Thread by @keithmgordon

The Upper Tribunal (“UT”) has given its decision in Hoey.
It will be uploaded to gov.uk/tax-and-chance… probably in the next couple of days.
1/11

It is interesting to see that after 3 days of oral argument, written submissions were made by the parties on eleven subsequent occasions. I am not saying that this is unprecedented but I have never before seen a case with so many iterations of post-hearing submissions.
2/11

On the question as to whether the taxpayer can argue the existence of a PAYE credit, HMRC won. In other words, the UT held that this argument cannot be considered by the Tribunals, but must be saved up until HMRC start collection proceedings in the County Court.
3/11

The UT noted that, from a policy viewpoint, this gave an odd outcome as they could see the desirability of the issue being litigated in the First-tier. However, the UT considered that the statutory wording militated against that approach.
4/11

However, this did not stop the UT from considering one question about the PAYE credit (effectively telling a County Court which way to decide the point). The point was whether HMRC had effectively removed the credit by making a direction under s684(7A)(b) of ITEPA 2003.
5/11

HMRC have tried to use s684(7A)(b) with retrospective effect but the UT said that the provision plainly has prospective effect only.
This part of the decision will be a major blow for HMRC.
6/11

Furthermore, the Upper Tribunal dismissed HMRC’s argument that any challenge to the retrospective application of s684(7A)(b) had to be by way of judicial review.
But, besides retrospection, the UT accepted that there was no operative restriction on HMRC’s use of s684(7A)(b).
7/11

The UT also considered that the discovery assessments made by HMRC were valid. However, the UT made it clear that its decision was fact-specific (and, to some extent, limited its review to looking at the approach taken by the First-tier and not the FTT’s actual decision).
8/11

The UT’s decision in respect of the complicated anti-avoidance legislation (transfer of assets abroad code) is unsurprisingly complex. However, the UT agreed that the amount of income caught by those rules was £nil (and so a pyrrhic victory on the other points for HMRC).
9/11

The decision leaves both parties in an awkward position.
HMRC have won the appeal (technically) but the taxpayer has been left in a strong position to defend any enforcement proceedings in the County Court.
10/11

The outcome is perhaps not that surprising and probably what HMRC deep down expected. I believe that is why they had to come up with a way out to get around the legal obstacles that the UT has now confirmed. That is why the loan charge was invented.
11/11

The decision is now published. assets.publishing.service.gov.uk/media/60742ea6…
It has been redated to 12/4. I saw a version dated 9/4. I have not checked for any changes.