As broken by Alex Thomson of Channel 4 News yesterday, HMRC have been granted leave to appeal against the majority decision in the EBT tax case known to one and all now as the “Big Tax Case”( © RangersTaxCase.com.)
After a flurry of anger on Twitter and elsewhere about this “leak” to Mr Thomson, and even more misplaced anger by people who thought this meant the appeal itself had been decided, Mr Thomson published a blog post on the subject. You can find it here.
As far as leave to appeal being granted was concerned, no one I spoke to with knowledge of the appeal system thought that the application for leave would be refused. An appeal can only be taken forward on a question of law.
What, some have cried, was the question of law in this case?
The answer to that question is very simple. (Though the answer to the legal question is not).
Put simply the majority interpreted the legislation and case law to allow them to look at the form of what was done whilst the minority judge applied the same law and reached the conclusion that the substance of what was done was more important than the form.
Therefore there is a clear distinction about how the law should be applied.
That is, undoubtedly, a “question of law”.
As Mr Thomson made clear, his source was none other than the HMRC Press Office. So, not a leak!
He is spot on too to say that it will take some time to finish this saga.
I wrote, at some length, in November regarding the appeal process. The full post is here.
The section of my post relevant to where we stand now is copied below, extracted from HMRC’s own publication, with my comments in bold (note that the document is addressed to the taxpayer as appellant so I have adjusted it to reflect this case, where HMRC is appealing):-
How the appeal will proceed
If HMRC has appealed, the Upper Tribunal (Tax and Chancery Chamber) office will ask you whether you have a representative and you (or your representative) will be asked if you wish to make comments on the appeal.
I suspect that Rangers/MIH would want to make some comments!
You will be told how the appeal is to proceed and any time limits. You and HMRC may simply be asked whether you object to the Upper Tribunal deciding the appeal on a particular point.
You should note that all comments or observations made by one party will be copied to all the other parties. At the same time the office will send out letters explaining what, if anything, needs to be done next.
Will there be an oral hearing of the appeal?
Appeals in the Upper Tribunal (Tax and Chancery Chamber) can be decided with or without an oral hearing. If the appeal has been made by someone else and you are a respondent, and the judge decides to have an oral hearing you will be told about it and will be entitled to attend even if you did not ask for a hearing.
An Upper Tribunal judge can direct an oral hearing be held even though no one has asked for one. Oral hearings are usually held in London, Manchester and Edinburgh.
What will happen if there is an oral hearing?
Once the date for an oral hearing has been set, you will be sent a letter with details of the date, time and place.
You must normally be given at least 14 days notice of the date of a hearing unless both you and HMRC have agreed to shorter notice. However you will usually be given more notice.
Oral hearings are normally in public unless the judge directs a private hearing. However, it is unusual for members of the public to come to hearings. If you would like your hearing to be private, you should say why and the judge will decide this.
Your representative (if you have one) and HMRC will also be entitled to attend the oral hearing and will be told about it.
Where a case raises a particularly important or difficult point of law, it may be heard by three judges instead of one. However, this is very rare.
It may be rare, but I think this will be one of those rare cases, both for the public interest issues but more so for the consideration of the Ramsay principles. (The “Ramsay” principles relate to the determination of “form over substance” or “substance over form”).
Mr Thomson has generally been on the mark with much of his comment, investigation and analysis of this issue. I was very disappointed to have missed his talk at Napier University regarding the matter.
However, as far as further procedure goes, Mr Thomson was incorrect to say that the matter would next go to the High Court, probably in London. I am sure he will not mind the correction.
In fact, the next level is, as mentioned above, the Upper Tribunal (and not the “Second Tier Tribunal” as the BBC referred to it).
After the Upper Tribunal, there is a further right of appeal, on a point of law, to the Inner House of the Court of Session (as this is a Scottish appeal) and from there, finally, to the UK Supreme Court in London.
At that stage the case would make it south of the border, but it will not go there beforehand.
At the appeal there would normally be no evidence led, as the Upper Tribunal, consisting of one or three judges, is only there to determine the legal aspects of the case. There was, in any event, little difference in the “factual” determinations of the Tribunal. The dissent arose from the way in which those facts were fitted into the legal matrix.
For that reason the Upper Tribunal appeal will take nowhere as near to be heard as the FTT did. The legal points at issue should be argues in two or three days only. However, it is unlikely that any appeal will be heard until near the end of this year.
In general, it takes the Upper Tribunal judge around 3-6 months to issue a decision after hearing an appeal. The appeal hearing itself would normally be listed to take place between 12 and 24 months after the decision which is being appealed against. This is simply a function of the number of appeals, as opposed to the number of judges able to hear these cases.
The First Tier Tribunal (Tax) decides over 700 cases a year, and in addition, there are appeals marked which are withdrawn before a decision is reached. The Upper Tribunal (Tax and Chancery) determines around 100 cases per year.
So, on that basis, there might not be an Upper Tribunal decision until into 2014, and an appeal to the Court of Session might not be resolved until 2016, and then the Supreme Court could take until 2017 or 2018 to determine the matter.
The costs for MIH will be significant. The costs for the taxman will be too. However, the case has implications not just for EBTs created by football teams. It is a high-profile case and one where clarification of the application of the Ramsay principles will extend far into all aspects of tax “arrangements” designed to reduce tax liabilities.
So there remains plenty of time for us all to be further educated in the intricacies of tax law!
(I knew that winning the class prize for Applied Tax Law in the mid-1980’s would prove to be useful eventually!)
And finally Mr Thomson is being a bit grudging in his comment that the FTT was misinterpreted as a win for oldco. It was a victory for MIH and oldco, but not, because of rights of appeal, a final one. It is better to be in MIH’s position now than that of HMRC. The taxman has to persuade the Upper Tribunal that the FTT majority got it wrong.
Equally though, and I will write more about this, I think, it was wrong to interpret it as a knock-out blow for Rangers either.
And I will next pen a couple of thoughts on Mr Green’s letter from whichever part of the world he is presently situated, to HMRC regarding the appeal.
(I can’t be bothered with that joke any more)
Posted by Hector McConville