Owens v Owens and No-Fault Divorce – Progress at Last?
Justice Secretary David Gauke is reportedly set to launch a consultation on reforming English family law to allow for so-called ‘no-fault’ divorces, where neither spouse is being blamed for the breakdown of the marriage.
Calls for an overhaul of the law strengthened after the much publicised case of Owens v Owens  UKSC 41 (25 July 2018), where the husband opposed his wife’s divorce petition. Owens went all the way to the Supreme Court, where it was held that the examples of the husband’s alleged unreasonable behaviour relied on were not sufficient to satisfy the test in s. 1(2)(b) Matrimonial Causes Act 1973, namely ‘that the respondent has behaved in such a way that the petitioner cannot reasonably be expected to live with the respondent’. In English law, the grounds for divorce are limited to adultery, desertion or unreasonable behaviour. Spouses can also divorce if they have been separated for more than two years and both are in agreement, or for more than five years if either contests the petition.
Both Lord Wilson (delivering the majority judgment) and Lady Hale (delivering one of two concurring minority judgments) expressed significant unease at the outcome of the case, but felt bound to uphold the husband’s argument on the basis of the law as it currently stands. In particular, the behaviour referred to by Mrs Owens consisted of a number of alleged incidents which on Mrs Owens’ case, while individually minor, when viewed together indicated‘authoritarian, demeaning and humiliating conduct‘. Based on a correct interpretation of the relevant subsection, the court concluded that Mr Owens’ alleged behaviour did not constitute unreasonable behaviour. While contested final hearings for divorce petitions are few and far between – as Lord Wilson remarked, only 0.015% of the petitions filed in 2016 proceeded to a final, contested hearing – as a result of the Court’s decision, Mrs Owens now has to wait until 2020 to reapply for divorce on the basis of what will then have been five years’ separation.
There is, fortunately, a glint of a silver lining. Lord Wilson noted in his judgment that ‘Parliament may wish to consider whether to replace a law which denies to Mrs Owens any present entitlement to a divorce in the above circumstances’, which is something that it will now be doing. Baroness Butler-Sloss introduced the Divorce (etc.) Law Reform Bill (a Private Member’s Bill) to the House of Lords in July, urging a review of the law on divorce and civil partnership dissolution. The Bill is a result of the research of Professor Liz Trinder from the University of Exeter Law School, published by the Nuffield Foundation, which argues that the current law creates needless conflict between spouses that can negatively impact on children. The Bill will now proceed to the second reading in the House of Lords and is supported by a considerable number of family practitioners. It remains to be seen if the proposals come to fruition.
Offshore Structures and Onward Gifts
The so-called “onward gift” tax anti-avoidance rules were introduced by the Finance Act 2018 to complement the changes brought in the previous year aimed at restricting the UK tax privileges afforded to non-UK domiciled individuals. The rules were designed to close some perceived loopholes in relation to the taxation of non-UK resident structures (including but not limited to non-UK trusts). With effect from 6 April 2018, it would no longer be possible for an individual to receive a gift without questioning its providence, particularly where family trusts are involved.
The rules were designed to prevent non-UK structures from using non-chargeable beneficiaries as conduits through which to pass payments in order to avoid tax charges. Gone are the days of “washing out” any trust gains that could be matched to offshore income or gains by prefacing a payment to a UK-resident taxable beneficiary with a non-taxable primary payment to a non-UK resident beneficiary.
“It is notoriously challenging to prove a negative (especially to HMRC) and even more tricky where the taxpayer must speak to someone’s intention other than their own.”
Note that the new rules will apply where funds are received from non-UK resident structures before 6 April 2018 to the extent that they are subsequently gifted after that date.
Increased Investment in Personal Tax Compliance in the UK
Changes in public opinion, advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. In addition, the Russian invasion of Ukraine and the corresponding economic fallout have prompted governments to increase transparency in relation to investments by wealthy foreign individuals in their countries.
The UK’s HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work.
It should therefore be well placed to take advantage of new international efforts to increase tax compliance, particularly against the backdrop of the already extensive network of bilateral tax treaties in the UK, and not forgetting that the UK was a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
Case note: Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC)
As HMRC continue to apply the Kittel principle to increasing numbers of industries and businesses, taxpayers need to be vigilant about evidential requirements that HMRC must fulfil in order to discharge their burden of proof. Read JHA’s latest insight into the First-tier Tribunal’s decision in Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC).
If you require any further information about the Kittel, Mecsek, and Ablessio principles, or any other allegations by HMRC of fraud or fraudulent abuse, please contact Iain MacWhannell (email@example.com).
Preparing for the Possibility of a Domicile Enquiry
Helen McGhee, a director and chartered tax advisor at Joseph Hague Aaronson, explores who might be vulnerable to an HMRC enquiry on domicile and how best to deal with such enquiries.
The Kittel Principle - Sweet Sixteen
The following is an article written by David Bedenham about HMRC’s wide-ranging application of the ‘Kittel principle’. The current focus appears to very much be on the labour supply industry and the allegation of ‘Mini Umbrella Company Fraud’ (or ‘MUC Fraud’). This article highlights the need for taxpayers to get specialist advice at an early stage when faced with a Kittel decision. If you have any queries about Kittel-related issues or similar denials of input VAT or assessments to VAT, please contact Iain MacWhannell (firstname.lastname@example.org).