Judicial review of HMRC’s interpretation of the remittance basis legislation (R (Mehan) v HMRC)

Article summary

Private Client analysis: This was a judicial review of HMRC’s interpretation of the remittance basis legislation as it applied to a specific transaction. The taxpayers entered into a complex transaction concerning the sale of shares. HMRC argued that this had given rise to a taxable remittance on the basis that that the taxpayers’ rights under the sale contract (and those of related companies) constituted ‘property’, and that the vendor’s commitments amounted to a ‘service’, within the meaning of section 809L of the Income Tax Act 2007 (ITA 2007). The taxpayers argued that this interpretation breached their legitimate expectations since it had not previously appeared in any HMRC publication, and that it gave rise to irrational distinctions. Mr Justice Birss, however, refused permission for judicial review. He thought it unarguable that a legitimate expectation had arisen that HMRC would not deploy the reasoning in its correspondence. Birss J also felt that the irrationality ground had no real prospect of...