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high court london | accountingweb | High Court Judges’ investments in tax avoidance schemes questioned

Tax avoidance scandal reveals judicial bias


A judge ruled on tax avoidance schemes while investing in one herself, it has emerged, sparking debate over judicial bias, conflicts of interest and whether senior members of the judiciary should be forced to disclose their investments.

18th May 2023
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Several High Court judges have become embroiled in a tax avoidance scandal, as it emerged one has ruled on avoidance cases while investing in a scheme challenged by HM Revenue & Customs.

The Financial Times reported that Justices Joanna Smith, Simon Bryan and Martin Griffiths first made investments before they were appointed to the High Court. The trio continued to invest after taking their positions, Companies House documents show.

Two other sitting High Court judges, Justices Julian Goose and Nicholas Mostyn, invested in tax schemes that have since closed, one of which was branded “highly abusive” and “completely contrived” by a government minister.

The judges made the investments between 2003 and 2012.

Conflict of interest 

“This raises valid questions raised about conflict of interest and the need for an independent official to rule on whether a judge can sit in such a case,” said Daniel Feingold, senior partner at specialist tax law firm Stratax LLP.

UK judges are not bound by public disclosure requirements and have no responsibility to declare their finances. They are, however, required to disclose in some cases if they believe there could be a conflict of interest or an appearance of one.

Tax avoidance is often pursued by HMRC, but the practice is not illegal like tax evasion, which is the deliberate failure to pay tax.

“Highly abusive and contrived”

Justice Smith invested in two controversial property tax schemes involving tax credits for renovating unused business premises in 2012, nine years before she became a High Court judge.

One of the schemes was Curo Charlotte House LLP which was based around a hotel in Glasgow and received payment demands from HMRC in 2014 after it said it was taking action.

Justice Smith invested in two property tax schemes related to tax credits for renovating disused business premises in 2012, nine years prior to her appointment as a High Court judge. One of the schemes, Curo Charlotte House LLP, centred around a Glasgow hotel, and faced payment demands from HMRC in 2014 after the authority threatened action.

Justice Bryan, appointed to the High Court in 2017, and Justice Griffiths, appointed in 2019, invested in the Cobalt Data Centre 2 LLP scheme in 2011. This involved tax credits in enterprise zones, which HMRC successfully challenged in the Court of Appeal.

The court ruled that Cobalt Data investors were not eligible for tax credits on their investment, after a lower court initially determined that the scheme sought legitimate tax incentives.

Julian Goose, who became a recorder in 1998, served as a director of Romangate Limited from 2009 to 2010. 

Romangate Limited was a component of the Rushmore tax avoidance scheme, which was blocked by the Labour government in 2009. Treasury secretary at the time, Stephen Timms, described the scheme as “highly abusive” and “completely contrived”.

In 2003, three years after being appointed as a deputy High Court judge, Nicholas Mostyn invested in two film partnerships that have since been dissolved. One partnership was orchestrated by Grosvenor Park, a film financing company that was known at the time for facilitating tax schemes.

Judicial bias

Tax experts noted the unusual circumstances in which Justice Smith, in the past year, adjudicated two separate tax appeals similar to those associated with the scheme she had invested in. 

The appeals revolved around questions of whether a taxpayer had a “reasonable excuse” and whether the primary objective of the scheme was tax avoidance.

Dan Neidle, founder of the Tax Policy Associates think tank and a former tax solicitor, said Justice Smith should have recused herself due to her investment in Charlotte House, even if it was not in dispute with HMRC at the time.

He argued that there could still be a potential bias, making it difficult for her to avoid addressing points relevant to her own scheme.

Fountain Court Chambers barrister Ed Levey KC defended Justice Smith, however, stating not enough is known about the particular cases, and given the reputation of the judge in question there is little evidence of any apparent bias.

Not a trivial matter

“I think all the tax professionals I’ve spoken to – solicitors, barristers and a retired judge – think that the issue should at least have been disclosed to the parties. This isn’t a trivial thing,” Neidle said in response.

Richard Moorhead, a professor of law and professional ethics at the University of Exeter, suggested the need for a formal register of interests for judges. This would ensure they do not rely solely on their individual recollection to determine whether a conflict of interest or perceived bias exists in specific cases, he said.

“It is very interesting indeed that law firms and banks are said to have prohibited firms from participating in tax avoidance schemes but the judiciary has not,” he said. “It is a more practical recognition of my broader point. The judiciary needs to think harder about its own governance and reputation.”

The Judicial Office, responsible for supporting the judiciary in England and Wales, stated that the judges involved declined to comment. It said the judiciary does not engage in discussions regarding the financial affairs of individual judges.

Replies (4)

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By Justin Bryant
18th May 2023 12:22

A bit of overkill sensationalism here by the FT/DN (and the professor of law). Contrary to the headline, no actual judicial bias is proven or even evident here at all (cf. my comments below about judicial bias proved in favour of HMRC on plenty of occasions and never widely reported). At most there is merely an unproved apparent appearance of potential bias. You always see cases where judges should have arguably recused themselves over a potential conflict of interest etc. (of one kind or another) and just coz this happens to be re tax avoidance schemes (that could potentially have worked just fine) it's been (rather predictably) sensationalised (it's hardly a "scandal", unless you're HMG/HMRC and of course such words are a bit rich coming from the likes of them), with the usual left-wing biased reporting of such things (judges should not take lectures on bias from biased reporters).

All the journalist has done here is simply trawl through the list of (nasty, horrible, greedy etc.) investors at CH looking for anyone high profile (and not a left-wing hypocrite) that they can throw mud at, hoping some sticks. That said, I agree that the judges should probably have recused themselves on this occasion, but then you can equally say that about dozens of other cases each year as I say above and a register or whatever clearly would not help in general there.

See also:
And what about the overt judicial bias in favour of HMRC that never gets mentioned here (or by FT/DN), except by me? See:

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Replying to Justin Bryant:
By philaccountant
19th May 2023 16:14

I wonder just how right wing you have to be to see the FT as a left wing outfit.

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Replying to philaccountant:
By Justin Bryant
20th May 2023 08:32

Eh? It's well known that the FT has for many years now made a big song & dance about (perfectly legal) tax avoidance planning like this in this same left-wing media style ultra biased manner (almost competing with the Guardian/DN). In any event, as everyone well knows here, I am very, very far from being a moron of the far right and this same story was in the Telegraph (without it being portrayed as proof of actual judicial bias as one would expect - unlike the above very badly written Aweb piece)!

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By listerramjet
19th May 2023 11:08

About time the government recognised that tax avoidance is entirely legal and also that the tax code is far far too complex, thus providing plenty of opportunity to arrange one's affairs to minimise taxation. I wonder how much of that complex tax code is actually concerned with trying to avoid the pitfalls that such complexity introduces?

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