Elite strategy for high-stakes litigation

Paragraph 5, Schedule 9 of the Finance Act 2025 inserted the emboldened wording to section 809P(12) ITA 2007 concerning the ‘re-remittance’ of foreign income and gains:

“if the amount remitted (taken together with any amount previously remitted that has been charged to tax) would otherwise exceed the amount of the income or chargeable gains, the amount remitted is limited to the amount which (when taken together with any amount previously remitted that has been charged to tax) is equal to the amount of the income or chargeable gains.”

The legislation refers to the treatment of remittances to the UK where the relevant foreign income and/or gains (“FIGs”) had previously been remitted to the UK, but not charged to tax- usually because the taxpayer was not UK resident in the remittance year and did not subsequently fall within the temporary non-residence rules.

The wording of s.809P(12) ITA 2007 prior to the FA 2025 tweak was widely accepted by the tax profession to mean that FIGs could be remitted to the UK at a time when this remittance was not taxable and that would ‘cleanse’ those FIGs such that they could be used freely in the UK thereafter- for example when the taxpayer resumed UK residence having been away for 6 years.

The addition of the emboldened wording now seems to mean that such cleansing will no longer be effective and if these income and gains are subsequently re-remitted to the UK, this later remittance may be charged to UK tax.

Of some concern is that HMRC set out their view on the FA 2025 amends in written correspondence with the CIOT stating that the amends to the legislation in fact simply reinforce/ clarify what has always been the HMRC view- that second/ subsequent remittances are only ever relieved from tax if the first occasion of the remittance had been charged to tax.

Perhaps as a result of this confusion/ conflicting views between industry experts and HMRC, a relief was introduced at Amendment 24 (“Relief for amounts remitted again on becoming UK resident”) to the Finance Act 2025 to limit the impact of the insertion of the new wording to future action only. The relief operates by treating the original remittance as having been taxed so that future re-remittances are not charged to tax. The wording of Amendment 24 possibly adds further uncertainty but the intention is to limit the retrospective impact of the FA 2025 wording.

In short going forward, relief should be available to individuals who cleansed and re-remitted funds prior to 6 April 2025. It will not help:

· Individuals who remitted FIGs to the UK in a non-UK resident period but have not yet re-remitted the FIGs to the UK;

· Individuals who have not been UK resident in 2024/25 or 2025/26;

· Individuals who have made a claim for split year treatment in either 2024/25 or 2025/26;

· Taxpayers who have previously ‘cleansed’ their FIGs by remitting these at a time when they were not subject to tax, for a reason other than a period of long term non-residence. This includes those with a period of non-residence of less than 5 years but where the temporary non-residence rules do not apply (for instance because they were UK resident for fewer than 4 of the 7 years before becoming non-resident) and those who have made a remittance of FIGs which were not subject to tax due to the availability of their personal allowance/ annual exempt amount.

Action Points

Some taxpayers may need to regularise their tax position with HMRC where the re-remittances of perceived cleansed funds have been treated as taxable.

Individuals who had been advised that FIGs were cleansed (but may in fact not be) and could be treated as clean capital may have ceased to operate account segregation meaning clean capital is now be buried deep beneath the affected FIGs. A mixed fund analysis may be required.

Anyone affected should take professional advice.

‍

In his speech delivered on 11 March 2025 at the Chartered Institute of Taxation, James Murray, Exchequer Secretary to the Treasury, announced plans for HMRC to introduce a new whistleblowing scheme. The new scheme will take inspiration from the US and Canadian whistleblowing schemes which substantially reward informants for providing information to tax authorities on tax non-compliance.

The new scheme follows the measures outlined in the Chancellor’s Autumn Budget to “close the tax gap,” and is aimed at tackling “serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes.” The scope of the scheme has not been confirmed but given the reference to “avoidance schemes” it is not expected to be limited to reports of tax evasion but also “serious” tax avoidance.

How does HMRC’s current rewards scheme work?

The new scheme is intended to complement HMRC’s current rewards scheme (contained in section 26 of the Commissioners for Revenue and Customs Act 2005) which rewards informants on a “discretionary” basis rather than as a percentage of the tax recovered (and so currently in the UK there is actually no guarantee that an informant would receive any reward for providing information to HMRC).

Rewards under HMRC’s current scheme are relatively modest and not linked to the amounts recovered. Therefore, it is unlikely that money is currently the main incentive for informants to approach HMRC (and the scheme is not widely publicised in any case). In 2023 – 24 HMRC reportedly paid out nearly £1m in awards (the highest payout in recent years). However, in comparison, in the same year the Inland Revenue Service (“IRS”) paid out a total of $88.8m across 121 awards in respect of recoveries totalling $338m.

How might the new scheme work?

Details of the new scheme have not been confirmed but, if the UK followed the US model, then rewards for whistleblowers could be between 15 – 30% of the sums collected (which includes tax, interest, penalties and fines). Whistleblowers in Canada receive less (5 – 15%). The payments are potentially very large sums, and it marks a significant change in practice for HMRC in tackling tax non-compliance.  

In the US, the IRS has a dedicated Whistleblower Office which processes information relating to whistleblowing claims. Whistleblowers in the US will qualify for awards for providing “specific” and “credible” information to the IRS regarding tax underpayments or violations that lead to proceeds being collected.  

Informants making claims are required to provide the following information to the IRS to support their claim:

• A description of the alleged tax non-compliance and supporting evidence (and a description of documents or evidence not in the whistleblower’s possession or control);  

• An explanation of how and when the whistleblower became aware of the information;

• A description of the whistleblower's relationship to the relevant party (for example, family member, client, employee etc); and

• A signed declaration under penalty of perjury if false information is provided.  

There are certain “ineligible” whistleblowers who cannot make claims, mainly individuals reporting on non-compliance linked to their roles in the federal government.

In order to qualify for a tax-geared award the information provided must relate to a claim exceeding $2,000,000 or, if the subject of the claim is an individual, the individual’s gross income for the relevant tax year must exceed $200,000 (the Canadian thresholds are less). If the claim does not meet the criteria for a tax-geared award, then the IRS can instead pay awards as part of discretionary programme. It might be anticipated that the UK government will include similar minimum thresholds in order to reduce time and cost spent pursuing smaller claims.

Notably awards can be decreased for claims based on information obtained from public sources or if the whistleblower “planned and initiated” actions which led to the non-compliance. Again, it is expected that a similar provision would be included in the UK rules to prevent, for example, individuals involved in planning and procuring tax avoidance schemes from receiving substantial awards.

Conclusion

It remains to be seen how the new UK whistleblowing scheme will work in practice, however, some early observations can be made at this stage:

1. Under the new UK scheme, whistleblowing will become a much more attractive option given the powerful financial incentives for informants. In essence, people are being encouraged to whistleblow. Even if the information supplied does not directly lead to a tax recovery, it (the information) will presumably potentially sit on HMRC’s Connect system. It is assumed that there will need to be systems in place to separate reports of genuine tax non-compliance from opportunistic informants providing misleading information to HMRC;

2. Dealing with more claims will require significant resource allocation from HMRC, but also from businesses and individuals who are the subject of allegations;

3. Due to the nature of the information provided, reports are more likely to be made by individuals close to the taxpayer or employed by them. Businesses should be aware of the protections afforded to whistleblowers by the law; and

4. Information obtained from whistleblowers by HMRC can be shared with different Government departments (subject to relevant information gateways), including, for example, the Serious Fraud Office, the Police (in some circumstances) and the Financial Conduct Authority.

The details of the new scheme are not yet available but there is clearly a potential for a significant change in tax compliance work. All of the information supplied to HMRC is likely to involve a breach of confidence of some nature. Some of the information supplied will be accurate, but it is likely that some of the information supplied will be inaccurate or incomplete. Both types of information may have consequences for the taxpayer.

A further note will be produced when details of the new scheme are published.

‍

‍

What are the practical implications of this case?

This decision is a stark reminder of the public nature of litigation. Before embarking on any litigation, practitioners would be wise to advise their clients on (i) the importance placed on hearings and decisions being public and (ii) the very limited circumstances in which their identity could be protected.

For those considering making an application for anonymity, this decision emphasises the need to accumulate evidence to support an assertion that failure to provide such anonymity would cause harm. That the taxpayer in this case was unable to preserve their anonymity by withdrawing their substantive appeal also flags the importance of considering all the consequences of making an interim application.

Note that the Taxpayer remains anonymous for the time being pending appeal. Either party may later seek to appeal this discrete issue which will continue to remain live, regardless of whether the substantive appeal is later withdrawn or settled.

The decision additionally provides guidance for third parties seeking disclosure of documents, including the test for determining such applications and a reminder of the importance of seeking disclosure from the correct court or tribunal.

What was the background?

In a decision released on 11 January 2024 (the January Decision) the UT allowed an appeal against a case management direction issued by the FTT on 15 September 2021 that ‘preliminary proceedings in this matter shall be heard in private’. The January Decision was temporarily anonymised, pending the expiry of the period for seeking permission to appeal, permission being refused or the taxpayer’s appeal ultimately failing.

On 9 April 2024, the taxpayer made an application to the UT to continue the anonymity proceedings provided for in the January Decision (the Anonymity Application) on the basis that the Taxpayer had decided to withdraw his substantive appeal to the FTT and ‘in those circumstances he ought to be permitted to retain the existing anonymity’. The taxpayer then later withdrew their substantive appeal on 8 October 2024.

Two of the key grounds for the Anonymity Application were:

• the making of a privacy or anonymity application should not be what causes privacy or anonymity to be lost if the application is unsuccessful, and
• if the position were otherwise, it would have a deterrent effect on privacy or anonymity applications

One of the third parties, Times Newspapers Ltd and News Group Newspapers Ltd (together NGN), also applied for disclosure of a number of documents relating to both the appeal to the UT and the substantive appeal with the FTT.

What did the tribunal decide?

The Anonymity Application

The UT refused the Anonymity Application. In doing so, it held that it is not the application for privacy which leads to publicity (if a privacy application is refused) but the choice to bring a tax appeal (or any other civil proceedings) [para 26]. The UT ‘firmly reject[ed]’ the taxpayer’s submissions that the very act of making a privacy application (regardless of its merits and without any supporting evidence) (i) generates anonymity for the proceedings in question, (ii) can be carried out with no risk of anonymity being lost, even if refused or overturned on appeal, and (ii) must itself attract permanent anonymity, in circumstances where the substantive appeal is eventually withdrawn [para 34].

A factor which appeared to have played a prominent role in the UT’s decision was the taxpayer’s failure to produce any evidence of potential harm which was said to have justified either the application to the FTT for privacy or the Anonymity Application. The UT further noted that the necessary requirement to justify the Anonymity Application did not disappear simply because the taxpayer had withdrawn their substantive appeal to the FTT.

In reaching its decision, the UT applied the principles for determining anonymity applications set out by Lord Neuberger in JIH v News Group Newspapers Ltd [2011] EWCA Civ 42, stating those principles would be undermined if the Anonymity Application was ‘granted without any consideration of the degree of necessity, the facts and circumstances said to justify anonymity, or the proportionality of the derogation from the principle of open justice’ [para 33].

The UT further confirmed that the guidance on the principle of open justice provided in Farley v Paymaster Ltd (1836) t/a Equiniti [2024] EWHC 3883, in the context of Civil Procedure Rules, equally applies to tribunal proceedings [paras 17–18].

The UT additionally distinguished the exception to open justice established in Scott v Scott [1913] A.C. 417 on the basis that that decision applied specifically to cases where trade secrecy is the subject matter of proceedings. JK v HMRC [2019] UKFTT 411 (TC), A v Burke and Hare [2022] IRLR 139 and Zeromska-Smith v United Lincolnshire Hospitals [2019] EWHC 552 (QB) were also all distinguished as each ‘concerned a situation in which the applicant had a strong, arguable case, supported by evidence, for privacy or anonymity’ [para 29].

Disclosure application

Paragraphs 44 to 50 of the UT’s decision concerned NGN’s disclosure application. In summary:

• access to the FTT transcripts was denied as sections relevant to the Anonymity Application were already included in the January Decision and access to the full transcript was not necessary to understand the January Decision
• access to the appeal papers at FTT stage was denied as those documents were not considered by or before the UT in reaching the January Decision, and
• access to the FTT’s 15 September 2021 decision was partially granted with the taxpayer’s identity and sections dealing with the separate stay application redacted

Original article can be found here: UT considers taxpayer’s application for permanent anonymity and third-party disclosure request (HMRC v The Taxpayer and Others) - Lexis

‍