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Contractor fails in bid to have BN66 retrospective tax ruling overrturned at Court of Appeal
Posted Jul 26, 2011
IT contractor Robert Huitson has failed in his bid to have his BN66 retrospective taxation ruling overturned at the Court of Appeal this week. Other contractors who have used offshore tax schemes in the past may be open to fresh demands for unpaid tax as a result.
Background to the Huitson BN66 case
In January 2010, Robert Huitson took HMRC to court, after receiving a demand £85,000 in retrospective taxes. Huitson had used the services of Montpelier Tax Consultants in the Isle of Man who provided a complicated offshore tax scheme, and paid an effective tax rate of a mere 3.5% over seven years.
In the original court case, Huitson claimed that HMRC should not be able to apply tax legislation retrospectively, and that such a move breached his human rights, as he (and others caught by the same rules) would have to sell assets and even face bankruptcy as a result.
On 28th January, Kenneth Parker J dismissed the case and stated that HMRC were entitled to close the loophole which had enable schemes like Montpelier to operate unchecked for a number of years, as outlined in Budget Note 66 (BN66) in 2008.
The legislation which enabled HMRC to tax offshore tax avoiders retrospectively was contained in Section 58 of the Finance Act 2008.
Appeal Hearing - July 2011
In November 2010, Montpelier was granted a hearing at the Court of Appeal to contest the original findings of Justice Parker. The judgement was handed down this week by Lord Justices Mummery, Sullivan and Tomlinson.
All three judges dismissed the appeal, and found no grounds which would entitle the Court of Appeal to disturb the original findings:
"In the circumstances of this case, the liability of the claimant under the retrospective legislation of s.58 to pay the UK income tax that he would have had to pay, if he had not participated in the tax avoidance scheme, is no more an unjustified interference with his enjoyment of his possessions than the ordinary liability that his fellow residents in the UK are under to contribute, by way of UK tax on their income, towards the costs of providing community and other benefits for the purposes of life in a civil society."
The Court also found that the retrospective element of BN66 did not breach the human rights of Robert Huitson: "There has been no conduct on the part of the State fiscal authorities that has made the retrospective application of the amended legislation to his tax affairs an infringement of his Convention rights."
You can read the full judgement here.
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