HMRC criticised by judge for attempt to alter argument
The judge criticised HMRC’s attempt to change its ‘case stated’ arguments by the back door over issues that had been resolved in two earlier tax enquiries.
The decision in Roger Preston Group Ltd v HMRC (TC08025) considers the definition of an intangible fixed asset (IFA) and the important difference between an IFA and a financial asset. HMRC’s conduct in the case, and the performance of its expert witness are also noteworthy.
The players in the story were:
- J Roger Preston and Partners (JRP), a partnership of consulting engineers.
- Roger Preston and Partners Ltd (RPPL), a company set up and by JRP and wholly owned (prior to the sale) by the individual partners of JRP.
- Roger Preston Group Ltd (RPGL), the appellant and the company in the Grontmij NV group which purchased the assets and business of JRP in 2008.
- Grontmij UK (GUK), the company in the Grontmij NV group which purchased the shares of RPPL in 2008.
JRP carried on a business of consulting engineers in the UK and also in Hong Kong, Germany, Poland and the US. In 1994, the then partners decided that the UK trade should be carried on by RPPL, which was wholly owned by the individual partners. There appears to have been good contemporaneous evidence as to the commercial rationale for this planning.
As part of the structuring in 1994, JRP granted RPPL a licence to use the designs and logos; the premises, fixtures and fittings etc; the client data; and the business know-how. JRP undertook to provide assistance and advice to RPPL to help it carry on the business and service clients.
An annual fee was payable for this assistance calculated by reference to the hours provided by JRP to RPPL and RPPL’s gross turnover, capped at 95% of RPPL’s annual pre-tax profit.
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Replies (3)
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Just the regular confirmation that HMRC looks to cheat the legal system more regularly than tax payers
Ah, Jolyon Maugham QC - helping rich people hang onto their money (quite legitimately), while doing his best to stop poor people getting the Brexit they voted for.
Quite humiliating for HMRC and their accounting expert witness, Mr Simms - yet not too surprising, given that he is an employee of HMRC. How could he be considered an independent expert witness if put forward by his own employer?
Extract:
"But the impression at times was that he (Simms) was arguing HMRC's case rather than giving neutral and independent evidence about it. This factor leads me to conclude that I cannot safely rely on his evidence where it is in conflict with that of Mr Marsden (BDO partner - for Appellant).
178. Even if that had not been the case, overall, and on reflection, I comfortably prefer the
totality of the evidence of Mr Marsden. His written evidence was clear and careful. The
underlying analysis was sound and he arrived at his conclusions by a process of reasoning
which was readily intelligible and capable of being followed by someone who is not an
accountant (i.e., me). His oral evidence was engaging, and he was intellectually engaged with
Mr Chapman QC's cross-examination. He was not dogmatic, but made sensible concessions,
acknowledging where he was in doubt about matters. His evidence did not seem to me to be
affected by any partiality. "
Looks like HMRC don't have all the answers in-house. And a slam dunk win for the appellant.