The Court of Appeal has upheld a ruling rejecting a claim that the government enacted disproportionate retrospective legislation to thwart “aggressive tax avoidance schemes” designed to escape the payment of stamp duty.
Participants in the so-called Blackfriars Scheme had challenged a decision last year in which Andrews J refused them permission to bring judicial review proceedings against Her Majesty’s Treasury and the Commissioners for Her Majesty’s Revenue and Customs (HMRC) in respect of retrospective changes to section 45 of the Finance Act 2003 relating to stamp duty land tax (SDLT).
They had argued at the High Court that the amount of tax lost to the Exchequer by the use of the scheme – around £7m – was too small to justify the use of retrospective legislation to close it down.
However, the Court of Appeal upheld her decision that Article 1 of the First Protocol (A1P1) of the European Convention on Human Rights was not engaged in this case because the claimants – who sought to take advantage of the schemes designed and marketed by Blackfriars Tax Solutions LLP – had not been deprived of any “possessions” by the legislative change, and that, even if A1P1 had been engaged, the changes were proportionate and lawful.
Vos LJ said that the schemes “have been described as aggressive tax avoidance schemes” and that the question was not whether they would actually have worked, which is “hotly contested”, but whether the retrospective legislation targeting them violated the ECHR.
He said: “When the detail is stripped away, the case is really quite straightforward. It is common ground that the challenged legislative changes put beyond doubt what it is also common ground was previously not beyond doubt, namely that the appellants’ schemes did not work.”
However, upholding the High Court decision, he said that neither the appellants’ claims that their option agreements were transfers of rights for the purposes of section 45, nor that the money representing “the unpaid SDLT in the appellants’ pockets” were properly to be regarded as possessions for the purposes of A1P1.
He added: “A1P1 is, therefore, not engaged. If it were engaged, I would hold that the legislative changes were, although retrospective, lawful. They were neither unforeseeable nor arbitrary. The fair balance between the public interest and the protection of the appellants’ fundamental rights falls firmly on the side of the public interest in preventing taxpayers taking advantage of abusive tax avoidance schemes after clear warnings have been given that such schemes would not be tolerated and would be tackled with retrospective legislation.”
In her decision, Andrews J said that the Blackfriars Scheme was a variant on an option scheme, under which A exchanges contracts to sell a property to B at market value; then B enters into an agreement by which, in return for a payment, B agrees to grant C an option to purchase the property on the date on which the contract of sale completes.
The Queen on the application of APVCO 19 Ltd and ors v Her Majesty’s Treasury and anr Court of Appeal (Black, Floyd & Vos LJJ) 30 June 2015
Jeremy Woolf (instructed by PWT Advice LLP) for the appellants
Kieron Beal QC and Simon Pritchard (instructed by General Counsel and Solicitor for HM Revenue & Customs) for the respondents
