Weekly Tax Update - Monday 1 October 2012

1. GENERAL NEWS

   1.1. Will writing and estate administration

   In July 2011 the Legal Services Board (LSB) launched investigations under sections 24 and 26 of the Legal Services Act 2007, in order to form a view on whether the list of reserved legal activities should be amended to include will-writing and estate administration activities. The inclusion of activities on that list would mean they may only be undertaken by individuals and entities authorised and regulated by an approved legal services regulator.

   A consultation document entitled "Enhancing consumer protection, reducing regulatory restrictions: will- writing, probate and estate administration activities" was published on 23 April 2012, setting out the results of LSB's investigations and their proposals for action. The investigations indicated that many consumers were not adequately protected at the time a will was written or an estate was administered and LSB proposed that action needed to be taken to protect consumers and promote their and the wider public interest.

   LSB published two key proposals:

   Recommending to the Lord Chancellor that the list of reserved activities be extended to include will-writing and estate administration activities; Improving the effectiveness of the existing legal services regulation that applies to the majority of providers delivering these services, where it is not working well for consumers. LSB has now reviewed all of the consultation responses received and has published a further set of documents for a six-week consultation, including a Provisional Report and draft guidance.

   The Provisional Report says: "The publication of a Provisional Report following a section 24 or 26 investigation is a statutory duty placed on the LSB by schedule 6 to the Act. In line with our obligations under schedule 6(10) the Provisional Report states that we remain minded to recommend that the Lord Chancellor amends the list of reserved legal activities to include will-writing and estate administration activities and the reasons for these recommendations."

   www.legalservicesboard.org.uk/what_we_do/consultations/open/pdf/will_writing_consultation_document_27_sep_12.pdf

2. PRIVATE CLIENTS

   2.1. Application for hearing in private

   A well-known broadcaster (described as Mr A) submitted a tax return claiming that he had made a loss. Mr A acknowledged that the alleged loss resulted from his use of a tax avoidance scheme, and HMRC issued an amendment rejecting the claim. The broadcaster appealed, and made a preliminary application for the hearing to be in private and for the decision to be anonymised.

   The First-tier Tribunal rejected the application (TC02217).

   The basis of Mr A's application was that there is currently considerable media interest in tax avoidance schemes, and in particular in their use by celebrities. Mr A appears frequently on television and radio, and the case report indicated that he is already the focus of media interest for other reasons, much of it hostile and he was fearful that his career might be damaged, if it were to become public knowledge that he had availed himself of a tax avoidance scheme.

   While the presumption was that hearings are to be in public, counsel for Mr A argued that the potential damage to Mr A's career infringed Mr A's "right to respect for his private and family life" under the European Convention on Human Rights.

   HMRC contended that the threshold a taxpayer must surmount in order to secure a private hearing is a high one, and the embarrassment Mr A might suffer, however acute it might be, was not enough. Counsel for HMRC referred to a Practice Note issued by the Court of Appeal inPink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429 in which the Master of the Rolls observed that "the Court of Appeal should not depart from the general rule that litigation is to be conducted in public, unless a judge of that court is persuaded that there are cogent reasons for doing so."

   The tribunal judge Mr Colin Bishopp said: "In my judgment the presumption of a public hearing is nowadays stronger than it might have been perceived even a few years ago. The modern view in relation to tax appeals was, I think, well put by Henderson J in Revenue and Customs Commissioners v Banerjee (No 2) [2009] STC 1930:

   "[34] ... In my opinion any taxpayer has a reasonable expectation of privacy in relation to his or her financial and fiscal affairs, and it is important that this basic principle should not be whittled away. However, the principle of public justice is a very potent one, for reasons which are too obvious to need recitation, and in my judgment it will only be in truly exceptional circumstances that a taxpayer's rights to privacy and confidentiality could properly prevail in the balancing exercise that the court has to perform.

   [35] It is relevant to bear in mind, I think, that taxation always has been, and probably always will be, a subject of particular sensitivity both for the citizen and for the executive arm of government. It is an area where public and private interests intersect, if not collide; and for that reason there is nearly always a wider public interest potentially involved in even the most mundane-seeming tax dispute. Nowhere is that more true, in my judgment, than in relation to the rules governing the deductibility of expenses for income tax. Those rules directly affect the vast majority of taxpayers, and any High Court judgment on the subject is likely to be of wide significance, quite possibly in ways which may not be immediately apparent when it is delivered. These considerations serve to reinforce the point that in tax cases the public interest generally requires the precise facts relevant to the decision to be a matter of public record, and not to be more or less heavily veiled by a process of redaction or anonymisation. The inevitable degree of intrusion into the taxpayer's privacy which this involves is, in all normal circumstances, the price which has to be paid for the resolution of tax disputes through a system of open justice rather than by administrative fiat."

   I respectfully agree. This case is not on all fours with Banerjee, but the issue is similar: whether the taxpayer is entitled to pay less tax because, in that case, she had incurred some expenses and, in this, because he has suffered a loss, whether or not real. There is an obvious public interest in its being clear that the tax system is being operated...