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Matalan founder loses tax bill appeal

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18th Sep 2014
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The founder of Matlan has lost an appeal against a tax bill for tens of millions of pounds.

In 2000, John Hargreaves [John Hargreaves v HMRC, upper tribunal] sold shares in Matalan after he moved to Monaco two months earlier in an effort to avoid paying capital gains tax (CGT) on the disposal.

HMRC issued a notice in January 2007, assessing the taxpayer to CGT on the disposal of his Matalan shares. It also issued a notice of determination of ordinary residence for 2000/01 and 2001/02.

Hargreaves completed the non-residence pages of his 2000/01 tax return by stating he intended to live outside the UK permanently.

One of the key matters in the dispute was whether Hargreaves was still resident in the UK for tax purposes.

In 2007, HMRC said Hargreaves owed £84m in income tax and CGT. It said Hargreaves was resident in the UK for the 2000-2001 tax year.

Hargreaves appealed against the tax bill. He also issued a judicial review against proceedings, arguing that HMRC had not followed its own guidelines for assessing tax bills of UK residents and non-residents.

This action was delayed because he also applied for judicial review to quash the residence notification on the ground that the Revenue had failed to apply the terms of its IR20 booklet.

He stopped his judicial review claim in 2011 when the supreme court ruled against taxpayer Gaines-Cooper in a similar case of tax residency.

Hargreaves lost an appeal in the first tier tribunal that HMRC did not have the power to assess for CGT. He then appealed to the upper tribunal, which dismissed the appeal.

It said that the taxpayer wanted two opportunities to challenge the assessment:

“First by a preliminary hearing of the competence issue at which he can call no evidence if so advised; and then if he loses that challenge, at a subsequent hearing of the substantive issue at which he can deploy his evidence to the full.”

Justice Nugee decided that the taxpayer was “attempting a procedural manoeuvre by which he can have two…bites at the cherry”.

The taxpayer’s appeal was dismissed.

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David Winch
By David Winch
18th Sep 2014 20:19

Not so fast!

I rather think this decision relates to a procedural matter, not the actual appeal against the tax liability.

The taxpayer wanted the tribunal to have an initial preliminary hearing to determine one issue relevant to the appeal against the tax assessment.

That decision has gone in favour of HMRC. When it comes to the appeal 'proper' there will be no preliminary hearing - just a single hearing to determine all the relevant issues.

David

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