The High Court is to rule on an attempt by HMRC to claw back millions of pounds from UK residents who have put their money in tax-haven offshore trusts.
Mr Justice Kenneth Parker was told at a two-day hearing last week that traditional action by HMRC was threatening many by bankruptcy, the loss of their homes in addition to causing mental health problems and marital breakdowns.
The judge is being asked to rule that the backdating of demands is ‘disproportionate’ and contrary to human rights legislation.
The test case application has been made by self-employed IT consultant Robert Huitson from Bredbury, Stockport, Cheshire.
For a number of years Mr Huitson took advantage of a scheme designed and marketed by Montpelier Tax Consultants (Isle of Man). The judge heard that he settled the ‘Robert Huitson Family Settlement’ in the Isle of Man.
However, legislation was introduced by the Government under the Finance Act 2008 to limit what HMRC described as a ‘widely-marketed tax avoidance scheme.’
HMRC argues that tax avoidance schemes are unfair to the majority of the British public who do pay the tax due on their income.
Lawyers acting for the Revenue argued that the 2008 Act confirmed that earlier legislation introduced in 1987 applied to defeat the scheme.
If Mr Huitson loses his legal challenge he faces an enormous tax demand of over £100,000 relating to the money he paid into the family trust.
Court documents have shown that 57 other scheme users say they cannot meet similar tax demands even if they sell all of their assets and a further 29 claim they could only settle by selling or re-mortgaging their family home. Several others have alleged they face personal bankruptcy.