Respondent wishes to withdraw from the proceedings, HMRC propose to continue to serve all documents relating to the proceedings on the Respondent.”
“Thank you for your email. The content of which we have kindly noted. We have to reiterate that The Respondent cannot pay any professional advisers nor can afford our own fees. We attach The Respondent’s payslips for the last 3 months and you will see that he does not have the funds to proceed with this Tribunal. As stated in our letter of the 15 December, due to the current pandemic, the finances of the Chartwell Group have been severely impacted. We enclose a letter from Landmark SA which again reiterates what we have said in our previous correspondence. The Respondent has made all reasonable efforts within his control and has been fully co-operative in his efforts to obtain information that HMRC have requested.”
“Noted. Good letter. Carl will take your input when he formalizes the letter to the UP.”
“Any submissions from HMRC should be made within the next 14 days. 97 Mr White- If you wish the below email to be treated as an application to reinstate their case under Rule 17 of the Tribunal’s Procedure Rules in which case they are directed to provide within the next 14 days (i) their authority to act on behalf of the respondent pursuant to Rule 11 of the Procedure Rules (ii) reasons why the application is being out of time (bearing in mind the time limit for reinstatement provided for in Rule 17(4)) and (iii) a full explanation as to the facts and matters that led them to believe that the Appellant was only being pursued for a penalty of£10,000 .”
“We attach the application to the UT re the tax related penalty we received. That is why we believed it only related to the penalty. The recent witness statement suggests tax of£1.9m ; which is contested and based on incorrect assertions and incomplete information. As such the appellant does not contest the penalty (purely on a cost benefit basis) but contests very loudly the tax asserted by the witness statement. Therefore there is NO NEED for any hearing if the Tribunal is confirmed to the penalty matter as that is agreed by the taxpayer as the cost of two days representation is more than the penalty. The purpose of this note is to ensure the UT is confining itself solely to the penalty matter. Copied to the taxpayers agents with whom we gave been engaged by and to confirm their authority to act on behalf of the respondent pursuant to Rule 11 of the Tribunal Procedure Rules (ii) the reasons why the application is being out of time (bearing in mind the time limit for reinstatement provided for in Rule 17(4)) is due to the extension by HMRC of the penalty matter to tax which has yet to be even assessed. Finally the full explanation as to the facts and matters that led the Applicant to believe that the Appellant was only being pursued for the penalty is set out in the attached document issued by HMRC”
“The sole issue before the UT is whether the penalty is the only issue. if so the taxpayer agrees to pay it and there is no need for a hearing.”
“Further to Mr Brian White's email of 22 February we confirm that our client has accepted the penalty of circa£10K and withdrawn his appeal to the Tribunal. We have also appealed against the assessments issued by Mr Jackson on3 March 2021 of£1,129,010.68 . This assessment was issued after Mr Jackson purported in his witness statement that there was tax owing of some£1.9M . 100 We reiterate what was stated by Mr Brian White's email of 23 February in that there is no need for a hearing as this will incur additional costs to our client and the tax owing as stated by Mr Jackson has no real foundation and is purely speculative. Particularly, when in Mr Jackson's letter of25 February 2021 , he states that 'HMRC consider it probable that capital payments would have been matched in 2014/15 (thus creating a charge under s87 TCGA 1992)'. There have been no such capital payments made to The Respondent! Can you confirm that whether Tribunal hearing of the 28 June is still going ahead in regard to the tax geared penalty under para 50 Sch 36 FA 2008.”
“The client accepted the penalty of 10k and therefore withdrew from the Appeal to Tribunal. so HMRC make no sense by asserting it should continue As HMRC state the daily penalties are under appeal to FTT and not Tribunal. So what is the Tribunal being asked to look at ??”
“Counsel has now been appointed, Michael Firth of Grays Inn Tax chambers to attend the hearing and make submissions.The taxpayer nor his advisers understood what HMRC was trying to do; it is important to note from the evidence that HMRC were apprised as to why there were delays as the Trustees had to take their own legal advice per Swiss Law before they could release information to the taxpayer. That evidence, that HMRC has received confirms that there is no tax liability. For the record, HMRC have received all the information requested”
"Judge Herrington has considered HMRC's letter of11 June 2021 regarding the late admission of the witness statements filed on behalf of the Respondent and HMRC's proposed timetable for the hearing. The Judge notes that the Respondent has had the opportunity of commenting on HMRC's proposals. The Respondent's representative has responded with an observation as regards HMRC's prior notice in their letter that they will be putting an allegation of dishonesty against The Respondent (which the Judge observes is set out in HMRC's skeleton argument). Neither the Respondent nor his representatives have made any observations on the timetable so the Judge is proceeding on the basis that they have no objections to it. Accordingly, the Judge approves the timetable proposed by HMRC in their letter of 11 June and admits the Respondents' witness evidence accordingly. The Judge has also directed that the hearing shall proceed as a hybrid hearing and accordingly both parties’ witnesses will be required to present in person at court for the purposes of giving their evidence and being cross-examined."