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The Supreme Court has rejected a challenge against the two-child limit on the individual element of child tax credit payments. In a unanimous judgment delivered by Lord Reed, the Court held that the provision imposing the limit was not contrary to the appellants’ Convention rights.
The Court found that the rule was potentially indirectly discriminatory against women, as well as children living in households with more than two children. However, any such discrimination could be validly justified and was considered to be proportionate on the basis of ‘protecting the economic well-being of the country’.
Background
Child tax credit is a welfare benefit scheme designed to provide financial support to families with children. The individual element of child tax credit, which is the subject of this case, entitles an individual to £2,830 per annum in respect of each child they are responsible for.
In 2015, the Conservative Party announced as part of that year’s General Election manifesto that they intended to limit a person’s entitlement to child tax credit to just two children, unless one of a narrow range of prescribed exceptions applied. This was part of a wider policy pledge to substantially reduce the amount spent on welfare benefits.
In March 2016, a bill was passed to that effect, and the limit came into force in April 2017.
Ofcom make some unlawful regulations in 2015, under which telecom companies have to pay higher fees. The regulations were quashed in 2017. Four telecom companies want restitutionary damages, being the difference between the sums paid under the 2015 regulations and the sums they would have paid under their predecessors, the 2011 regulations.
Big money washing around: the claim was for over £200m.
Ofcom says – no, you are only entitled to the difference between the 2015 payments and the hypothetical fees which we could lawfully have charged had we done our job properly in 2017.
Sounds quite simple, but the answer goes deep into the intersection between public and private law.
The claim, as I have said, was restitutionary.
Ofcom said that the law of restitution is rooted in the private law of obligations. The private law approach (as with any tort claim) is to apply a “but for” test – what would the telecoms have paid but for the unlawfulness? This involves the counterfactual: what lawful fees could Ofcom have imposed?
The telecoms, and the Court of Appeal, disagreed. Ofcom’s argument offended the principles of legality, and parity (the principle that those who pay voluntarily should not be worse off compared to those who refuse to pay and litigate).
In Episode 93, Emma-Louise Fenelon speaks to Isabel McArdle about the ways in which taxation and human rights overlap, with a particular focus on how this has arisen domestically in relation to the licensing of wholesale alcohol trading.
Moseley R (ota) v. London Borough of Haringey [2014] UK 56 – read judgment
Lord Wilson posed the question, answered today by the Supreme Court, with concision. When Parliament requires a local authority to consult interested persons before making a decision which would potentially affect all of its inhabitants, what are the ingredients of the requisite consultation?
The judgments reveal the surprising fact that the core principles of consultation (named after Gunning, as public lawyers will know) have never been approved by the Supreme Court or its predecessor, the House of Lords. The Court was happy to endorse them as embodiments of fairness. But it went on to consider the duty to consult on rejected alternatives – as very recently debated by the Court of Appeal in the Rusal case – see my post here.
A good week, to say the least, for Mikhail Kordokovsky, recently released from a Russian jail. A complex story of punitive tax assessments on his former company, Yukos, has led to a judgement of €1.866 bn in Strasbourg against Russia.
I shall concentrate on the Strasbourg case, although for sheer numbers the story is perhaps elsewhere; on 28 July 2014 shareholders had obtained awards from the Permanent Court of Arbitration in The Hague ordering Russia to pay $51.57 bn to shareholders in Yukos Oil, saying officials had manipulated the legal system to bankrupt the company.
Imagine you are on the board of large corporation. You attend the Annual General Meeting and asked the chief executive about that controversial tax avoidance scheme the company had been considering, but which the in-house legal team had advised against. The Chief Exec smiles and says that has been dealt with: “we just sacked the lawyers”.
The BBC is reporting what many suspected. Attorney General Dominic Grieve QC was sacked in order to clear the path for major reform of the relationship between the UK and the European Court of Human Rights. This is bad news, for the UK and potentially for the European Court of Human Rights too.
The Attorney General’s advice, which has been leaked to the BBC, was that plan to limit the power of the European Court of Human Rights were “incoherent” and a “legal car crash… witha built-in time delay“. Intriguingly, the BBC’s Nick Robinson also reports that William Hague, the now-former Foreign Secretary, also raised doubts over the plans.
Barnes v. The Eastenders Group [2014] UKSC 26 read judgment
Not Albert Square, but it could be. The Crown Prosecution Service suspect two individuals of a massive duty/VAT fraud in their cash and carry businesses. The CPS go to the Crown Court (in the absence of the individuals) and get an order to appoint a receiver (i.e. a paid manager) to run the affairs of companies (Eastenders) in which the individuals are involved, as well as a restraint order against the individuals. Both receivership and restraint orders are set aside some months later by the Court of Appeal, on the basis that the HMRC investigator’s statements were largely “broad and unsupported assertions”. Problem: by then the receiver had run up £772,547 in fees.
Simple issue. Who bears those fees? The receiver, the CPS or the companies against whom the order was made? And A1P1 (the right to possessions) made the difference.
R (on the application of Ingenious Media Holdings plc and Patrick McKenna v Her Majesty’s Revenue and Customs [2013] EWHC 3258 (Admin) – read judgment
Sales J has rejected an application for judicial review by Ingenious Media Holdings plc and Patrick McKenna, who complained that senior officials in HMRC had identified them in “off the record” briefings.
Ingenious Media is an investment and advisory group which promotes film investment schemes which allow participators to take advantage of certain tax reliefs and exemptions. HMRC has long been fighting to close down these “film schemes”, with some success (see the Eclipse 35appeal). Continue reading →
UK Uncut Legal Action Ltd v. (1) Commissioners of Her Majesty’s Revenue and Customs (HMRC) and (2) Goldman Sachs – read judgment
Tax avoidance has hit the news again, with Apple currently facing questions from the US Senate about its exploitation of Irish company law loopholes and David Cameron writing to offshore tax havens to push for more transparency over tax rules. As it happens, the High Court has just handed down a ruling in a case which raises many of the same issues.
The campaign group UK Uncut brought a judicial review claim against HMRC. They argued that it was unlawful for HMRC to reach a confidential settlement in 2010 with the investment bank Goldman Sachs over a multi-million pound unpaid tax bill arising out of a failed tax avoidance scheme. Mr Justice Nicol held that HMRC’s decision was not unlawful, but criticised the actions of HMRC officials and HMRC have acknowledged that the manner in which the settlement was agreed involved several mistakes.
Those of a certain age will remember when top tax rates in the UK were 98%. This was the marginal rate of tax in this successful claim that such taxation offended Article 1 of the 1st Protocol (A1P1) – the peaceful enjoyment of possessions. But the very wealthy seeking to safeguard their bankers bonuses may not obtain too much comfort from the Strasbourg ruling, as the facts were fairly extraordinary.
The applicant had been a Hungarian civil servant for 30 years until her dismissal (with many others) in July 2011. Long-standing rules gave her 8 months severance pay. The 98% tax rate was introduced in 2010; it was then successfully challenged in the Hungarian Constitutional Court. On the day of the Court’s adverse judgment, the tax was re-enacted, but this time the 98% rate was applied to pay exceeding 3.5m forints – c. £10,000 – and, further, only where the earnings came out of specified categories of public sector employees.
A fresh challenge in the Constitutional Court annulled the retrospective effect of this law, but could not as a matter of jurisdiction review the substantive aspects of the tax. So the applicant went to Strasbourg to challenge the tax when deducted from her pay.
Reeves v. Northrop, CA, 17 April 2013, – read judgment
Randy Northrop is a Californian and a wanderer in spirit. He lives with his family aboard MY Cannis – see the pic. He got fed up of “living in a grotty council house in a rough area” of Bristol, so bought and renovated this former Thames tug. And nice inside it sounds too – two open fireplaces, several flat screen TVs, a music room and grand piano.
He spent 8 years moored in Bristol, but the “authorities there aren’t too keen on “live-aboards.”” So he moved on and in 2008 ended up in North Devon moored off Chivenor.
How then did he have the misfortune to stray into one of the backwaters of the law – the law of council tax? Because, after featuring in the local paper, he made a generous offer “as a gesture of good citizenship” to pay some “voluntary” council tax. And instead of the authorities saying “how kind, than you very much” he got a “statement” saying that he was Band A – “fait accompli” as he rightly observed. But a po-faced response which did not indeed endear itself to Randy. Hence this challenge by him to the authorities’ decision.
Sounds a bit dry? Not at all. In the witty and elegant prose of Sir Alan Ward, even rating law is made interesting – and the retired Lord Justice pokes fun at the pompous verbiage you have to wade through to answer the question – do you have to pay council tax on a moored boat?
Prudential plc and another , R (on the application of) v Special Commissioner for Income Tax and another [2013] UKSC 1 23 January 2013 – read judgment
The Supreme Court has ruled that legal advice privilege should only apply to advice given by a member of the legal profession; that this is what the common law has always meant, and that any wider interpretation would lead to uncertainty. Two strong dissents do not find any principled underpinning for the restriction of the privilege to advice from solicitors or barristers.
The following summary is based on the Supreme Court’s press release (numbers in square brackets denote paragraphs in the judgment).
The Queen on the application of Totel Ltd v The First-Tier Tribunal (Tax Chamber) and The Commissioners for Her Majesty’s Revenue and Customs [2012] EWCA Civ 1401 – read judgment
Tax litigation is not the most obvious hunting ground for human rights points but if claimants feel sufficiently pinched by what they perceive as unfair rules, there is nothing to stop them appealing to the courts’ scrutiny of the lawfulness of those rules.
Human rights were not raised per se in this appeal but constitutional principles which arguably play the same role made all the difference to the outcome.
This case concerned the removal of a right of appeal by an Order in Parliament that stopped the appellant company (T) in its tracks, so naturally it turned to judicial review to find a remedy that the tax tribunal was not prepared to grant. T prayed in aid a fundamental principle of our unwritten constitution set out in R (Spath Holme Ltd) v Secretary of State for Transport, the Environment and Regions [2000] 2 WLR 15:
Parliament does not lightly take the exceptional course of delegating to the executive the power to amend primary legislation. When it does so the enabling power should be scrutinised, should not receive anything but a narrow and strict construction and any doubts about its scope should be resolved by a restrictive approach.[35] Continue reading →
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UK Uncut Legal Action Ltd v. (1) Commissioners of Her Majesty’s Revenue and Customs (HMRC) and (2) Goldman Sachs – 
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