Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/new-model-adviser/article/a379413
HMRC in retrospective raid on offshore schemes after Court victory
by Tony Bonsignore on Jan 28, 2010 at 14:50
HM Revenue & Customs may be about to embark on a £100 million grab on offshore tax avoidance schemes after winning a critical High Court ruling today.
The ruling by Mr Justice Parker upholds the ability of the Revenue to plug tax loopholes retrospectively, a power first enshrined in the Finance Act 2008.
This power had been challenged by a self-employed IT consultant, Robert Huitson, who had avoided some £85,000 in tax by using a complex tax avoidance scheme based in the Isle of Man, offered by a company called Montpellier.
The scheme exploited a loophole in the tax regulations to allow Huitson to pay an effective tax rate of 3.5%, and thus avoid most of his domestic tax bill. HMRC subsequently closed the loophole and hit Huitson with a £100,000 bill.
Huitson argued HMRC’s decision to chase him for back taxes broke his personal rights as guaranteed under the 2008 Human Rights Act, because until then HMRC had failed to take any action - despite being aware of the scheme for a number of years.
Mr Justice Parker, however, rejected this defence as unreasonable, effectively giving HMRC the right to challenge any avoidance scheme retrospectively.
‘The tax avoidance scheme, if it worked, would, therefore, appear to realise every taxpayer's dream of lawfully avoiding, or at least greatly reducing, income tax in any jurisdiction,’ the judge said.
The court was told during the hearing that dozens of other people using the scheme would be unable to pay their tax bills if the High Court ruled in the HMRC’s favour and the tax authorities took a similar approach with them.
Huitson’s solicitors said they would appeal against the ruling.
News sponsored by:
Today's top headlines
Challenged by growing risk aversion?
Challenging financial markets over recent years have resulted in growing risk aversion among British savers and led many to seek safety in cash. Click here for more.