Arctic, what now ?

In a result which surely only the most heartless would begrudge the Jones on a personal level, the House of Lords has found in favour of the taxpayers in the saga of Jones v Garnett. Although often far from straightforward to call, and with there being the dread fear of Lord Hoffman turning in a repeat of his less than impressive performance in Dextra, the consensus before the giving of the speeches was that the Revenue would lose, and that the real issue was the content of the Lordships' judgment.

The Lordships were unanimous (with a dissent, which was, but wasn't really, from Baroness Hale) in holding that there was a settlement, but that the day was saved because there had been an outright gift of property which was not wholly or substantially a right to income.

What may prove more telling is the authority given by the Lords to the "bundle of rights" analysis of ordinary shares or, conversely, the spectacularly feeble efforts of the Revenue to make more of the opportunity to weaken the authority given that, legal niceties aside, the income rights aspect of Arctic was at the very core of the Revenue's case. After all, one can hardly imagine Mr Jones ever gained any brownie points in the Jones' household by gifting to Mrs Jones the right to vote at an AGM or, even more exciting still, the right to complain under section 459 Companies Act 1985 (even now, does Mrs Jones actually know her share conferred such a right, let alone what it might entail ?). These may be well be rights in law, but when those rights have no realistic actual or perceived value in the circumstances of the case (and the many others just like it), then what remains ? Only the right to receive income, duh. One cannot help but think that, for once, it was probably a good job that Lord Millett took early retirement because he would have still been young enough to hear the case, and one suspects he might have been more inclined towards examining this aspect with more rigour than was displayed by his colleagues.

For those taxpayers in similar circumstances to the Jones, but who caved in following the Court of Appeal judgment and acquiesced in paying more tax to the Revenue than has now been shown to have been necessary, self assessment returns for 2004-2005, or earlier, will not now be capable of amendment unless a concessionary treatment is announcement by the Revenue (fat chance). Returns for 2005-2006 and 2006-2007 can be amended, where necessary.

What of the law moving forward ? With this year's Finance Act signifying that the government is now bored with courting the middle England types and is turning, instead, towards cosy-ing up to the big corporates, we suspect that only the prospect of a general election will dissuade the government from amending the law to "reflect what has always been our understanding", as the late, and in no way lamented, Paymaster General would have said. Quite how an amendment could be drawn is difficult to envisage, and one fears that a government which has a well deserved reputation for enacting unintelligible drivel in lieu of good law will fail to take heed of Baroness Hale's comments (para 65) when she opines "The policies are easy to state. But it is not easy to translate them into statutory language which exactly captures the promoters' intent".

At the time of writing, we are told by the Revenue that they are considering the judgement (sic) and a further statement will be made later.