The Court of Appeal finds that the EAT had been wrong to reverse the tribunal. Administrators “will almost always have a transfer of the undertaking as their ultimate objective” but that does not mean that the reason for dismissals made by them will always be to make the business more attractive to a purchaser. They can also be made to allow the business to carrying on trading. On the facts the dismissals at the Club had been made for that reason, so liability did not pass to the purchaser. The case will be of considerable importance to insolvency professionals. It marks a partial retreat from Spaceright and a recognition (notably in the firm concurring judgment of Briggs LJ) of the importance of the wider policy objective of corporate rescue.
Court finds HMRC entitled to tax under dispute where taxpayer left it to HMRC to calculate the tax
21 November 2013
A taxpayer must perform a calculation of the amount of tax due itself, rather than leave that calculation to HMRC, in order to retain possession of funds under dispute, the Supreme Court has ruled.
Pinsent Masons discusses the ruling:
The ruling still leaves open the possibility that taxpayers engaged in avoidance can retain possession of the cash, and so benefit from cash flow advantages, if they carry out their own tax calculations, according to tax expert Jason Collins of Pinsent Masons. "HMRC has for many years been taking steps to remove the ability for taxpayers to keep possession of the cash during a dispute about tax avoidance," he said. "As the disputes are lengthy, in some cases lasting a decade or more, even if the taxpayer has to pay the tax at the end of the process with statutory interest, the cash flow advantage of keeping possession of the cash in the meantime can of itself be quite attractive". "The irony is that HMRC usually strings out its enquiries into avoidance: if it were to progress cases more quickly, it would not have to worry so much about the cash flow advantages. HMRC's latest guidance states that it will not delay in opening enquiries during the 12 month window, but that is only the start of it – the issue is how quickly the enquiry itself is progressed, which is often in the gift of HMRC itself," he said. The taxpayer in this case, Maurice Cotter, filed his tax return for 2007/08 on 31 October 2008, without making any claim for loss relief and leaving HMRC to calculate his tax liability for that year. On 24 December, HMRC sent Cotter a tax calculation showing that he owed over £210,000 in income and capital gains (CGT) taxes. The following January, Cotter's accountants submitted a 'provisional' loss relief claim showing employment-related losses of £710,000 for 2008/09 and asserting that no further tax was due because of this. HMRC opened an enquiry into the loss claim under the Taxes Management Act (TMA); however, it claimed the unpaid tax for 2007/08 through the county court, ignoring the loss claim that they were enquiring into. Cotter appealed on two grounds: firstly, that his loss for 2008/09 covered the amount owed for the previous year; and secondly, that the county court did not have the jurisdiction to hear the dispute. In its judgment, the Supreme Court overturned an earlier decision by the Court of Appeal and found in favour of HMRC. As the loss claim for 2008/09 was not made 'in a return', the department was right to proceed to recovery through the courts. HMRC had argued that not allowing it to do so could expose it to the risk of "irrelevant claims" with no merit being made in tax return forms in order to postpone the payment of tax that would otherwise be payable.
CIPP Policy News Journal
16/04/2014, Page 125 of 519
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