Taxman may be allowed to reclaim millions from offshore investors

THE taxman's bid to claw back millions from UK residents who put their money in tax-haven offshore trusts was given the backing of the High Court yesterday.

A judge heard the retrospective action by HM Revenue and Customs (HMRC) was threatening many with bankruptcy and the loss of their homes.

But Mr Justice Kenneth Parker, sitting in London, ruled the backdating of demands was "in the relevant circumstances proportionate" and did not breach human rights.

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The judge said the absence of any assessment "of how individual taxpayers might be affected financially" could not affect the proportionality of the retrospective legislation.

The decision was a blow for self-employed IT consultant Robert Huitson, from Bredbury, Stockport, Cheshire, who brought a test case. Although the judge refused him permission to appeal, his lawyers indicated that they would ask the Court of Appeal to hear the case because of its broad implications.

For several years Mr Huitson took advantage of a scheme designed and marketed by Montpelier Tax Consultants (Isle of Man). The judge was told he settled a trust in the Isle of Man – the "Robert Huitson Family Settlement".

But anti-tax avoidance legislation was introduced by the Government under the 2008 Finance Act, with retrospective effect.

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As a result, Mr Huitson now faces an overall tax demand in excess of 100,000 relating to the money he paid into the family trust back to 2001.

Court documents reveal 57 other scheme users say they cannot meet similar tax demands even if they sell all their assets, and another 29 could settle only by selling or remortgaging their family homes. Several users also say they face personal bankruptcy.

But the judge dismissed Mr Huitson's legal challenge and ruled that HMRC had not acted unlawfully or disproportionately.