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Contractors hit by BN66 finally get response

Contractors affected by BN66 have finally read a response by Stephem Timms MP that was demanded by the Joint Committee of Human Rights.

After reading representations by those affected by Section 58 of the Finance Act 2008, the Joint Committee of Human Rights (JCHR) stated that in their current view the changes enacted breach the human right to peaceful enjoyment of possessions in Article 1 of Protocol No. 1 of the European Convention on Human Rights.

The committee claimed that the representations question whether the Government has provided a sufficient justification in their actions to date. Stephen Timms MP (Financial Secretary to the Treasury) has previously stated in May 2009 that an impact assessment of the effect of the closure of the schemes was not necessary because "formal impact assessments are not published in respect of measures where the impact is only on those who are avoiding tax." However, the JCHR has decided that without this impact assessment an arguable breach of Article 1 Protocol 1 has occurred.

In a letter dated 7th July 2009 to Stephen Timms MP the JCHR asked to be provided with a memorandum setting out a detailed assessment of the impact of Section 58 of the Finance Act 2008 on those affected, with detailed justification for the provision having retrospective effect. They have also demanded evidence that throughout the entire period of 1987 to 2008 HMRC "has consistently made the case that the avoidance scheme in question does not work."

The deadline for this memorandum was 21st July 2009, however due to the Parliamentary recess it took time for all members of the committee to see the letter, which has now made it into the public domain. It appears that anyone that thought there might be a breakthrough will be disappointed by Stephen Timms' reply.

In a letter dated the 22nd July the MP wrote:

"Thank you for your letter of 7th July in which you ask for a memorandum on s58 FA2008. In particular, a detailed assessment of the impact of the legislation, detailed justification for retrospective effect, and evidence that HMRC had consistently made the case that the avoidance scheme does not work.

"By way of background, this legislation retrospectively clarifies pre-existing anti-avoidance legislation which was itself introduced with retrospective effect. The retrospective aspect of the legislation is the subject of a number of applications for judicial review - a main element of which is the quest for a declaration of incompatibility of that retrospective apect with the European Convention on Human Rights. Permission for a review was granted by the High Court on 16th June for one of those cases. HMRC is in the process of preparing its formal defence with a hearing likely towards the end of this year.

"In the circumstances, I wonder if you and the committee would be content that, rather than providing the memorandum you have requested, HMRC undertakes to keep you informed about the progress of the case.

"Your report also recommends that in the future a memorandum be provided to the Committee identifying provisions in the Finance Bill which have retrospective effect. I am willing to consider this, but as I'm sure you will appreciate, I will need to discuss further with colleagues in the Ministry of Justice and elsewhere."

Only time will tell if the JCHR believe that this is an acceptable response. In the meantime, the fight for those who believe that they are being hit by retrospective legislation goes on.

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