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Contractor group expresses concern over retrospective offshore tax case

Published on Jan 29, 2010 |

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Following yesterday's High Court ruling that HMRC could apply taxes retrospectively in a 'BN66' offshore tax case, the PCG (and other groups) have expressed concern that the judgement could be seen as opening the door to retrospection elsewhere within the tax system.

The High Court case

In the court case, an IT contractor - Robert Huitson - challenged HMRC's right to claim taxes retrospectively. Huitson had utilised the services of an offshore tax scheme based in the Isle of Man for seven years, saving around £85,000 in the process. However, following the enactment of the Finance Act 2008, the Government not only tightened up the rules on the use of loopholes in double taxation treaties to avoid paying UK tax, but also allowed for the retrospective collection of any avoided tax all the way back until 1987.

Judge Mr Justice Parker rejected Huitson's claim, saying that HMRC had warned users of such schemes that they may be challenged in the future, and that the Government was legally entitled to change tax laws retrospectively to squash 'artificial arrangements'.

Opening the door to retrospective taxation?

Commenting on the judgement, PCG chairman Chris Bryce said:

"Whilst we recognise that the High Court Judge has clearly set out his reasons for upholding the 2008 Finance Act which allowed the Revenue to claim back this tax retrospectively in this particular instance, we share a common concern with all taxpayers that this judgement may be seen as opening the door to retrospection."

"For a seven year period up to 2008 HMRC failed to take any action before the law was changed, despite being well aware of these arrangements. Whilst PCG in no way encourages off-shore tax arrangements we object in the strongest terms to taxpayers being retrospectively penalised for arranging their tax affairs in a way which was entirely legal and proper at the time they undertook to do so."