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Where Taxpayers and Advisers Meet
Budget 2018 and Could Taxpayers Claim Damages for HMRC Negligence?
11/11/2018, by Peter Vaines, Tax Articles - General
Rating: 5/5 from 8 people

Peter Vaines reflects on the 2018 Budget and considers a foreign tax case with possible implications for our own HMRC...

Non-Resident CGT Returns and Other Disposals of UK Dwellings

There has been no end of criticism about the penalties for the failure to submit Non-Resident CGT returns and the excessively onerous obligations. HMRC have no sympathy; taxpayers ought to know the rules because they are all quite clear – except that not even the judges
can agree what those obligations are.
Anyway, they have found a way to resolve this difficulty. They obviously did not want to abandon the system, or admit that it was flawed (and of course they could have done both), so from 6th April 2019 the capital gains tax payable by a non-resident person on the disposal of UK residential property must be paid 30 days after completion. I guess the expectation is that the solicitors will deal with it just like they do with SDLT. That will solve the problem. (And there is a little note which says that this 30 day payment date for CGT on residential property will apply to UK residents from 6th April 2020.)

Addition to an Existing Trust / Settlement

It may be remembered that there is a hot dispute about the IHT treatment of additions to an existing settlement. Is an addition to an existing settlement an addition to an existing settlement (well, you would have thought so), or is it a new settlement? HMRC says it is a new settlement. So we have an announcement that legislation is to be introduced:
“ reflect HMRC’s established legal position in relation to the Inheritance Tax (IHT) treatment of additions to existing trusts. The legislation will confirm that additions of assets by UK-domiciled (or deemed domiciled) individuals to trusts made when they were non-domiciled are not excluded property”.
At least that will deal with the arguments (although the reference to “HMRC’s established legal position” is a bit of a cheek). However, this approach is so at variance with the existing legislative framework that I fear there will be a lot of unintended consequences unless they are extremely clever and get all the legislation to link together. I see the potential for another Mansworth v Jelley debacle here.

Damages for Tax Office Negligence?

Some interesting news emerges from the Canadian Courts. This may look like clutching at straws – but this could a very valuable straw.
The Quebec Superior Court recently held that the Canada Revenue Agency (the Canadian equivalent of HMRC) could be liable in damages for negligence if their actions caused measurable harm to the taxpayer.
In the case of Ludmer v AG of Canada, the Court held that the Canada Revenue Agency was negligent and had improperly conducted its tax audit by:
  • Creating and refusing to abandon clearly untenable tax assessment positions.
  • Making a request to the Bermuda authorities with reference to a “criminal tax matter”.
  • Acting improperly in attempting to railroad through a settlement.
  • The failure to properly disclose information to the taxpayers.
The damages amounted to $4.8million.
Goodness me! Does some of this look familiar? (Be still, my beating heart.) 
I cannot imagine that the UK courts would readily adopt a similar approach in the current climate – but I have a feeling we might find out. After all, if HMRC were to be negligent or behave improperly causing harm to the taxpayer why should they be exempt from the consequences of their negligence or improper behaviour. Or, to put it another way – be above the law.
Such conduct would surely be an abuse and taxpayers should have a legal remedy – beyond perhaps Judicial Review which would merely tell HMRC to stop.

About The Author

The above item is an extract from ‘UK Tax Bulletin’ which is written by Peter Vaines and is reproduced with the kind permission of the author.

Peter Vaines is a barrister at Field Court Tax Chambers. He advises clients in the UK and overseas on all aspects of corporate tax and personal tax law including tax investigations, trusts and offshore structures as well as wider issues such as the valuation of unquoted shares for fiscal purposes. He is one of the leading authorities in the UK on the law of residence and domicile. Mr Vaines is also qualified as a chartered accountant, chartered arbitrator and member of the Institute of Taxation. He is a columnist for the New Law Journal and the Tax Journal and is a former member of the editorial board of Taxation. He was awarded Tax Writer of the Year in the LexisNexis Taxation Awards of 2015.


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