In Dunn Motor Traction Limited v National Express Limited [2017] EWHC 228 (Comm), Mr Justice Teare has outlined that the Claimant’s irrevocable undertaking to pay adverse costs is not enough to defeat a security for costs application.
The claimant’s sole shareholder, Mr Dunn, argued that the irrevocable undertaking was akin to cases that have held that the existence of an ATE insurance policy satisfies security.
Overall this is an important decision on security for costs, and shows the weight that the Courts give to a matter being backed by an ATE provider.
Originally printed in Tax Journal on 10 February 2017.
The recent opinion of AG Wathelet in BT Pension Trustees (Case C-628/15) provides an interesting and direct answer to the question: what is a taxpayer’s remedy for a breach of EU law where it has not paid any tax at all?
In BT Pension Trustees, Advocate General Wathelet challenges the established dichotomy adopted in the characterisation of claims in breach of EU law. He finds a simpler way to address a claim by an exempt taxpayer seeking a credit denied in breach of EU law than the usual distinction between a claim for the repayment of tax and the more restricted claim for damages to compensate for indirect losses. In his view, the primacy of EU law acts to remove the discriminatory provisions pure and simple.
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On 9 December 2016 the Swiss Federal Council reported that they had decided to extend the freezing of all the assets in Switzerland of President Yanukovych, as well as of other Ukrainian individuals allegedly associated with him. Amongst other things, the report asserted that “assets amounting to approximately CHF 70 million are involved” (without saying precisely to whom these assets might belong). Many reports in the Ukrainian media had mistakenly attributed this entire amount as belonging to Viktor Yanukovych.
As a result of the intervention of Joseph Hage Aaronson LLP representing President Yanukovych and his son, Oleksandr Yanukovych, the Swiss Federal Department of Foreign Affairs in its letter of 8 February 2017 confirmed that the figure of CHF 70 million is an estimate of the sum total of assets of over 20 individuals listed in the relevant Swiss Ordinance that have been frozen. They have also confirmed that the press release of 9 December 2016 does not comment on assets belonging to President Yanukovych or Oleksandr Yanukovych individually.
President Yanukovych and Oleksandr Yanukovych contend that they have no bank accounts or money or other assets in Switzerland, other than Oleksandr Yanukovych’s company Mako Trading SA, which has around CHF 1 million in its account in Switzerland, and that account is transparent and audited. The Swiss authorities have not confirmed the existence of any other assets owned by either President Yanukovych or Oleksandr Yanukovych in Switzerland.
ENDS
Notes to editors
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VAT exemption not of direct effect
The CJEU held here, contrary to the decisions of the UK First-tier and Upper Tax Tribunals, that Article 13A(1)(n) of Sixth Council Directive 77/388/EEC, which exempts from VAT the provision of “certain cultural services… supplied by bodies governed by public law”, was not sufficiently clear and precise so as to have direct effect.
The significance of this was that The British Film Institute was not able to rely on the directive itself to recover tax paid in relation to periods prior to the UK implementing it into domestic law. The decision provides useful guidance as to the court’s approach where a Member State fails to implement a directive correctly or within the prescribed time-frame and the potential risks which taxpayers may face in such circumstances.
This article appears in the JHA February 2017 Tax Newsletter, which also features:
CJEU allows restriction on free movement of capital
The CJEU here considered the scope of the exception to the free movement of capital contained in Article 64(1) TFEU. This allows restrictions on capital movements that were adopted prior to 31 December 1993 and which involve direct investment, establishment, the provision of financial services or the admission of securities to capital markets. The court notably gave a broad interpretation to Article 64(1) and held, contrary to the findings of the Dutch Regional Court of Appeal, that the exception was not limited to restrictions on the movement of capital which relate solely to the categories referred to in Article 64(1). As such, it could apply to general measures, such as the extended time-period for the recovery of tax on foreign income here, provided that the particular case involved one of the prescribed types of capital movement.
This article appears in the JHA February 2017 Tax Newsletter, which also features:
Originally printed in The In-House Lawyer: Comparative Guides on 29 September 2016.
This country-specific Q&A provides an overview to tax laws and regulations that may occur in the United Kingdom (UK).
It will cover witholding tax, transfer pricing, the OECD model, GAAR, tax disputes and an overview of the jurisdictional regulatory authorities.
This Q&A is part of the global guide to Tax. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/tax-2/
Continue reading on The In-House Lawyer: Comparative Guides
First-tier Tribunal CGT appeal on foreign currency gains gives rise to interesting jurisdictional points on the Liechtenstein Disclosure Facility
The First-tier Tribunal has given a detailed decision in an appeal against discovery assessments to capital gains tax that HMRC made in consequence of the Appellant’s disposal of a property in Switzerland (declared via the Liechtenstein Disclosure Facility, the “LDF”) and associated penalties. The main issue was which method should was the correct method to calculate the chargeable gain on disposal:
The Tribunal judge found that he was bound by the Court of Appeal’s decision in Capcount Trading v Evans (HM Inspector of Taxes) [1993] STC 11 and the High Court’s decision in Bentley v Pike (Inspector of Taxes) [1981] STC 60, so Method B was correct. The point of principle arising out of the Court of Appeal’s decision in Capcount was that foreign currency was a distinct asset for CGT purposes. Thus, expenditure in foreign currency is expenditure consisting of giving up a distinct asset, not expenditure in money, and it falls to be valued by converting the foreign currency into sterling at the exchange rate prevailing on the date of expenditure. Similarly, receipts in foreign currency are receipts of separate assets which need to be converted into sterling at the rate prevailing on the date of receipt.
HMRC had applied the minimum percentage penalty (20%) in accordance with Schedule 24 of the Finance Act 2007 for deliberate inaccuracies, but the Appellants had also argued that the applicable penalty percentage under the terms of the LDF was 10%. The Tribunal found that this argument was fundamentally flawed in that the LDF was not a statutory provision and the Tribunal did not have any jurisdiction to consider complaints that HMRC had not honoured their agreement with the Government of Liechtenstein. Nor did the Tribunal have jurisdiction to consider arguments to the effect that HMRC should have applied a lower level of penalty given their public statements on the LDF: those were public law arguments that would have to be pursued in the courts by way of judicial review. In any event the Tribunal judge would not have accepted the Appellants’ arguments as he believed that HMRC had applied the LDF correctly. The Tribunal judge also considered whether HMRC’s perceived failure to apply the LDF amounted to a “special circumstance” which could justify reducing the penalty below the minimum level of 20% under paragraph 11 of Schedule 24. The Tribunal’s jurisdiction on “special circumstances” – which allows the Tribunal to reach a different decision to HMRC if the Tribunal thinks that HMRC’s decision is “flawed” – was, the Tribunal held, confined to considering HMRC’s approach in light of judicial review principles. The Tribunal took the view that HMRC had made no error of law in this regard: HMRC had turned their mind to the LDF and applied it in a manner that was reasonable (and in a manner which the Tribunal judge considered to be consistent with the terms of the LDF).
Finally, the Appellants had argued that HMRC should not have pursued enquiries into their tax affairs under HMRC’s Code of Practice 8 because the dispute between HMRC and the Appellants was essentially one of law, namely which method should have been used to calculate the chargeable gain. However, the Tribunal held that, as a creature of statute, it had no jurisdiction to consider this complaint. One option available to the Appellants would have been to complain to HMRC and, if not satisfied, to pursue the matter to the Adjudicator’s Office. Alternatively, they could have considered pursuing a judicial review in the courts.
Article 50 of the Treaty on the European Union provides, in summary terms, that, if a member state decides to withdraw from the European Union (“the EU”) ‘in accordance with its own constitutional requirements’, it should serve a notice of that intention (“a Notice”), and that the treaties which govern the EU (“the EU Treaties”) “shall cease to apply” to that member state within two years thereafter. Following the June 2016 referendum, the Government proposes to use its prerogative powers to withdraw from the EU by serving a Notice withdrawing the UK from the EU Treaties.
The principal issue in these appeals is whether such a Notice can, under the UK’s constitutional arrangements, lawfully be given by Government ministers without prior authorisation by an Act of Parliament and whether the terms on which powers have been statutorily devolved require consultation with or the agreement of the devolved legislatures before Notice is served, or otherwise operate to restrict the Government’s power to do so (‘the devolution issues’).
The Supreme Court by a majority of 8 to 3 dismisses the Secretary of State’s appeal. In a joint judgment of the majority, the Supreme Court holds that an Act of Parliament is required to authorise ministers to give Notice of the decision of the UK to withdraw from the European Union.
On the devolution issues, the court unanimously concludes that it is not necessary for the court to decide if the Northern Ireland Act 1998 imposes a discrete requirement for such legislation, and that the Sewel Convention, which says that the UK Parliament will not normally exercise its right to legislate with regard to devolved matters without the agreement of the devolved legislature, does not give rise to a legally enforceable obligation.
This article appears in the JHA January 2017 Tax Newsletter, which also features:
The case deals with circumstances in which a Member State may refuse – on the grounds of preventing tax evasion – an exemption from WHT that would normally be granted for dividend payments of a resident subsidiary to its non-resident parent company.
French tax authorities refused to exempt from WHT the dividends of a French company that were paid to its Luxembourg parent company, which was indirectly controlled by a Swiss company, on the grounds that proof was required to show that the ownership structure was not tax-related. Moreover, the proof had to come from the beneficiary of the dividends, i.e. the non-EU parent company, without the French tax authorities being obliged to provide sufficient indications of tax evasion. AG Kokott found that such a rule was disproportionate and that it went beyond what is required to prevent tax evasion. The mere reference to the direct/indirect control by shareholders in third States cannot be regarded as an indication of tax evasion.
AG Kokott also held that that it is irrelevant that the company relying on the freedom of establishment is controlled by persons with their seat in a non-Member State. The origin of the shareholders of companies does not affect the right of those companies, who are resident in the EU, to rely on the freedom of establishment. Consequently, a difference in the tax treatment of dividends between parent companies, based on the location of their seat, constitutes a restriction on the freedom of establishment.
Full opinion can be found here.
This article appears in the JHA January 2017 Tax Newsletter, which also features:
Where a tax exempt shareholder is denied a cash credit in breach of EU law on the distribution by a resident company of non-resident sourced income, in circumstances where resident-sourced income would carry a credit, what is the nature of the remedy? Is it a repayment remedy, recoverable as of right or is it a damages remedy which can only re recovered if certain conditions are met including the difficult requirement of a sufficiently serious breach?
In his opinion of 21 December in The Trustees of the BT Pension Scheme C-628/15, AG Wathelet concludes that it is neither. It is not the repayment of tax unduly levied as the exempt taxpayer paid no tax. However, he concludes, the principle of the primacy of EU law obliges the Member States to adopt such measures as are necessary to enable any person that has suffered discrimination prohibited by Art 63 TFEU to obtain the payment of any sums to which it would have been entitled in the absence of such discrimination. In the current instance the exempt shareholders had suffered a “direct loss” and were entitled to the dis-application of the restriction which excluded non-resident income from the grant of a cash credit.
Full opinion can be found here.
This article appears in the JHA January 2017 Tax Newsletter, which also features:
