The long awaited Judicial Review regarding IR20 sought by Mr Gaines-Cooper started to be heard by the Court of Appeal on 30 June. For those who have been on extended holiday to Mars I would explain that Mr Gaines-Cooper left the UK to take up residence in the Seychelles, returning for less than 90 days in accordance with IR20. HMRC considered he should still be regarded as UK resident because HMRC were not bound by IR20 and Mr Gaines-Cooper was not entitled to rely on it. They also said that he did not satisfy the conditions of IR20 anyway because he (and everybody else) had misunderstood its terms. Mr Gaines-Cooper appealed to the Special Commissioners who said that they had no jurisdiction to consider IR20 as it was merely a statement of practice and nothing to do with the law; they had to apply the law and in their view, under a strict legal analysis Mr Gaines-Cooper should be regarded as UK resident.
Excuse me, said Mr Gaines-Cooper, that may be the strict legal position but I satisfied IR20. Surely if HMRC make a public statement about how I should be treated for tax purposes they should be obliged to honour it. Certainly not, say HMRC – which is why we are in the Court of Appeal with Judicial Review proceedings.
HMRC has the most wonderful additional argument. The taxpayer asks them to apply IR20. No, sorry, we do not know the facts; you have to go to the Special Commissioners so that we know what the facts are. OK, we have now gone to the Special Commissioners and established the facts; will you apply IR20 now? Oh no, say HMRC, you can’t ask us to apply IR20 once the matter has been determined by the Special Commissioners. Er, when does IR20 apply then? Not our problem. You could not make this up.
So the view of HMRC is that IR20 is not binding on them but is merely general guidance. In any event, everybody has misunderstood the terms of IR20 and taxpayers are not entitled to rely on it – nor should they expect to do so. It merely sets out how HMRC might approach a taxpayer’s position. Mr Gaines-Cooper argues that they are bound by it – and what earthly use is guidance if nobody can rely on it? Furthermore, whilst HMRC are quite entitled to adopt a new interpretation of their guidance, they cannot do it retrospectively so as to catch people out for earlier years. HMRC don’t agree with that either. They have not adopted a new interpretation; it is just that everybody has misunderstood what it says – for decades.
The Court of Appeal suggested that if that is their case, they need to put in some evidence. This is a really important matter affecting not only an enormous number of taxpayers but the relationship between HMRC and taxpayers generally, so the hearing should be adjourned for HMRC to provide evidence to prove that there has not been any change of practice. I think that all the professions will be very interested to hear what they say.
HMRC have consistently refused to accept that the taxpayers should even be allowed permission to have the case heard. Lord Justice Moses said that they should acknowledge that there are certain types of cases that need a public airing. It is just wrong for HMRC to say that we are going to fight it tooth and nail all the way. They should say that the issue should have a full hearing. This is very important where the matter is of grave concern to lots of people. OK, said HMRC, we will not oppose permission. In that case, says counsel for the taxpayers, HMRC should pay the costs caused by all this. Quite right, said the Court of Appeal.
So the case is now adjourned pending the submission of further evidence by HMRC, and it is hoped by both parties and the Court of Appeal that the same panel of Lords Justices will be able to be convened to hear the case when it resumes. Stay tuned.