Our pick of this week's cases
In R (oao Cartref) v HMRC [2019] EWHC 3382 (Admin) (13 December 2019), the High Court granted permission for judicial review (JR) to only one of the five applicants (Cartref) and concluded that the loan charge legislation was compatible with the Human Rights Act 1998 and did not constitute a breach of article 1 protocol 1 (A1P1) or article 6.
As part of a circular lending arrangement, company directors received loans from a company other than their employer in respect of which no income tax or NICs were paid.
HMRC notified the applicants of its intention to: treat the companies or the directors as being from 5 April 2019 liable for tax and NICs unless a settlement was reached before that date (the loan charge can be imposed on certain arrangements dating back to 6 April 1999); and disallow the tax deduction in the amount of the loans made by the companies to the directors.
Although the High Court only granted JR permission to Cartref, the court still considered the substantive JR application of the other applicants as if they had been granted permission.
The High Court decided that the loan charge legislation was compatible with human rights law as it complied with the principle of lawfulness and pursued a legitimate aim by means reasonably proportionate to the aim sought to be realised. This was because:
While the court was concerned by the extent of the loan charge’s retrospectivity (20 years prior to the commencement of the legislation), it found that, for the particular claimants in this case, who entered into the loan arrangements in 2010 and 2013, there was no evidence of hardship. This was because:
Why it matters: Although this JR claim failed, this decision leaves open the possibility that other taxpayers, who entered into loan arrangements at a time before overt warnings about the taxation of such arrangements were made, might be able to bring a JR claim that a less intrusive measure (less retrospective than 20 years) should have been implemented instead.
It is interesting to note that the changes to the loan charge legislation that are due to be included in Finance Bill 2020 will, among other changes, limit its retrospectivity so that it only applies to loans outstanding at 5 April 2019 that were made on or after 9 December 2010. On the basis of the Cartref decision, it is likely that the amended loan charge legislation should not breach human rights law.
Other cases reported this week:
Our pick of this week's cases
In R (oao Cartref) v HMRC [2019] EWHC 3382 (Admin) (13 December 2019), the High Court granted permission for judicial review (JR) to only one of the five applicants (Cartref) and concluded that the loan charge legislation was compatible with the Human Rights Act 1998 and did not constitute a breach of article 1 protocol 1 (A1P1) or article 6.
As part of a circular lending arrangement, company directors received loans from a company other than their employer in respect of which no income tax or NICs were paid.
HMRC notified the applicants of its intention to: treat the companies or the directors as being from 5 April 2019 liable for tax and NICs unless a settlement was reached before that date (the loan charge can be imposed on certain arrangements dating back to 6 April 1999); and disallow the tax deduction in the amount of the loans made by the companies to the directors.
Although the High Court only granted JR permission to Cartref, the court still considered the substantive JR application of the other applicants as if they had been granted permission.
The High Court decided that the loan charge legislation was compatible with human rights law as it complied with the principle of lawfulness and pursued a legitimate aim by means reasonably proportionate to the aim sought to be realised. This was because:
While the court was concerned by the extent of the loan charge’s retrospectivity (20 years prior to the commencement of the legislation), it found that, for the particular claimants in this case, who entered into the loan arrangements in 2010 and 2013, there was no evidence of hardship. This was because:
Why it matters: Although this JR claim failed, this decision leaves open the possibility that other taxpayers, who entered into loan arrangements at a time before overt warnings about the taxation of such arrangements were made, might be able to bring a JR claim that a less intrusive measure (less retrospective than 20 years) should have been implemented instead.
It is interesting to note that the changes to the loan charge legislation that are due to be included in Finance Bill 2020 will, among other changes, limit its retrospectivity so that it only applies to loans outstanding at 5 April 2019 that were made on or after 9 December 2010. On the basis of the Cartref decision, it is likely that the amended loan charge legislation should not breach human rights law.
Other cases reported this week: