HMRC defeats tax QC's own scheme at tribunal

A specialist tax barrister recently lost a first tier tribunal appeal against HMRC’s decision not to allow him to claim tax relief on a £475,000 loss on an avoidance scheme of his own devising.

Rex Bretten QC, who retired around 18 months ago from Tax Chambers at 15 Old Square, designed a scheme that involved setting up two trusts in which he invested £500,000 in loans raised against what are known as relevant discounted securities (RDS). The arrangement created a £475,000 loss against which he tried to claim £190,000 relief.

While the loan arrangements were fairly simple, the interpretation of their legality was much less straightforward. In a what might be termed a 2-1 points decision in the case of George Rex Bretton QC v HMRC [2013] UKFTT 189 (TC), tribunal judge Barbara Mosedale ruled in March that the transactions were caught by anti-avoidance provisions (paragraph 9A) in schedule 13 of the Finance Act 1996 that applied at the time of Bretten’s initial appeal.

Bretten represented himself at the tribunal hearing in January, and the case was given an added twist by Public Accounts Committee chair Margaret Hodge, who named Bretten as one of a handful of tax QCs who “prostitute themselves” to schemes designed to deliberately create gross tax relief for investors.

In February 2003, Bretton became joint trustee...

Continued...

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Comments
ShirleyM's picture

Well done, HMRC :)    1 thanks

ShirleyM | | Permalink

Any penalties? Has he lost anything really?. He has managed to illegally hold onto the tax for 10 years, and it has cost him little in the way of defence costs.

What cost to the country, though? Until there is a positive deterrent the risk still seem to be worth taking as the potential gains are huge, but as in this case, the potential losses are minimal.

frustratedwithhmrc's picture

Oh, the irony...    1 thanks

frustratedwithhmrc | | Permalink

Just goes to show the truth of the old adage "A man who is his own lawyer has a fool for a client"

Well done HMRC!

My only observation is that this tax cheats claim relates to 2003. Why does it take 10-years to find a man guilty for perpetrating such a grotesque fraud against the public treasury?

I realise that interest and penalties will mitigate this, but justice deferred is justice denied.

.    2 thanks

ireallyshouldkn... | | Permalink

I wonder if this is the same chap who is always quoted when tax scheme promoters tell you the tax position has been agreed by a QC!

My bit of fun

secondhand_22 | | Permalink

I only ever look at tax scheme marketing material that comes in the post just to check that it contains the phrase "approved by a QC" (or similar).....it's just my bit of fun....I take it as a 100% foolproof indicator that the thing is a concoction and is doomed to fail.

Know how to avoid costly QC opinions?  Just read the words of the legislation naturally and fairly.  Don't try to twist them to mean something they clearly don't and that will provide a ridiculous 'cake and eat it' position for the taxpayer.

Donations on account of the penalties my advice saves clients to my Paypal account please! ;)