A court ruling has allowed HMRC to reclaim money that UK residents have placed into offshore accounts. The ruling dismissed opposition that suggested such actions could have crippling effects on those who had to repay.
During the proceedings a judge was told that people who were facing back-payments to HMRC were stricken with fears of bankruptcy, extreme psychological difficulties and also property losses. The judge, Mr Justice Ken Parker, rejected these claims and stated that the payments were “in the relevant circumstances proportionate”.
The rulings have taken place during a case regarding anti-tax avoidance, which the UK Government have been attempting to restrict since the 2008 Finance Act. Avoiding tax via offshore facilities has been referred to by HMRC as “a widely marketed tax avoidance scheme”. The 2008 legislation gave HMRC the ability to act retrospectively and demand unpaid taxes from money placed in offshore funds years prior.
This has led to uproar and dismay from many people who claim they simply cannot meet the financial demands that this legislation asks. Documents shown during the case highlighted 57 people who said they couldn’t pay even if they offloaded all their assets with a further 29 claiming they could only pay if they remortgaged their homes. Others stated that the demands would ruin them and force them into bankruptcy.
One of these individuals is a Mr Robert Huitson, who will challenge the rulings at the Court of Appeal, despite his original appeal request being rejected. His situation was borne out of the “Robert Huitson Family Settlement” trust that he created in the Isle of Man back in 2001. He has now been hit by a £100,000 bill. His lawyer, David Elvin QC, argued that the back-dating conflicts with Article 1 of Protocol 1 of the European Convention of Human Rights, which gives people the “right to free enjoyment of property”. The level of retrospectivity in place with the tax legislation is hitherto unprecedented and Mr Elvin argues that the burden is too great: “It is a legitimate aim to make fiscal policy. However, because it is a legitimate aim does not mean that the imposition of retrospective legislation is therefore proportionate”.
However the challenge was rejected as the judge deemed HMRC to be acting within the realms of fairness, and that HMRC will take matters such as hardship and financial difficulty into consideration when looking into individual payment cases.
A member of the Association of Chartered Certified Accountants, Chas Roy-Chowdhury told Times Online that he was against the retrospective nature of the legislation: “The case related to a particular trust arrangement but could have implications for similar offshore trust-based schemes. It is quite justified for the Government to attack complex schemes set up to avoid tax but it should not do it retrospectively”.