2000 – The Ten Major Cases Worldwide by Paul Stibbard
UNITED KINGDOM Revenue Forces Bank Disclosure
In R v Inland Revenue Commissioners Ex Parte Banque Internationale a Luxembourg SA (2000) STC 708, the High Court dismissed an application for judicial review by Banque Internationale a Luxembourg SA (“BIL”) against the Inland Revenue. BIL wished to set aside disclosure notices in connection with a Revenue investigation into artificial tax schemes seeking to avoid UK tax in excess of £150 million through payments to an employee share ownership trust (“ESOT”).
This case provides a good example of the Revenue’s attempt to attack those behind contrived tax avoidance schemes which operate in a way which the Revenue believe Parliament would not have intended.
This case is interesting because of the contention that these notices impinged upon BIL’s and their customer’s confidentiality, and the rights of privacy under Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms 1950. Although that argument found little favour with the High Court in this case, with the Revenue’s powers to obtain information being progressively enhanced, and the coming into force of the Human Rights Act 1998, this may be the start of a more sustained challenge to the Revenue’s powers with respect to alleged infringements of Human Rights.
In determining whether to attack the efficacy of a particular tax structure, the Revenue seeks to gather as much information as possible from third parties. It has increasingly gained stronger powers to do so. Plainly, those concerned with aggressive tax planning should be aware for example that the Revenue are likely to regard the handing of cheques around the table at a meeting as being merely a circular transaction. It may be by itself insufficient to sustain the legal substance of a particular transaction.
The evidence submitted by the Revenue in this case seems to indicate that the Revenue is likely to view with considerable disfavour any attempt to drain funds away from a corporate entity, in this case through massive payments to an ESOT, leaving inadequate funds to pay any UK tax should such payments not qualify as tax deductions.
Following amendments in the Finance Act 2000 to the powers of the Revenue contained in Section 20C, henceforth those subject to a Revenue raid may be required to produce computerised information in a form which can be taken away. Clearly, where the UK based computers are networked in with other overseas offices, the Revenue may be able to obtain overseas information which is accessible from the UK.