Inner House case concerning an application to exercise a right to buy croft land at the Pairc Estate in South East Lewis. Pairc Crofters Limited was the owner of the land and had leased it to Pairc Renewables Limited. The Pairc Trust is the crofting community body which sought to exercise the right to buy. It sought purchase both the interest of Pairc Crofters as owner and the interest of Pairc Renewables as tenant.

The Scottish Ministers granted the trust’s application. Pairc Crofters and Pairc Renewables appealed to the sheriff. The sheriff referred the devolution issues arising from the appeal to the Inner House. The court required to consider whether Part 3 of the Land Reform (Scotland) Act 2003 (which contains the crofting right to buy) is incompatible with the European Convention on Human Rights. Specifically the landowners and their tenants claimed that Part 3 contravened Article 6(1) (right to a fair trial) and/or Article 1 of Protocol 1 (right to protection of property) of the Convention. If Part 3 had been incompatible with the Convention rights, the making of the 2003 Act would as a consequence have been outwith the legislative competence of the Scottish Parliament (in terms of the Human Rights Act 1998 and the Scotland Act 1998).

The landowner argued that Part 3 does not provide sufficient safeguards for landowner’s rights. Although A1P1 makes no mention of procedural requirements, the landowner contended that the procedure employed must give the proprietor a reasonable opportunity of putting its case to the decision maker. And, in the landowner’s view, Part 3 did not do that.

The court took the view that the landowner’s case depended on the proposition that the safeguards for a landowner’s rights required to have been explicitly spelled out in the 2003 Act. However, this is not the case. The question of competence depends on how the legislation operates in practice and not on how any specific provision may appear if looked at in isolation. (It may be that proper interpretation of the Act, the terms of other legislation, or the principles of the common law may restrict the impact of the Act so that it cannot be said to be incompatible with Convention rights.)

As regards Part 3 of the 2003 Act:

1. The provisions requiring the crofting community’s approval (to exercise of the right to buy) by ballot were compatible with article 6 (the right to a fair trial). Regulation 2 of the Crofting Community Right to Buy (Ballot) (Scotland) Regulations 2004 requires that the ballot be carried out in a “fair and reasonable manner”. In the event that the landowner considers the ballot to be unfair, it had a judicial remedy under the same regulation.
2. The exercising of the right to buy is at the discretion of the Scottish Ministers. Section 74(1)(n) of the 2003 Act requires that the applicant must in every case satisfy the Ministers that the proposed purchase is in the public interest. In making a judgment as to the public interest, the Ministers must act compatibly with A1P1 (right to protection of property). In assessing the broad overall consideration of the public interest, the Ministers must take account of the interests of persons who may be adversely affected by the decision, such as the landowner. When the Ministers decide where the overall public interest lies, the central consideration will be that of balancing the harm to the landowner against the benefit of the proposal to the wider public.
3. The 2003 Act gives the landowner adequate means to put forward his case. On receipt of the community body’s application, the Ministers are obliged to invite a number of interested parties, including the landowner, to submit their views in writing on the application (s 73(8)(a)). The Ministers are then under an express obligation, when considering whether to grant the application, to have regard to all views that have been received (s73(12), (13)). In addition to the statutory procedure the Ministers also have a duty at common law to observe such additional procedural safeguards as are necessary to attain fairness.
4. Lastly, the legislation provides for an adequate level of scrutiny of the factual issues that an application to exercise the right to buy may raise. It does so in three separate ways:
   1. in the requirement of the details that the crofting community body must provide in the prescribed form of application;
   2. in the requirement that the Ministers must invite views on the proposal from interested parties, including the landlord, and from the public; and
   3. from the right given to any interested party, again including the landlord, to refer any question relating to the application to the Land Court.

The Inner House found that, when considered as a whole, the legislative provisions and principles of administrative law offer a level of protection “equal to or surpassing that” which is required by the European Convention on Human Rights.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

The UK Supreme Court has found that sections 1 and 9 of the Tobacco and Primary Medical Services (Scotland) Act 2010 are within  the legislative competence of the Scottish Parliament.

(Section 1 of the 2010 Act prohibits the display of tobacco products in a place where tobacco products are offered for sale. Section 9 prohibits vending machines for the sale of tobacco products)

A summary of the judgement is available from the Supreme Court here.

The full judgement is available here.

Time for another “tax land”.

Where to start?  Jersey seems as good a place as any.  Jersey is also considering its constitutional options.  This is not new news.  I was in Jersey a couple of years ago and independence was also being discussed amongst the lawyers I was meeting.  Jersey is in a different position to Scotland as it is for all intents and purposes already fiscally autonomous and is a British Crown dependency.  An article on this from the Guardian can be found here.  This is from the Guardian article:

“A barrage of regulatory clampdowns and political attacks on the Channel Islands’ controversial financial industry has prompted one of Jersey’s most senior politicians to call for preparations to be made to break the “thrall of Whitehall” and declare independence from the UK.  Sir Philip Bailhache, the island’s assistant chief minister, said: “I feel that we get a raw deal. I feel it’s not fair.  I think that the duty of Jersey politicians now is to try to explain what the island is doing and not to take things lying down.  The island should be prepared to stand up for itself and should be ready to become independent if it were necessary in Jersey’s interest to do so.”

It seems that the constitutional genie is well and truly out: Scotland, Falkland Islands, Jersey and now it seems on UK membership of the European Union.

Now to the announcement by the Scottish Government of its intention to create its own tax administration and collection agency, to be called Revenue Scotland.  Its main job initially will be to administer the two new Scottish taxes devolved under the Scotland Act.  The fact that it is to work closely with Registers of Scotland and the Scottish Environment Protection Agency, also makes sense.  These new taxes, a Scottish Stamp Duty Land Tax and a Landfill Tax, will be directly linked to the work done by these organisations.  A press release from the Scottish Government on this can be found here.

As regular readers of this blog will know I have been writing about this issue for many years now.  Whilst I welcome this announcement I still think we need to be more radical.  We need to review all government tax, law and registration services.

I was not surprised to see some negative comments about the Revenue Scotland announcement. However, if Scotland has its own tax system it needs its own tax administration and collection agency.  That applies just as much under the Scotland Act as independence.  That though is not the only reason.

Let’s not forget the fact that UK tax law is based on English legal principles, or how HMRC and HM Treasury dealt with the introduction of Stamp Duty Land Tax in Scotland, or the inheritance tax changes to trusts, or the proposed planning-gain supplement, or the Scottish Government’s local income tax proposal or VAT and the new Scottish police and fire services.  All good reasons for welcoming Revenue Scotland.

The Scottish Government is in no doubt that Revenue Scotland will be able to administer the new Scottish taxes at a lower cost than HMRC.  I agree with that.  I have also noticed that no-one seems to remember one of the more ridiculous claims made when the Calman Commission proposals were being debated.  The Scotland Office claimed that the cost of administering a separate Scottish tax system would be the same as the present UK system.   Complete and utter nonsense.  The Scotland Office paper can be found here.

One last point on Revenue Scotland.  I met with a number of Scottish Government officials just before the 2011 Scottish election on this issue.  It was quite clear that they wanted nothing to do with this idea and only met with me at the insistence of a Scottish Minister.  Thank you Jim Mather.  I wonder if their attitude has changed in any way?  Let’s hope so as this is just the start.

The Scottish Government has also published its consultation on a Land and Buildings Transaction Tax.  This will replace Stamp Duty Land Tax.  The consultation for Scotland’s replacement to Landfill tax will follow later this year.  I use the word “summer” advisedly.  The consultation can be found here.

And there’s more.  The Scottish Government has finally published its consultation in a “plastic bag tax”.  The consultation can be found here and a press release from the Scottish Government here.

Even the UK Government is playing its part.  The UK Government is consulting on whether to allow the Scottish Government the power to issue its own bonds.  The move would potentially allow Scottish Ministers to raise hundreds of millions of pounds.  A provision in the Scotland Act 2012 has already enabled the UK government to amend the way in which Scottish Ministers can borrow from 2015-16.  An article on this from the BBC news website can be found here.  The consultation can be found here.

One last point on fiscal powers.  The UK government is reportedly considering proposals to devolve complete control of income tax if Scotland votes ‘no’ in the independence referendum.  This sums up nicely what is wrong with the UK Government’s approach to this debate.  If the UK Government has a serious proposal to make, make it.  If not be quiet.

Now to tax and morality.  David Cameron branded comedian Jimmy Carr “morally wrong” for seeking to avoid paying his fair share of tax.  Mr Carr is understood to use an aggressive, though legal, tax avoidance scheme which enables members to pay income tax as low as 1%.  This is dangerous territory for David Cameron.  Already the press have published the names of many others who are involved in similar schemes.  If David Cameron seriously wants to tackle this issue he must act against all those who seek to evade tax.  Has he considered the public disclosure of all tax returns or a minimum percentage of tax that must be paid?  I suspect not.

This is not just a UK Government issue.  The Herald discovered that Transport Initiatives Edinburgh used tax loopholes to allow directors to avoid paying income tax rates on £1 million in fees and bonuses. The company, which closed last year due to its handling of the trams project, paid directors and consultants through their firms.  As a result, they were subject to 20% corporation tax rather than 40% income tax.  The article from the Herald can be found here.

The evidence that the “rules” do not apply to everyone is growing.  Whether it is the 3,000 UK civil servants being paid through a company, or the payments made to those who were partially responsible for the trams fiasco in Edinburgh or the celebrities avoiding tax.  I am resisting the urge to say it was ever thus but in times such as this it does seem even more reprehensible.

One last point.  I often am quite critical of HMRC.  I would argue for good reason.  That said, is it really time to cut 10,000 jobs?  An article on this and the proposed strike by HMRC staff can be found on the BBC news website here.

Have a good week.

Great to see progress at last on a Scottish tax system.

One of the first steps is the Scottish Government’s consultation: Taking Forward a Scottish Land and Buildings Transaction Tax.   The consultation document can be found here. 

The consultation runs to 30 August 2012.

Not a great week for the UK Government and in particular George Gideon Oliver Osborne.  The problem here for the coalition government is not just the fact that there has been three U-turns in one week, it is the feeling that the March Budget was a bit of a shambles.  I would not go as far as that but it does seem a bit odd to me that so much was made of the so called “pasty” and “caravan” taxes and not that the UK Government did not even consider reducing VAT on repairs and renovations on residential property. 

As suspected the proposed cap on tax relief for charitable donations has been dead in the water for a number of weeks.  All we heard this week was  confirmation of that fact.  One final point on this.  These three U-turns come at a cost of approximately £150m.  Where is that revenue now to come from?   

“Flat rate” taxes were all the rage a few years ago.  Personally I have not been persuaded by the arguments put forward.  That said, as we start to think about how a Scottish tax system might look flat rate taxes should also be considered.  The latest call again came from those generally regarded to be on the political “right”, the TaxPayers’ Alliance and Institute of Directors.  In addition to arguing for a single rate of income tax the usual noises were made for the tax system to be simplified.  No-one is likely to argue against a simpler tax system until specific proposals are made.  For example, recent changes to the amount of personal allowance for those aged over 65.  This change has been termed the “granny tax”.  I did though like the idea of abolishing certain taxes although not necessarily those listed in this report.  It is claimed that the cost of these proposals would be met by prolonging the UK Coalition’s spending cuts by an extra five years.  More on this can be found here.  The report also claims that these changes would increase gross domestic product by 8.4% over 15 years.

Again on tax rates.  According to City A.M. the UK has continued to raise taxes while most other European Union countries tax rates have fallen.  The European Union average top rate of income tax decreased from 44.8 to 38.1% between 2000 and 2012.  In this same period, the UK’s average rose from 40 to 50% although the top rate is to fall from April 2013.  Unless of course we see another U-Turn.  The UK has though followed the European Union wide trend for raising VAT.  The average rate has risen from 19.2 to 21%, with the UK’s up from 17.5 to 20%.  The report from City A.M. can be found here.

Some stories do not surprise you in any way.  This is one of them.  Taxpayers are spending more than £1 million every month on the rent and upkeep of empty fire service control rooms that have never been used.  Details revealed under Freedom of Information legislation show that only one of the nine Fire Control centres is operational, despite the fact that taxpayers will continue to pay for their upkeep for up to 20 years.  This was reported in the Times on 24 May. 

Then there are stories that do surprise you but shouldn’t.  This is one of them and is also a story I have covered recently.  3,000 civil servants are employed by private firms in order to keep their tax bills down.  By remaining off the UK Government’s payroll, thousands of officials are avoiding paying national insurance contributions and are able minimise their overall tax contributions.  The report from HM Treasury can be found here.    

Good news that could have been even better news.  HMRC collected an extra £4.32bn during the last five years.  This is 11 times greater than the investment made for collecting this extra revenue.  However, a House of Commons Public Accounts Committee report claims that another £1.1bn could have been collected without job losses at HMRC.  A report on this from the BBC news website can be found here.

The International Monetary Fund (IMF) and in particular its managing director Christine Lagarde, is rarely out of the news these days.  Lagarde has said said that the UK economy had underperformed and unemployment remained much too high.  The IMF urged the UK Government to consider cutting interest rates and a further round of quantitative easing.  Ms Lagarde also said that UK ministers should prepare a plan for a worse economic environment which could include a cut in VAT.  However, the IMF also said that the UK Government should not divert from its aim of deficit reduction.  A report from the BBC news website can be found here.    

How to win friends and influence people.  Political parties in Greece have criticised Christine Lagarde for suggesting that Greeks were avoiding paying taxes.  Socialist leader Evangelos Venizelos accused Ms Lagarde of “insulting the Greek people”.  A report, again from the BBC news website, on this can be found here. 

There may be trouble ahead.  The UK Supreme Court has ruled that HM Treasury breached European Union law by retrospectively blocking tax refund claims.  The amount involved could be as much as £5bn.  Not surprisingly, HMRC has said that it is “considering the implications of this complex judgement carefully.”   A report on this from City A.M. can be found here. 
 
Now to what some might consider an overreaction.  Some US politicians are so irked at the idea that Americans are renouncing their citizenship to avoid tax, that they are introducing a new Senate bill to tax them forever.  A report on this from ABC news can be found here.  In addition, Congress is close to approving a law under which the Internal Revenue Service will be able to revoke the passports of Americans who owe substantial unpaid taxes.  An article from the Wall Street Journal on the passport claim can be found here. 

I think I will finish with fiscal powers.  HMRC is under no obligation to implement any tax proposal made by the Scottish Government under the Scotland Act.  HMRC can effectively veto any proposal if it differs too greatly from the UK system.  A report on this from the Herald can be found here.  I find it worrying that anyone is at all surprised about this.  I would be even more worried if I thought that anyone actually believes that HMRC and HM Treasury are happy to see tax powers being devolved.  I suspect that there are very few people in HMRC and HM Treasury who are happy to see the beginning of the end for a unified UK tax system.  An earlier blog on this point can be found here.     

Also on fiscal powers.  I still think it is unlikely that the so called “second question” will be asked as part of the independence referendum.  What will those who are arguing for “devo plus” and/or “devo max” do?  Will they vote for independence or the status quo and the hope of something more in the future?  This is an issue I will come back to after my well deserved holiday.  

Have a good weekend.

Where to start?  Tax and morality seems as good a place as any.

Cardinal Keith O’Brien has accused David Cameron of acting immorally by favouring the rich ahead of ordinary citizens affected by the recession.  The cardinal also denounced David Cameron’s opposition to a “Robin Hood tax” on financial institutions.  Those arguing for a European financial transaction tax have gone a bit quiet recently.  The cardinal’s interview has though brought this proposal back into the news.  Whether a tax such as this is introduced is though only part of the debate.  As with most taxation debates the secondary debate involves how the revenue should be spent.  The cardinal would like it spent helping the poor and vulnerable at home and abroad.  Others want an emergency fund for the next banking crisis.  An article from the BBC new website on this can be found here.

Now to the London mayoral debate. Included in Boris Johnson’s manifesto for a second term is a proposal to set up a commission that would explore the possibility of a “Barnett” style formula for London.  Johnson wants to keep more of the tax raised in London to be spent in London.  An article on this from the Guardian can be found here.  This is further evidence of how quickly the fiscal powers debate is moving.

The Scotland Bill has received its Royal Assent.  An article on this from the BBC news website can be found here.  A missed opportunity?  I think so.  That said, even under the Scotland Act (2012) we are going to have a Scottish tax system.  I am of course looking forward to the Scottish Government’s consultations on the tax powers being devolved but why stop there?  It is surely now obvious that we need to start thinking about the type of tax system we want.  That must include a review of all government tax, law and registration services and the creation of a Scottish Exchequer.

Good to see an article in the Herald on something I have written about recently.  Businesses in new Scottish enterprise zones will be able to claim up to 100% business rates relief as part of new incentives to stimulate investment in the economy.  Other measures announced by the Scottish Government include more efficient planning procedures, improved broadband, targeted capital allowances and international marketing.  The article in the Herald can be found here.

Another article from the Herald, this time on an “unprecedented” number of business rates appeals.  The article reports that court cases have been launched by retailers in Edinburgh, Glasgow, Dundee and Kirkcaldy and elsewhere as firms contest the size of their rate bills.  The article from the Herald can be found here.  The main argument being used is that the current rates were calculated in 2008, before the extent of the downturn became apparent.

For those of you interested in tax statistics, the relevant HMRC page can be found here.  For those of you interested in tax consultations, current HMRC consultations can be found here and current HM Treasury consultations here.  There will be many more consultations added over the next few months as the UK Chancellor in his Budget made reference to approximately 45 consultations.

Approximately 12,000 people who had been told that they no longer needed to fill in self-assessment tax forms have been sent penalty notices in error.  To put this in context, 130,000 people were taken out of the self-assessment process for this tax year.  Some 850,000 people were sent penalty notices for failing to submit their tax returns on time this year.  This is 550,000 fewer than a year ago.  An article on this from the BBC news website can be found here.  As mentioned in this article it is likely that “HMRC’s resources” played a part in this latest error.

Nearly 60,000 more Scottish pensioners than first thought will be hit by the UK Government’s decision to freeze age related personal allowances according to new figures published by HM Treasury.  The figures show the so called “granny tax” will impact 423,000 pensioners in Scotland by 2015-2016.   The article from the Herald can be found here.

David Cameron has backed proposals for an “airline levy” to ease waiting times at London Heathrow Airport border control.  Airlines using London Heathrow would pay higher landing fees to pay for additional UK Border Force staff to help remedy the long queues currently occurring.  You would be forgiven for thinking there was an election in London this week.  The UK Government is not making many friends in the airline industry just now.  The spat over increases in Air Passenger Duty continues.  More information on this can be found in an article on the BBC news website found here.

Now to Europe and the “debt crisis” debate.  Financial Times journalist, Gideon Rachman continues to argue against European countries trying to spend their way out of their debt crisis.  This is a quote from his article:  “There is, of course, scope for argument about the pace of deficit reduction.  But in a highly-taxed, highly-regulated, highly-indebted continent like Europe, more state-funded public works would simply build another road to nowhere”.  The full article can be found in the Financial Times on 1 May.

I will finish on a matter I have blogged on before.  More than 2,000 public sector workers could be avoiding the full rate of income tax through special contracts, UK Government research has found.  An article on this from the BBC news website can be found here and my earlier blog here. This is an incredible figure as it does not include those in the NHS or local government.  Danny Alexander is seemingly “shocked”.  It seems that “shock” is becoming the default reaction for UK Government Ministers.  You may remember George Osborne’s was also recently “shocked” at the extent of tax avoidance.  Tax and morality it was ever thus.

Have a good weekend.  “Tax land” will be back in three weeks time.