JHA LLP | London Tax Disputes Solicitors & Barristers

SHORT CASE REPORT FTT DECISION – EXCISE DUTY - Cantina Levorato SRL v. HMRC [2021] UKFTT 461 (TC)

10 March 2022

Author:

Cantina Levorato SRL v. HMRC

[2021] UKFTT 461 (TC)

This decision of the FTT is interesting because:

The Appellant was an Italian company that was assessed to a UK tax on the basis of HMRC’s allegation that certain “irregularities” for the purposes of excise duty legislation had occurred in the UK element of the supply chain. HMRC had issued a “Uniform Instrument Permitting Enforcement”, which was received by the Appellant from the Italian tax authorities. HMRC conceded (and the FTT ruled) that this did not constitute a notification for the purposes of s 12 FA 1994.
The conclusion is different from several cases following Honig v Sarsfield,¹ a Court of Appeal judgment that decided that the statutory time limit did not apply to the notice of the assessment. For example, in Cirko v HMRC,² the FTT had upheld the assessment, concluding that the delay of the notification (two years after the assessment had been raised) had “no bearing on the validity of that assessment”. Here, the FTT reached the opposite conclusion.
It is the first time that (as far as the authors are aware) the FTT has followed the test created by the Supreme Court in FMX Limited v HMRC³ to quash assessments. Based on EU law, the principle states that legal certainty requires that assessments are communicated within a “reasonable time”. Although the FTT had previously applied the test,⁴ it had (as far as the authors are aware) never invalidated an assessment based on it. In this case the FTT found that the four-year delay between the raising (2013) and notification (2017) of the assessment did not represent a “reasonable time”.

¹ [1986] STC 246.
² [2019] UKFTT 0482 (TC).
³ [2020] UKSC 1.
⁴ Mr Stephen J Mullens v HMRC [2021] UKFTT 131 (TC).

Return to List of Articles by UK Lawyers on Tax Disputes, Tax Litigation, HMRC Tax Appeal

Return to Listings

Left Button on Tax Dispute & Tax Litigation Lawyers in London

Our Insights

Insights from UK Tax Dispute Lawyers & HMRC Tax litigation

Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)

Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).

In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).¹

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; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).² The UK was also 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 personal 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.

It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.

This article was first published with ThoughtLeaders4 Private Client Magazine

Tax-Related Measures in the Autumn Statement 2022

On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).

This note focuses on tax measures included as part of that statement.

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 [2022] 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 [2022] 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 (imw@jha.com).

Right Button on Tax Dispute & Tax Litigation Lawyers in London

View Our Insights