Court Victory For Dubai Expat Jimenez Could Prove To Be Landmark Ruling Against HMRC

Nov

07

Cash Out Pensions

The UK’s High Court of Justice has ruled in favour of the taxpayer in a landmark case concerning limits to HMRC and its powers to investigate the affairs of UK expats and non-resident persons who have permanently severed their ties with the UK.

Dubai resident Tony Jimenez took on Her Majesty’s Revenue & Customs in the case at the High Court, which has now provided a ruling on how HMRC should conduct itself in matters relating to non-UK individuals, recognizing that once a person leaves the UK, the degree to which HMRC can inquire into their tax affairs is much reduced.

A member of Mr Jimenez’s legal representation called the ruling a game changer for the powers vested in Her Majesty’s Revenue & Customs, and a ruling that will also greatly interest non-domiciled residents who have made their permanent domicile outside the UK. Seemingly, HMRC may no longer be able to examine their UK tax affairs.

The court was told that Mr Jimenez, a former co-owner of Charlton Athletic Football Club, left the UK in 2002 and had cooperated with Her Majesty’s Revenue & Customs’ questioning about his residence status but the agency had tried to force matters by issuing him with a production notice at his Dubai residence.

As a non-UK taxpayer, who lives outside the UK and has done so for many years, Mr. Jimenez challenged HMRC’s right to issue a production notice to his house in Dubai and eventually he decided to bring the case for judicial review in London.

According to his legal team, the key dispute was the degree to which HMRC can exercise its powers outside the UK. Mr Jimenez’s case centred on powers accorded to HMRC to issue notices under Schedule 36 to the Finance Act 2008 (Schedule 36), which the claimant’s legal team argued do not extend to subvert the sovereignty of foreign states; as a rule, countries will not assist other countries to collect tax unless they have a reciprocal arrangement.

It was argued that HMRC has no extra-territorial effect, and that HMRC therefore has no power to issue a notice against the taxpayer when they are resident in Dubai.

However, HMRC asserted that Mr Jimenez is a taxpayer for the purposes of Schedule 36 and, therefore, the agency does have the power to issue a notice to taxpayers like him who live outside the UK.

The judge is said to have agreed that Her Majesty’s Revenue & Customs’ approach was both unlawful and unreasonable, which resulted in a ruling that the correct approach in such a situation is to make a request of the appropriate tax authority abroad under a reciprocal arrangement.

The judge ordered HMRC to pay Mr Jimenez’s costs.

Mr Jimenez himself was quoted after the ruling: “For a long time HMRC have held the view that distance was no object to their powers meaning any expats outside of the UK were in their sights long after they had left the UK. Young or old, rich or poor, retired or not or simply wanting to move to warmer climates and having made the decision to no longer be a resident of the UK, made no difference the attitude that HMRC adopted towards these expats. This ruling shows that this is fundamentally not the case and that HMRC’s powers actually stop at the UK border.”

Alan Turner

The Author

Alan Turner

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