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Retrospective Legislation Glossary

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Lost in a stream of words and phrases when reading up on BN66 and retrospective legislation? Hopefully this glossary will help...


Also known as Budget Note 66, this was released in March 2008 to fight double taxation treaty abuse, i.e. being taxed in a country with lower taxes whilst living in and working in another country. The Treasury had found that schemes existed whereby income generated by a UK resident was diverted to a foreign partnership and then returned to the UK resident without attracting the usual levels of UK tax.
It is controversial because it seeked to "clarify, retrospectively, legislation introduced in 1987" so "that it has effect as intended."
Some argue that this is retrospective legislation and therefore wrong. They argue that the idea of something being "treated as having always had effect" sets a dangerous precedent.
Double taxation treaties
Double taxation is the imposition of two or more taxes on the same income. In todays modern world, it is not unusual for an individual to be resident in one country yet create income in another. In some cases, this person may find that they are obliged to pay tax on this income both in their resident country and the country the income was generated within.
Treaties between countries exist to reduce this problem. In some cases the tax is only payable in the resident country, in other cases the tax may be payable in the country in which it was generated.
Occasionally, schemes exist that take advantage of these treaties, for example stating that the income generated by a UK resident in the UK should be taxed in a country with lower levels of tax.
Finance Act 2008
When the Finance Bill 2008 (see below) gained Royal Ascent in July 2008 it became the Finance Act 2008. Measures to fight double taxation treaty abuse were contained within section 58.
Finance Bill 2008
This was the Bill that was debated in Parliament. Measures to fight double taxation treaty abuse were contained within section 55.
Judicial Review
A Judicial Review is a procedure in English law whereby the courts can decide whether the exercise of public power (for example, by the Treasury or HMRC) on an individual is unlawful. If they decide it is they have the power to compel the authority to stop acting illegally.
Retrospective legislation
Retrospective legislation refers to any law that is passed that is expected to be treated as if it has always had effect. Therefore, stuff you did legally before the legislation was passed is suddenly classed as illegal, and you could get in trouble for it.

Tax avoidance

The use of accounting measures to reduce the amount of tax you pay. This is legal, and it's what you pay a good accountant to do for you.

Tax evasion

Using schemes and loopholes to avoid paying tax. The methods used are often illegal and likely to be closed as soon as the Treasury or HMRC become aware of them.

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