The Commissioners for HMRC v Raj Sehgal & Anor
[2024] UKUT 74 (TCC)
Afzal Alimahomed v The Commissioners for HMRC
23 May 2024
[2024] UKFTT 432 (TC)
First-tier Tribunal
A non-domiciled person living in the UK challenged tax bills for money sent to family and friends here. The court decided that even though he didn't directly benefit, sending the money was a taxable event. The part of the bill for unpaid taxes was removed, however, because the tax office didn't fully prove that he intentionally avoided tax. The remaining part will be recalculated.
Key Facts
- •Appeal against discovery assessment (£89,546.24) and closure notice (£133,681.90) for 2015-16 and 2016-17 tax years respectively.
- •Appellant, a non-domiciled UK resident, claimed remittance basis of taxation.
- •HMRC alleged taxable remittances to the UK under s 809L Income Tax Act 2007.
- •Transactions involved transfers to UK accounts of non-relevant persons (son, friends, family), direct payments using offshore credit cards for UK services/goods, and jewellery purchases in the UK.
- •Key issues: whether bank transfers to non-relevant persons constitute remittances; whether a relevant person must benefit; and the interpretation of 'brought to' in s 809L(2)(a).
Legal Principles
Interpretation of 'brought to' in s 809L(2)(a) ITA 2007 and the legal nature of electronic bank transfers.
Foskett v McKeown [2001] 1 AC 102; R v Preddy & Ors [1996] AC 915; Thomson v Moyse [1960] 39 TC 291; [1961] AC 967
Validity of discovery assessment under s 29 Taxes Management Act 1970; requirement for 'deliberate' behaviour.
R & C Comrs v Tooth [2021] UKSC 17; CPR Commercials Ltd v HMRC [2023] UKUT 00061 (TCC); Atherton v HMRC [2017] UKFTT 831 (TC); Addo v R & C Comrs [2018] UKFTT 93 (TC); Sheth & Ghazi v HMRC [2022] UKFTT 167 (TC); First Choice Recruitment Ltd v HMRC [2019] UKFTT 412 (TC)
Purposive construction of statutes, particularly tax legislation; considering the 'mischief' and avoiding absurd results.
C & E Comrs v Top Ten Promotions Ltd [1969] 1 WLR 1163; W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300; Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991; MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311; Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51; [2005] 1 AC 684; Astall v HMRC [2010] STC 137; Berry v HMRC [2011] STC 1057; Pollen Estate Trustee Co Ltd v R & C Comrs [2013] 1 WLR 3785; [2013] EWCA Civ 753; Bogdanovic v Secretary of State for the Home Department [2014] EWHC 2872; Eclipse Film Partners No 35 LLP v HMRC [2015] EWCA Civ 95; Project Blue Ltd v R & C Comrs [2018] UKSC 30; [2018] 1 WLR 3169; Lachaux v Independent Print Ltd & Anor [2019] UKSC 27
Definition of 'relevant debt' under s 809L(7) ITA 2007; application to offshore credit card payments for goods/services in the UK.
Income Tax Act 2007, s 809L(7)
Exemption for personal use property under s 809X ITA 2007; application to jewellery purchased in the UK.
Income Tax Act 2007, s 809X
Outcomes
Appeal allowed in part.
Discovery assessment set aside due to HMRC's failure to prove deliberate behaviour. Closure notice upheld in principle but quantum to be agreed or determined by further application.