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HMRC Welcomes Ruling Against Manx Avoidance Scheme

by Jason Gorringe, Lowtax.net, London
13 October, 2015

The UK tax authority, HM Revenue and Customs (HMRC), on October 5 welcomed a ruling from the UK First-Tier Tribunal against a complex tax avoidance scheme used mainly by property developers and IT contractors.

The scheme aimed to exploit the UK-Isle of Man double taxation agreement through the use of a trust and partnership in the Isle of Man. Over 2,000 people signed up to such an arrangement from 2001-02 to 2007-08, believing it would reduce their rate of income tax to typically less than five percent, HMRC said.

The scheme was blocked by Parliament in 2008, by targeted anti-avoidance legislation in Finance Act 2008 that had retrospective effect.

In its September 3 ruling in Robert Huitson v. HMRC , the First-Tier Tribunal agreed with HMRC that the scheme was blocked by the retrospective legislation.

The ruling is expected to yield extra revenues worth GBP200m for HMRC.

Earlier, the retrospective legislation had been challenged via two Judicial Reviews, both of which failed. In February 2012, the Supreme Court refused an application to hear appeals against the Court of Appeal's judgments in these two cases. An argument was also presented to the European Court of Human Rights alleging the legislation was incompatible with Article 1 Protocol No.1 of the Human Rights Act. In February 2015, the Court unanimously declared the application inadmissible stating that "this complaint is manifestly ill-founded and must be rejected."

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