News
High Court refuses judicial review of retrospective anti-avoidance legislation
Posted on: 28 January 2010
The High Court has rejected a taxpayer's application for a judicial review of anti-avoidance legislation introduced, with retrospective effect, in Finance Act 2008. (HMRC contends that the scheme was never effective, and that the Finance Act 2008 provisions only put the matter beyond doubt.)
The legislation was introduced to counteract a widely marketed scheme under which self-employed consultants provided their services to a partnership instead of to the end user, and established an Isle of Man trust in which they had an interest in possession. The consultants received a fixed fee, plus payments from the trust. Double tax relief was claimed on the trust income, resulting in an overall effective income tax rate of only 3.5 per cent.
The taxpayer faced a total liability of over £100,000 for tax years 2001/02 onwards, and argued that the retrospective effect of the legislation was disproportionate and contrary to Human Rights legislation. However, the judge disagreed, and dismissed the claim for judicial review.
It is believed that the scheme was used by around 2,500 taxpayers.
