Our recent Tax Cases Update was presented by Ximena Montes Manzano, Barrister at Temple Tax Chambers. Ximena practises in all areas of tax litigation and accordingly, this update covered a range of taxes, highlighting particular areas of importance. Ximena discussed cases ranging from Supreme Court, all the way down to the FTT, highlighting the important takeaways in the higher courts and the cases to keep an eye on for future.
Here, we will only discuss in detail the points arising from the Supreme Court and briefly mention cases from the Court of Appeal.
Supreme Court Decisions
The Supreme Court found that a tax return must be viewed in the round and that any information in the whitespace must therefore be taken into account when determining whether an inaccuracy on the return is deliberate or not. In this case, the whitespace disclosure clearly explained the reason for losses being claimed in the incorrect box and therefore the tax return was not found to have been filed inaccurately deliberately. Unfortunately however, the Supreme Court also decided that the concept of “staleness” does not exist and that there is no concept of “collective corporate knowledge” when it comes to HMRC. This means that the something known by one officer is not deemed to be known by anyone else in HMRC. Therefore, it is possible that a new officer can pick up a case five years down the line and issue an assessment on the basis of careless behaviour, even if all the facts were available to HMRC at the time the return was filed.
This is an employment case, which has potentially far reaching consequences for tax. Drivers for Uber had signed contracts saying they were self-employed, however, the Supreme Court agreed with lower courts, that drivers were entitled to employment benefits. This did not make them employees, rather “workers” for the purposes of employment law. In tax law, people are treated as employed of self-employed. This case is important for tax because it shows that there is no legal presumption that a contract alone defines the working relationship between two parties. The relationship must be looked at on the basis of all the facts and the practical working relationship.
This was a case involving the sale and leaseback of a newly constructed care home, subject to the zero rate of VAT. According to Sch 10, VATA 1994, if there is a disposal of a person’s “entire interest” in the relevant premises, then a clawback provision applies. The Supreme Court decided that realistically, the sale and leaseback transactions were to be treated as “indissolubly bound together”. Therefore, there was no disposal of the entire interest in the property and the clawback provision did not apply.
The case centred around whether an individual who had omitted to draw on pension benefits and then transferred their pension into another plan was transferring value to her sons, and in doing so incurring an inheritance tax charge. The SC found that the taxpayer’s omission to take pension benefits was a transfer of value but that the transfer of the scheme was not. This is because there was no link between the two actions and the two actions did not amount to a single arrangement with an intention to confer a gratuitous benefit. The takeaway from this one is that the clearer the taxpayer’s intention is, the better as otherwise courts need to read into the information available potentially many years after the event.
Cases heard in the Court of Appeal include:
Payne, Garbett, Coca Cola V HMRC  EWCA Civ 889 regarding employee benefits around company cars/vans and what defines a car or a van.
JJ Management Consulting LLP and others –  EWCA Civ 784, which is a Judicial Review case on how far HMRC are entitled to take informal investigations. The court held that HMRC has a wide discretion to undertake informal investigations and it is up to the taxpayer whether they wish to cooperate or not (bearing in mind the consequences of not doing so).
HMRC v News Corp UK & Ireland Limited  EWCA Civ 91 – whether digital newspapers are zero rated in the same way as traditional newspapers. The CoA found that the digital versions were standard rated, overturning the decision by the UT.
HMRC v Development Securities PLC  EWCA Civ 1705 – whether Jersey incorporated companies were resident in the UK or in Jersey. The case looked at the facts – were the Jersey Directors independently making decisions? The fact that they independently verified the legality of their actions did not mean they were making decisions independently.
Easter Power Networks Plc v HMRC  EWCA Civ 283 – This was more about procedural points rather than tax technical and confirms that the FTT has jurisdiction to deal with closure notices.