Christmas crackers
General Tax
Tis the season for end-of-year lists so here’s mine, the highlights of 2011 for a tax warrior.
Firstly, the personal ones:
In July I received confirmation from HMRC that investors in my friend’s gym could claim tax relief under the Enterprise Investment Scheme. I knew it wasn’t going to be a pushover – I said as much in my July 2010 blog – but I wasn’t going to let it drop and after a year-long war of attrition HMRC threw in the towel.
In November the First-tier tribunal in Harrier LLC v. HMRC decided that the photobooks produced by Harrier qualified for zero-rating. Another hard-fought victory for common sense which I found particularly satisfying (you’ll understand why if you read my 2009 Case Study ‘When is a book not a book?’). It took a while, but we got there is the end.
Come December, I had unwound the potential SDLT double whammy which was the subject of last January’s blog. The couple got their leases for £1 (SDLT payable nil), declarations of trust were put in place and they could stop worrying. Job done.
Secondly, some highlights I can’t claim credit for:
In July HMRC received this well-deserved kicking from the First-tier tribunal for its habit of waiting several months before sending out penalty notices for late PAYE returns:
‘HMRC is a manifestation of the state. It is no function of the state to use the penalty system as a cash generating scheme. The penalty system has a legitimate aim, which is to ensure that appropriate filings take place in good time and to discourage default. Given that that is the legitimate aim, it is inexplicable why HMRC deliberately delays sending out a penalty notice for four months, with the effect that a penalty for five months becomes payable.’
Actually it’s not inexplicable at all (inexcusable would be nearer the mark), but the tribunal made its point, forcefully I think.
On 20 September, the European Court of Human Rights reached its decision in what was hyped as the biggest claim ever submitted to the Strasbourg court. The claim had been brought in 2004 by the oil giant Yukos against the Russian government, no less.
While the ECHR dismissed many of Yukos’ claims, it held that the speed with which the Russian tax authorities enforced a court decision in their favour (by seizing Yukos’ assets before a final domestic appeal had been heard) constituted a breach of the right to peaceful enjoyment of property. It also found that Yukos’ right to a fair trial had been violated in that it had been given insufficient time to prepare its case before the Russian Court. It’s comforting that even Russia doesn’t get things all its own way.
And finally, a couple of the sillier ones:
In October the Observer reported that it would take the world’s fastest speaker, Steve Woodmore, five days at full speed to get through the over eleven thousand pages of the UK tax code. It’s there on YouTube (The World’s Fastest Speaker v. The UK Tax Code) if you want to have a look.
In December HMRC found itself in the doghouse after taking on Three Counties Dog Rescue, a charity that cares for and rehomes abandoned dogs. The charity, which funds its operations by requiring prospective owner to make a minimum ‘donation’ of £150 for a dog, contended that it was making taxable supplies (of the dogs) in return for the donations and could therefore register for VAT. It could zero-rate the sale of ‘donated’ goods (the rehomed dogs) and so didn’t have to charge VAT, but could reclaim the VAT it had paid on its costs and use this to fund more good works.
(In an earlier case it had been decided that animals which had, for example, been rescued by the emergency services, were strays or had been lost or abandoned, and therefore given by a third party, were ‘donated’. And yes, HMRC really took the point in that case that only the owner of an animal could donate it).
HMRC argued that Three Counties was simply rehoming dogs in return for a voluntary donation, wasn’t making taxable supplies and therefore couldn’t reclaim the input VAT.
Of course they lost the case. Will HMRC never learn?
Have they never heard of legal realism? Jerome Frank is famously credited with the idea that a judicial decision might be determined by what the judge had for breakfast. So faced with a potentially homeless pooch a few weeks before Christmas, what would any self-respecting judge do?
Retrospection over. Time to head down to the Cat and Cucumber for a full English and a beaker of mulled wine.
Tax lawyer specialising in business tax, SDLT and VAT
