In introducing "views" or other subjective psychological
processes into their behavioural analyses of taxpayer reaction,
HMRC and the Financial Secretary to the Treasury appear to have
lost touch with the reference points in their own language. It is
now at the point where, despite continuing warnings from the Tax
Tribunals and the Courts to the contrary, they and the First and
Second Lords of the Treasury are assuming that the views expressed
in their manuals are "law", on what amounts to a "pre-crime" basis
without a defined criminal offence.
A previous advisor to a Labour Government, not in this case a
SpAv, had mentioned to his disciples that the Common law changes
slowly, this may have been his remedy to that familiar
constitutional state of affairs. Parliament is a creation of the
common law stemming from Runnymede, the lack of jurisdiction by the
Great Seal over the Marcher Lords and then the Statute of
Westminster which guaranteed free elections to it. By way of
historical anecdote, the Herald carrying the writ to the Welsh
Marches was forced to eat it.
In relation to retroactive legislation, the following was said
in Parliament in relation to the 2020 Excluded Property amendments
to s 48(3) ITA 1984 by which it is pretended to simply 'clarify'
the law, by which is, of course HMRC's interpretation of the law,
an interpretation that was never convincing and which the Court of
Appeal came close to rejecting absolutely in Barclays
Wealth (Jersey) v. Commissioners  EWCA Civ 1512. Henderosn
LJ appeared as Counsel for the Revenue in his life prior to his
elevation to the Bench, so it can hardy be said, even by a
politician, that he was unaware of the law.
More precisely, on the subject of retroactivity, redubbed
"retrospective" for the occasion the statements made by the, as yet
unknighted Jesse Norman, the Financial Secretary to the Treasury
regarding the amendment to s 48(3), in the seventh sitting
discussion of the Finance Bill, were little short of eye-wateringly
'The hon. Lady asks whether this measure is retrospective.
As she will be aware, we do not believe that it is retrospective.
The key point is that HMRC's application of the legislation, and
therefore the legal position, was widely accepted in practice
before the Court of Appeal decision put that position in doubt
The effect of it is going to be that individuals have been
liable [sic] to the tax owed in the spirit of the legislation
The hon. Lady asks whether there should have been more
consultation. As I outlined in my speech, the Government have had
this in the public domain for a considerable period and discussed
it, with plenty of occasion for people to conform their tax affairs
to what is, after all, only a reaffirmation of existing tax law
through legislation …'
What complete twaddle! Which ghoul are we talking about? The
unwritten one that wasn't mentioned and "clarified" in the
", and therefore the legal position" : HMRC is not a
…Widely accepted in practice…? … Before the Court of Appeal
put that position in doubt …?
There was apparently no recorded reaction from the Honourable
Lady, which means either that she fainted on the overpowering
rhetorical eloquence of the rt. Hon Norman or was frankly
Firstly HMRC has no right to impose its "views" as if they were
statute where the statutory provision or hook upon which their view
is to be hung does not permit or admit their view. Has anyone tried
placing twice the design weight of wet overcoats on an alloy
clothes hook? So much for that singularly stupid statement:
"only a reaffirmation of existing tax law through legislation".
"Views" are not law.
Is that not what the Courts are there for, to interpret the
statute by reference to the law and clarify it by applying it
correctly? Certainly Henderson LJ who gave the Court of Appeal
Judgment in Barclays Wealth appeared on several occasions for and
against the Revenue in tax cases, so it can hardly be said that he
did not know what the law actually was, as the somewhat
pusillanimous statement from Jesse Norman attempted to imply.
I am not sure whether one of psychological bent or training
would view it as sociopathic or merely psychopathic; schizophrenic
or simple plain paranoia to assume as a constitutional norm
that one organisation's own ideas are accepted by everyone else,
without their having been communicated clearly by and what is more
in the actual law initiating these.
"Clarification" of the law, means that the law was not clear. If
the law is not clear, the tax it seeks to impose is not collectable
in the cases where the lack of clarity is of advantage to a given
taxpayer, or more aptly here a non-taxpayer.
Put in another language, that in which the celebrated "au
bon Beure" is writ, beurre clarifiée -clarified butter- or
ghee can be cooked at a higher temperature only because one of its
essential ingredients - milk protein or in French Caséine
has been removed
For those unwashed in French culture, "au bon Beurre" was a book
written and a film about a family of French collaborators running a
black market operation from a crémérie who transformed themselves
into resistance heroes on the arrival of the allied forces in
Other commentators have said that whether HMRC appreciate the
wide-ranging effects the proposed change to s 48(3) will have on
the application of the RPR and the GWR rules is extremely doubtful.
Certainly, apart from gifts to settlements made by domiciled /
deemed domiciled settlors, the scenarios which will apparently be
caught by the change do not appear to have been within HMRC's
declared sights during any consultation.
However, that is not the main issue, The Court of Appeal 's
decision in Barclays Wealth went into a fairly clear description of
the result of the changes in 2006 concerning what are now Relevant
Property Settlements, which thereafter include certain types of
interests in possession in settled property. Despite the fact that
s.43(2) ITA 1984 defining a settlement and settled property refers
to "disposition or dispositions" in its first paragraph, defined by
reference to a), b) as being held in trust, not in anything
else and c) following, HMRC have extended the interpretation
of the same phrase in the next paragraph, in other words with the
same meaning to include what they refer to as "trust-like
arrangements" which are have no trust content, and are legal right
in rem in foreign property as comprising settled
One example is HMRC's unremittingly unlawful treatment of the
French usufruit in land in France. It goes without saying
that you cannot have a trust of French land in the same manner as
you cannot have a settlement under the law of any part of the
United Kingdom without a trust (Lord Wilberforce Roome and
Denne v Edwards Tax Cases Vol 54 359 at page 389 §G. The
view is in fact complete rubbish.
That falsehood had been tolerated by City law firms prior to the
2006 relevant property régime, but only on the basis that they
could massage a Treaty credit through for a deferred French payment
of succession duty on what would otherwise have been a dry
succession to the point where the falsely extrapolated "settlement"
could be treated as ending in a chargeable transfer out of the
initially deceased's fictional estate.
The assumption has since been that that treatment, which in any
other country would be treated as no more than as an administrative
tolerance within a limited factual and legal context, into a
something which for HMRC has now become law, by silence, bar the
few who contest it.
Be very aware of what is going to happen next, in the context
of the settlement régime certainly over the next few
years. HMRC should not be able to substitute its "views" for the
law with impunity.
An example, the term "disposition or dispositions" appears twice
in the statutory definition of a settlement for IHT purposes
s.43(2) ITA 1984, and is limited to trusts in succession or by
contingency by a), accumulation by b) and annuities by c). Yet
despite the House of Lards stating what is a simple matter of
English law, that you cannot have a settlement without a trust,
HMRC have been playing tax professionals that the term
"dispositions or dispositions" can include non-trust arrangements
under foreign civil laws.
To cite Rudyard Kipling a contrario: "Watch the writing
on the wall, my darling, as the Gentlemen from Revenue and Customs
go by." If you don't read it correctly, you are likely to be
surprised and found wanting at the outcome.