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Richard Robson from the Professional Contractors Group (PCG) was in court and gives a flavour of the proceedings on the final day.
Richard writes:
Well it was all over in a whirlwind. The case closed at one o-clock and the "short recess" will be rather longer than the previous day's. The contest is over and we must sit back patiently and await the judgment.
Richard Robson |
Whatever else I may say or imply in this report, please understand that five of the most highly qualified and independent judges in the land are going to spend several weeks examining the issues that occur in this case regardless of just what happened in court.
Malcolm Gammie QC (Arctic) attempted to address the issues from several angles, but was clearly steered down one course by their Lordships who by and large had already grasped the nettle and seemed only to want to explore a few side aspects.
From listening to the arguments, there seems to be a case of 'You can't have it both ways'. This crops up on two counts and since even I can understand them I'm going to attempt to get a bit technical:
Point 1 - under the provisions of the legislation there is a settlement if there was bounty in the arrangement, however if there was an outright gift of property from Geoff to Diana then, subject to certain exclusions, that gift is exempt. Since bounty implies that something has been given at undervalue much of the HMRC's case is built on arguments which attempted to differentiate between Diana's acquisition of a single share (of two) as bounty or a gift.
To the layman this is so esoteric as to be bizarre and Furness QC (HMRC) had introduced a third component which is the plan; this carries almost sinister implications of malice aforethought and a clear determination on the part of Geoff and Diana in 1992 to eventually cheat HMRC eight years later. This has always seemed to me to be the very heart of what is wrong with the Revenue's approach.
Point 2 - which becomes entwined was that somehow we can look at the arrangement in 1992 for the purposes of discerning a plan and determine that Diana's share had no real value at that time and therefore was not a gift, but look again in 2000 and determine that it had been obtained undervalue and therefore was bounteous.
This may seem like the same point and I did warn that they were intertwined, but their Lordships were not prepared to take 2000 as the date for one part of the argument and 1992 for the other and Lord Hope went so far as to tell Furness QC that "you cannot have it both ways".
There were a few other useful aspects which cropped up in the last hour. We have an acknowledgement that the Revenue have been quietly attacking companies with this approach since somewhere in the mid 90s, but their first guidance was only published for the taxpayer in 2000 or 2001 and they were unable to confirm which. Lord Walker, who in a previous life, was also on the bench for our Appeal of the Judicial Review made a connection with IR35.
This is very much part of the same real business/not-real business camp as IR35 and reluctantly I believe that it is even tighter than just an attack on small businesses IMO it is quite specifically about IT contractors. No doubt the Government will be taking a very keen interest in this case and I'm sure that their own experts will be examining the entrails in order to discern the likely outcome. I really do hope that if they intend to set their sights on our members again they do the job properly, recognise that most of us run genuine businesses, then craft decent fair legislation which does exactly what it says on the can and avoids the immense ill will and collateral damage of the unworkable IR35 and the inapplicable S660.
I particularly hope that they decide to leave us entirely alone to do what we do best which is oil the wheels of the UK economy and not oblige us to become pocket tax experts too. Respect is long overdue!
Richard Robson
Professional Contractors Group
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