UT-2023-000051 - [2024] UKUT 00114 (TCC)

Mr Gordon argued that HMRC misrepresented [53] of the Decision. The FTT did not say that no tax liability could arise simply because the distribution had been made to Relkeel. Instead, the FTT said that HMRC’s position was “undermined” by Mr Rolls’ misunderstanding of the actual sequence of the transactions relating to the distribution. The FTT had acknowledged that HMRC’s case turned on investigating whether [58] “the beneficiary to whom the funds were appointed by the Settlement many years prior to the years of enquiry, and… whether the beneficiary passed it onwards, invested it on behalf of, or in any other way acted to direct that value to one or more of [the Respondents].”

Mr Gordon observed that HMRC had progressively narrowed their case but had maintained their original arguments at the November 2022 hearing, even when it became obvious in the course of cross-examination in the May 2022 hearing that HMRC’s factual case was incorrect. It was only in their skeleton argument for this hearing that HMRC finally accepted that the case rested only on a possible charge under section 731 ITA.

Mr Gordon further submitted that HMRC’s acceptance that the dividend had been paid to Relkeel meant that HMRC were no longer asserting that there had been a relevant transfer for the purposes of the ToAA legislation. Instead, HMRC were now arguing that there could still be income arising to a person abroad linked to the investment of the £40 million.

There was no evidence to support HMRC’s position. In any event, this argument could have been put forward by HMRC years ago based on the public information available to HMRC. Instead, HMRC chose to base their case on a different and incorrect factual premise.

HMRC were, according to Mr Gordon, seeking to tax the value of any benefit that might have arisen from the investment of any part of those funds by a person abroad, assuming that the appointee(s) (or a subsequent recipient) actually transferred the funds (or part thereof) and only if such a benefit had somehow arisen to one or more of the Respondents in any one or more of the tax years under enquiry.

It was against this background that Mr Gordon contended that the FTT had concluded that the enquiries have gone on for “far too long.” Thus, even if HMRC’s interpretation of the ToAA had technical merit, the FTT’s overall analysis, applying the balancing approach to the facts, made it clear that the enquiries should not be prolonged any further.