The Commissioners for HMRC v Abubaker Arrbab
[2024] EWCA Civ 16
Hugh Murphy & Anor. v The Commissioners for HMRC
15 May 2023
[2023] EWCA Civ 497
Court of Appeal
A tax rule (ESC B18) lets people get money back on taxes paid for them by a foreign trust. HMRC said this only worked for the last six years of income. The court said the rule is actually more generous and people can get money back on older taxes too.
Key Facts
- •Appeal concerns the interpretation of extra-statutory concession (ESC) B18 by HMRC.
- •ESC B18 allows UK resident beneficiaries of non-resident trusts to claim credit for UK income tax paid by the trustees.
- •The dispute is whether this credit applies only to income arising within six years before the year of assessment.
- •Appellants, beneficiaries of a Guernsey trust, claim credit for tax paid on income arising over many years.
- •HMRC granted credit only for the last six years, rejecting claims for earlier years.
- •Appellants brought judicial review proceedings, which were dismissed by Chamberlain J.
- •The appeal concerns the interpretation of various versions of ESC B18 (1978, 1994, 1999).
Legal Principles
HMRC has wide discretion in tax collection.
R v Inland Revenue Commissioners, Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617
HMRC can formulate policy in the interstices of tax legislation.
R (Wilkinson) v Inland Revenue Commissioners [2005] UKHL 30
Formally published HMRC statements can be binding if a case falls clearly within their terms.
R v Inland Revenue Commissioners, Ex p M.F.K. Underwriting Agents Ltd [1990] 1 WLR 1545
A taxpayer's claim to benefit from an ESC is a claim to a legitimate expectation.
R (Accenture Services Ltd) v Revenue and Customs Commissioners [2009] EWHC 857 (Admin)
Court interprets the meaning of an ESC.
R (Accenture Services Ltd) v Revenue and Customs Commissioners [2009] EWHC 857 (Admin)
The meaning of an ESC is assessed by how it would reasonably be understood by those to whom it was directed.
R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473
The hypothetical representee is the ‘ordinarily sophisticated taxpayer’.
R (Davies) Revenue and Customs Commissioners [2011] UKSC 47
An ESC should not be construed as a statute.
R (Greenwich Property Ltd) v Customs and Excise Commissioners [2001] EWHC Admin 230
For HMRC to be bound, a statement must be clear, unambiguous and devoid of relevant qualification.
R v Inland Revenue Commissioners, Ex p M.F.K. Underwriting Agents Ltd [1990] 1 WLR 1545
Outcomes
Appeal allowed.
The court found that Concession 3 in ESC B18 (1999) is not subject to a six-year income limit. The wording of ESC B18 (1999) strongly supports the appellants' case, and consideration of EU law and earlier versions of the concession reinforces this interpretation.