AC-2024-LON-001976 - [2025] EWHC 2479 (Admin)

As set out in the Statement of Facts and Grounds for the judicial review, the Claimant contends that correspondence from the predecessor to HMRC (which for convenience I will refer to as HMRC ) – especially a letter dated 27 November 2000 – as well as subsequent actions by HMRC, gave rise to a substantive legitimate expectation that HMRC would continue to treat him as if he was not-domiciled in the United Kingdom (but in Israel) and would not charge him tax retrospectively on a different domicile basis if HMRC changed their view as to his domicile.

In the letter of 27 November 2000, HMRC informed the Claimant’s agent that:

“I have now completed my enquiries into your client's claim to be not domiciled in the UK made on the form DOM1 dated 17 January 2000. I have decided that no amendment to the claim is needed. . . .”.

The claim referred to in the latter sentence was to the Claimant’s tax return for the year ending April 1999. In the DOM1 form (‘Income and Chargeable Gains – Domicile’), the Claimant stated that he considered that he was domiciled in Israel and that he intended to retire to Israel on completion of his business activities in the United Kingdom.

In reliance on the assurance provided in 2000, the Claimant contends that he filed his subsequent tax returns on the basis that he was not domiciled in the United Kingdom, and planned his financial affairs accordingly, in particular by making offshore investments which would not be taxable on the remittance basis. The Claimant contends that this assurance was amplified by other conduct of HMRC, which I refer to below.

The Claimant contends that it was not until a meeting in February 2013 that HMRC first stated that they would no longer abide by the ruling given in 2000, and that HMRC intended to challenge his domicile retrospectively and without giving any notice or warning of their change in position.

The closure notices were issued on 10 May 2019. The Claimant appealed against the closure notices on 4 June 2019 and he requested statutory reviews against those notices on 4 July 2021. In the statutory review, the Claimant raised the legitimate expectation argument, but this was not considered by HMRC. In a letter dated 17 November 2021, HMRC concluded that the closure notices should be upheld and stated that:

“I note your comments in your letter dated 4 July 2021 regarding whether Legitimate expectation applies in this case. Please be advised that I have not considered this in my review as an evaluation of HMRC conduct is not within the scope of a statutory review.”

On 20 December 2021, the Claimant’s appeal against the closure notices was notified to the First Tier Tribunal (Tax Chamber) (“the FTT”). In the meantime, on 4 June 2021, the Claimant had made a formal complaint to HMRC (a tier 1 complaint) under HMRC’s internal complaints process. In his complaint, the Claimant raised the legitimate expectation issue arising from the letter of 27 November 2000 and other matters. On 5 October 2021, HMRC rejected the complaint at tier 1. HMRC stated that no legitimate expectation had been created. On 20 December 2021, the Claimant requested that the complaint be considered as a tier 2 complaint. The Claimant included with his complaint a copy of a legal opinion from tax counsel which supported his claim that a legitimate expectation had been created. The tier 2 complaint was rejected by HMRC on 11 May 2022.

On 8 August 2022 (within 3 months of the conclusion of the tier 2 complaint), the Claimant’s agent, a firm of accountants Lopian Gross Barnett (LGB), made a complaint to the Adjudicator’s Office (“the AO”).

According to the “Service Level Agreement for the provision of adjudication services for HM Revenue and Customs and Valuation Office Agency by the Adjudicator’s Office” (“the SLA”), the Adjudicator is an officeholder, external to HMRC with the independent personal authority to review complaints about HMRC. The AO is made up of staff who are employees of HMRC. Paragraph 5.10 of the SLA provides that:

“The Adjudicator and AO can look at complaints about all the following:

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mistakes

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unreasonable delays

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poor or misleading advice

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processes - including those surrounding an individual ADR

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whether a policy has been followed

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inappropriate staff behaviour

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the use of discretion (subject to next paragraph)

If a complaint involves how HMRC has used its discretion, the Adjudicator and AO will consider the process relating to the exercise of discretion, but will not be entitled to substitute their judgement for a reasonable judgement reached by HMRC”.

Paragraph 5.11 of the SLA provides that the Adjudicator and AO may decide that “compensation is appropriate”. Paragraph 5.12 of the SLA provides that the Adjudicator and AO cannot look at certain complaints, including “matters which have been considered on appeal by independent tribunals or issues that the courts could have considered or could consider”.

In the Summary Grounds lodged by HMRC, it is said that the AO responded to the letter of complaint made by LGB on 10 August 2022, enclosing an authorisation to act form. LGB have claimed that they never received this letter. According to the AO, in the absence of any response to its letter, the complaint was closed without sending any further correspondence either to LGB or to the Claimant.

The Claimant instructed the firm of solicitors, Farrer & Co LLP, to chase up what had happened to the complaint made to the AO. Correspondence was sent by Farrer & Co LLP to the AO on 19 March 2024. The AO replied the following day to say that it was unable to communicate without an authorisation to act form. This form was duly completed by the Claimant and returned to the AO. On 10 May 2024, the AO wrote to Farrer & Co LLP to say that it would not review the complaint because the file had been closed. The judicial review proceedings were brought within one month of that decision.

In the meantime, the Claimant and HMRC had entered into an ADR process. I have little information about that process. The following mention is made in the Summary Grounds:

“On 4 April 2023, the appointed mediator wrote to the Claimant’s representatives (in the context of the Claimant not participating in ADR planned for 14 March 2023 due to his ill health and having submitted a new application for ADR) saying, “… I cannot keep a dispute in ADR or accept a dispute into ADR when the customer is unable to take part in the process … When your client is able to proceed, please contact me; there is no need to submit a new application for ADR. In the meantime, your current application is not accepted and so the dispute is not currently within ADR.”. There was no contact between the Claimant’s representatives and the mediator after April 2023”.

The Summary Grounds also refer to a letter from Farrer & Co LLP to the AO dated 24 May 2024. This states that the advice of counsel in May 2023 was that “it would not be worthwhile or advisable to chase the [AO] whilst actively pursuing Alternative Dispute Resolution”. It would appear, therefore, that a deliberate decision was made by the Claimant not to chase up the AO. I also note that, at no point, did the Claimant intimate to the HMRC that he would be issuing judicial review proceedings if his complaint was rejected; and no protective claim was issued.

On 21 March 2025, the FTT (see [2025] UKFTT 00348 (TC)) determined the Claimant’s substantive appeal against the income tax charges being made during the tax years 2005/06 and 2007/08 to 2015/16. In their judgment, the FTT noted that the total of the adjustments to tax made by HMRC for those years is £6,322,880.69. (The tax payable under the closure notices that are the subject of the judicial review claim amounts to around £3,600,000). The FTT decided that the Claimant had acquired a domicile of choice in England before 2005/06.