QUEEN’s BENCH DIVISION

REGINA v. INSPECTOR OF TAXES, READING, Ex parte FULFORD-DOBSON

See annotated Law Review version at [1987] Q.B. 978

COUNSEL: Ian Ferrier for the applicant executors.

Alan Moses for the Crown.

SOLICITORS: Wilkinson & Durham, Kingston-upon-Thames; Solicitor of Inland Revenue.

JUDGE: McNeill J.

DATES: 1987 Feb. 23, 24, 25, 26

Application for judicial review.

[*981] MCNEILL J. On 9 July 1985, Mr. Roger Fulford-Dobson was given leave to apply for judicial review by way of certiorari to quash an assessment upon him to capital gains tax dated 20 December 1983 and for associated declaratory relief.

On 26 April 1986, Mr. Fulford-Dobson died. Prior to the hearing of the application I gave leave ex parte for the executors appointed in his will to be substituted as applicants, in the interests of the estate. The assessment was in the sum of £59,000 upon chargeable gains of £200,000. No issue arises before me as to figures.

The real meat in the application, however, lies behind the assessment. What is really challenged is the refusal of the Board of Inland Revenue to extend to Mr. Fulford-Dobson an extra-statutory concession. If it had been extended to him, he would have been chargeable only on a much smaller sum, with tax payable of £3,885. The extra-statutory concession in point is D2 which is set out in the booklet, Extra-Statutory Concessions in Operation at 8 August 1980 (I.R.1 (1980)), the relevant part of which reads:

“When a person leaves the United Kingdom and is treated on his departure as not resident and not ordinarily resident in the United Kingdom he is not charged to capital gains tax on gains accruing to him from disposals made after the date of his departure.”

The statutory provision to which this concession relates is section 2 of the Capital Gains Tax Act 1979 which reads:

“(1) Subject to any exceptions provided by this Act,” – and I interpolate that that is not relevant here – “a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment during any part of which he is resident in the United Kingdom...”

By section 155(1) “year of assessment” in relation to capital gains tax means “a year beginning on 6 April and ending on 5 April in the following calendar year...”

In the event which happened, which I shall have to describe later in detail, it is common ground between the parties (a) that until 13 September 1980 Mr. Fulford-Dobson was resident and ordinarily resident in the United Kingdom, that is to say, within the year of assessment 1980-81; and (b) that from 13 September 1980 he was not resident or ordinarily resident in the United Kingdom. Accordingly, the assessment, if not quashed, is not open to the appeal procedure provided by the tax legislation.

Concession D2, as I have said, is to be found in the booklet “Extra-Statutory Concessions in Operation at 8 August 1980.” Inside the front cover of the booklet the following appears: [*982]

“The concessions described within are of general application, but it must be borne in mind that in a particular case there may be special circumstances which will require to be taken into account in considering the application of the concession. A concession will not be given in any case where an attempt is made to use it for tax avoidance.”

It is the latter sentence which is central to the argument. The passage itself has for convenience during the hearing been called the “rubric” and I adopt that word.

The assessment was made because the board concluded that what was done was to attempt to use the concession for tax avoidance. The applicants contend that what was done was legitimate tax planning. Before I turn to the facts and the law, two other matters can be got out of the way. First, so far as declaratory relief is concerned, Mr. Ferrier for the applicants concedes that he is not entitled to (a), (b) and (c) which are in essence so worded as to invite the court to determine matters which are not factually established and, in a sense, to give “academic” decisions, and further that (d) is decided one way or the other by the decision on certiorari. Secondly, Mr. Ferrier made it plain that he mounted no challenge to the decision of the board on what in now accepted legal shorthand are called “Wednesbury principles: Lord Diplock’s irrationality:” see Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 K.B. 223 and Council of Civil Service Unions v. Minister for the Civil Service [1985] A.C. 374, 410.

The facts are short and simple. Mr. Fulford-Dobson was married. He had been in the Merchant Navy, but early in 1980 he was without employment. In 1977 his wife had inherited a property called “Hardings Farm.” During 1980 she was considering the sale of the property. A letter from accountants acting, it appears, for both Mr. and Mrs. Fulford-Dobson, dated 7 December 1983 to H.M. Inspector of Taxes makes it clear that the proposed sale had generated “a vast amount of correspondence,” and involved considerable organisation, in relation, for example, to contracts of employment of farm workers, obtaining vacant possession of farm cottages, termination of grazing rights, investigation of rights of way and the like.

During the same period in 1980, Mr. Fulford-Dobson was negotiating employment with a German firm of publishers at Herrsching. His contract of employment was concluded and signed on 18 August 1980. He was thereby required to work and reside in Herrsching and to commence work on Monday 15 September 1980. On 29 August 1980, that is, 11 days after the contract of employment, Mrs. Fulford-Dobson transferred Hardings Farm to her husband by deed of gift. On 13 September he left for Germany. On 17 September Hardings Farm was sold by auction.

In his affidavit of 21 May 1985, Mr. Fulford-Dobson was wholly frank. He said:

“The purpose of the gift by my wife to me was to avail ourselves of concession D2 and to provide me with funds which I could invest [*983] outside the United Kingdom during my employment abroad without liability to United Kingdom tax.”

A similar statement appears in the accountant’s letter to the inspector of taxes of 23 May 1984, three paragraphs of which I must read:

“There were two reasons for the transfer of Hardings Farm by Mrs. Fulford-Dobson to her husband. The first and most important was that it was realised that Mr. Fulford-Dobson would not be liable to U.K. income tax on foreign source income during his period of non-residence. Investing the proceeds abroad thus presented them, in common with other non-residents, with the opportunity to add to their wealth bases taking advantage of the high rates of interest payable worldwide at that time. The other reason was to ensure that, when the sale took place, it would be outside the scope of capital gains tax by virtue of Mr. Fulford-Dobson’s foreign employment and the fact that he would be not resident and not ordinarily resident for U.K. tax purposes.

“As your papers will show, until 15 September 1980 Mr. Fulford-Dobson had been unemployed for some time. However the family’s finances were such that he had been under pressure to obtain gainful employment and negotiations for his German employment commenced early in 1980 (see enclosed copy of employer’s letter dated 20 August 1980).

“It was whilst negotiations for his overseas employment were being concluded that the opportunity for avoiding capital gains tax on the sale of Hardings Farm was recognised. Naturally, following the principles laid down in the Duke of Westminster case [1936] A.C. 1 our clients transferred ownership of the farm to Mr. Fulford-Dobson on 29 August 1980.”

The inspector’s response was by letter dated 19 October 1984. The major part of that letter reads:

“Your client’s contention is that no gain is chargeable for the year ended 5 April 1981 (other than the small agreed gain of £3,885) since at the date of disposal of Hardings Farm he had left the United Kingdom. You will of course be aware of the fact that to 29 August 1980 Mrs. Fulford-Dobson owned the farm and on that date she gifted it to her husband. It is accepted by yourself in your letter of 23 May 1984 that one of the two reasons for the transfer of Hardings Farm from Mrs. Fulford-Dobson to her husband was ‘to ensure that when the sale took place it would be outside the scope of capital gains tax by virtue of Mr. Fulford-Dobson’s foreign employment and the fact that he would be not resident and not ordinarily resident for U.K. tax purposes.’ Of course, your contention that Mr. Fulford-Dobson would be outside the scope of U.K. capital gains tax is based on the applicability of extra-statutory concession D2 operated by the Board of Inland Revenue. The application of all extra-statutory concessions is subject to the general condition which is printed on the inside cover of the booklet I.R.1 and reads...” [*984]

The letter then recites the passages which I have already read. It continues:

“I am instructed to inform you that in the particular circumstances of this case and in the light of the transactions which your client and his wife entered into, the Board of Inland Revenue do not consider this condition satisfied. The extra-statutory concession D2 will not be applied with the result that Mr. Fulford-Dobson is chargeable on the gain which accrued on the disposal of Hardings Farm under the terms of section 2 of the Capital Gains Tax Act 1979.

“I would therefore ask for the detailed computations of gain arising on the disposal of the farm and your agreement subject to my acceptance of the figures that the appeal should be determined in that figure. I should mention, perhaps, that if agreement of the gain is not possible, the appeal will have to be listed for hearing by the commissioners and of course, my contentions before the commissioners will be based on the terms of section 2 of the Capital Gains Tax Act 1979, the commissioners not being able to concern themselves with the application of an extra-statutory concession.”

The decision so conveyed had been reached by Mr. J. P. B. Bryce, an assistant secretary employed by the Board of Inland Revenue in the Policy Division, and dealing with taxes on capital gains. At paragraphs 6 to 9 of his affidavit, he deposes:

“6. In October 1984 I was required to decide whether or not the applicant should benefit from the extra-statutory concession D2 referred to in his affidavit. There was before me at this stage the applicant’s tax file and also the tax file of Mrs. Fulford-Dobson. In addition there was before me the correspondence making up the bundle referred to as MTC1 in Mr. Cooper’s affidavit, save for the correspondence between the accountants and the National Westminster Bank. 7. All extra-statutory concessions, including extra-statutory concession D2, have to be construed in accordance with the warning published on the inside of the extra-statutory concession booklet....” Again, I have read the passage which has been called the “rubric.” The affidavit continues: “Accordingly it is made clear to anyone who seeks to take advantage of a concession that it will not be available where an attempt is made to use it for tax avoidance. 8. After the protective assessment had been raised further correspondence took place between the accountants and the revenue.... (See MTC1.) On 19 April 1984 the inspector specifically asked for the reasons for the gift by Mrs. Fulford-Dobson. The reasons were given in a letter written on behalf of the applicant dated 23 May 1984.” That is the letter which I have just read. “I formed the view that the letter made it clear that the reason for the gift was for the purpose of avoiding capital gains tax upon the sale of the farm. The gift combined with the use of a concession was a scheme designed to avoid tax. I also took the view that the gift coupled with the attempt to use the concession came within the prohibition set out in the warning notice. As must have been apparent to the applicant, or at least the accountants, the [*985] concession would not be granted to a taxpayer if an attempt were made to use it for tax avoidance. 9. The final decision not to grant the concession was only made after careful consideration of all the facts and matters which the applicant’s advisers chose to lay before the revenue in letters passing between them and the revenue. Furthermore between the receipt of the letter from the accountants dated 23 May 1984 and the decision of 19 October 1984, discussion took place between members of Policy and Technical Divisions of the Board and the Solicitor to the Board.”

That last paragraph which I have read went more to the possibility at that stage of a Wednesbury challenge being directed at the board, but, as I have said, Mr. Ferrier for the applicants expressly abandons any such contention.

I should say for completeness that in paragraph 6 of that affidavit the deponent made reference to correspondence between the accountants and the National Westminster Bank Plc. The whole of the correspondence now exhibited by Mr. Cooper makes it clear that there was correspondence and the passing of advice between the bank and the accountants, and that in the course of the letters from the assistant manager of the trust and tax services estate planning unit of the bank there are references to the law, but it is noteworthy that nowhere in the correspondence, either from the bankers or from the accountants, is there any reference to the rubric or the condition imposed on the concessions, including concession D2.

Mr. Ferrier conceded that if the applicants could not bring the case within the concession the assessment could not be challenged (except to the extent that as it was a “protective” or “estimated” assessment the figures might require adjustment). However, he sought to attack the legal validity of extra-statutory concessions but contended that, if valid, a taxpayer could not be deprived of a concession otherwise appropriate by the words on the inner cover of the booklet. These, he said, were, like the concessions themselves, unauthorised by statute and the inclusion of them was an unlawful assumption of authority by the board. Further, he said, if the words were to be read as part of each concession they were discriminatory in the sense that they did not operate evenhandedly to all taxpayers but only to a selected number of taxpayers. They did not, he said, apply indifferently (using the word used by Walton J. in Vestey v. Inland Revenue Commissioners (No. 2) [1979] Ch. 198, 204B, to which I shall return later) to all who fall, or who can bring themselves, within the scope of the concession.

His second submission was that if the code, being the whole wording of the booklet, was intra vires the board was wrong in law in raising this assessment. The facts did not disclose an attempt to use the concession for “tax avoidance” as those words are properly to be understood in law. Thirdly, he said that the procedure adopted by the board in reaching its decision was unfair and in breach of natural justice. The board was, he argued, guilty of procedural impropriety.

Mr. Ferrier developed his first submission by reference to the decision of the House of Lords in Reg. v. Inland Revenue Commissioners, [*986] Ex parte National Federation of Self-Employed and Small Businesses Ltd. [1982] A.C. 617. That decision in essence turned on the locus standi of the federation to challenge the failure to collect tax from the so-called Fleet Street casuals, but their Lordships took the view that the point should not have been decided as a preliminary issue: Lord Diplock, for example, concluded that it has not even been shown that the board did anything ultra vires or unlawful.

The federation’s case, in part at least, was based on the statutory obligation on the revenue to “collect and cause to be collected every part of the inland revenue:” see section 13 of the Inland Revenue Regulation Act 1890. The complaint was that the revenue by a so-called, but according to Lord Wilberforce inaccurately called, “amnesty” decided not to investigate tax lost in years before 1978-79, and this, it was contended by the federation, was unlawful. The revenue in reply claimed to be making “a special arrangement” for the collection of tax pursuant to the Income Tax (Employments) Regulations 1973 (S.I. 1973 No. 334). Lord Wilberforce regarded what was done as falling within the care and management of the revenue within section 1 of the Taxes Management Act 1970. Lord Diplock, too, regarded it as a managerial function. He said, at p. 637:

“I do not doubt, however, and I do not understand any of your Lordships to doubt, that if it were established that the board were proposing to exercise or to refrain from exercising its powers not for reasons of ‘good management’ but for some extraneous or ulterior reason, that action or inaction of the board would be ultra vires and would be a proper matter for judicial review if it were brought to the attention of the court by an applicant with ‘a sufficient interest’ in having the board compelled to observe the law.”

A little later he continued:

“It is enough for me to say that I agree with my noble and learned friend that no court considering this evidence could avoid reaching the conclusion that the board and its inspector were acting solely for ‘good management’ reasons and in the lawful exercise of the discretion which the statutes confer on them.”

Of their Lordships, only Lord Scarman referred to Vestey v. Inland Revenue Commissioners [1980] A.C. 1148, and he only on the question of fairness. It is I think plain that to “dispense” with the obligation and power to collect back tax from 4,000 to 5,000 casuals did not attract the criticism that extra-statutory concessions attracted in the Vestey case.

The question of fairness was further considered by their Lordships in Reg. v. Inland Revenue Commissioners, Ex parte Preston [1985] A.C. 835. Lord Scarman said, at p. 851G: “My third proposition is that unfairness in the purported exercise of a power can be such that it is an abuse or excess of power.” He referred to Council of Civil Service Unions v. Minister for the Civil Service [1985] A.C. 374, and to his own judgment in H.T.V. Ltd. v. Price Commission [1976] I.C.R. 170.

Mr. Ferrier recognised the force of some later words of Lord Scarman in Ex parte Preston where he said, at p. 852: [*987]

“I accept that the court cannot in the absence of special circumstancesdecide by way of judicial review to be unfair that which the commissioners by taking action against the taxpayer have determined to be fair. But circumstances can arise when it would be unjust, because it would be unfair to the taxpayer, even to initiate action under Part XVII of the Act of 1970” – that is to say, the part dealing with tax avoidance.

In Ex parte Preston the taxpayer complained that having withdrawn certain claims for relief and paid certain tax on the strength of information from an inspector that he, the inspector, did not intend to raise any further inquiries on his tax affairs, the revenue could not reopen the same matter and request further information, but he failed on the facts to get judicial review of the request. It could only be if there was conduct equivalent to breach of contract or breach of representation that the taxpayer could show abuse or excess of jurisdiction.

Mr. Ferrier said that he relied on the formulation of the remedy by Lord Templeman in Ex parte Preston, at p. 862C, and that there were here special circumstances which enabled the court to interfere. He reminded me of Lord Templeman’s words, at p. 864E: “the commissioners themselves must bear in mind that their primary duty is to collect, not to forgive, taxes.”

Mr. Ferrier relied strongly on the passages in the Vestey cases critical of extra-statutory concessions: see the much quoted words of Walton J. in Vestey v. Inland Revenue Commissioners (No. 2) [1979] Ch. 198, 203-204. Walton J.’s criticism in Vestey v. Inland Revenue Commissioners [1979] Ch. 177, 197, received the approval of Lord Wilberforce in Vestey v. Inland Revenue Commissioners (Nos. 1 and 2) [1980] A.C. 1148, 1173: and see Lord Edmund-Davies, at pp. 1194 et seq., and he expressed the view that it was high time to consider the basis of the claim by the executive to make extra-statutory concessions.

It is not difficult to understand their Lordships’ concern in that case. The discretion said to be exercisable there was to assess each of the resident beneficiaries of an overseas discretionary trust on the basis that each was the recipient of the whole of the appointed sums. Secondly, that was said to be consistent with the earlier decision of the House of Lords in Congreve v. Inland Revenue Commissioners [1948] 1 All E.R. 948, which, to reach the result which their Lordships desired, had to be overruled.

It is, however, to be noted that although extra-statutory concessions were criticised, Walton J. appears to have accepted that if there was some published code of concessions which applied indifferently to all who fall or can bring themselves within its scope the position might be different. There was no such code in Vestey’s case. Lord Edmund-Davies, [1980] A.C. 1148, 1194, cited this passage of Walton J. with apparent approval. Lord Wilberforce, at p. 1173A, appears to have accepted, as in the Fleet Street Casuals case, that the revenue could act with “administrative common sense.” [*988]

Despite the strong words of their Lordships, extra-statutory concessions have persisted. Parliament has not sought to legislate to provide for concessions, despite the words of Scott L.J. in Absalom v. Talbot [1943] 1 All E.R. 589, 598, cited by Lord Edmund-Davies in Vestey’s case [1980] A.C. 1148, 1195:

“‘The fact that such extra-legal concessions have to be made to avoid unjust hardships is conclusive that there is something wrong with the legislation.’”

Mr. Ferrier argued that the existence of concession D2 meant that section 2 of the Capital Gains Tax Act 1979 was unworkable. The reality was, he said, that the assessment was made not under the section but under the concession as limited by the rubric. His difficulty was that if he successfully established that the concession itself was unlawful, it is unnecessary to consider the rubric; it falls with the concession. The taxpayer is then left with section 2 and in no way can Mr. Ferrier argue that he would not be caught by that. Nor am I persuaded that the rubric is discriminatory. It is, in terms, of general application to all those who come within its words. This, of course, does not decide what those words mean; that is the next question to be answered.

So far as the argument based on Vestey’s case is concerned, I am not prepared to hold that concession D2 is unlawful. I consider it as falling well within the concept of good management or of administrative common sense, as those words were used by their Lordships and already cited by me, and they are within the proper exercise of managerial discretion.

There is really no additional argument of any substance advanced by Mr. Ferrier to isolate the rubric from the concession to say that the concession is lawful but the rubric unlawful. In my judgment, the rubric is effectively part of each concession. It loses none of its force by being given a special and early place in the booklet: indeed, perhaps, it gains force from that. And, indeed, why should a taxpayer have the advantage of a concession when he is attempting to use it for tax avoidance? That, of course, begs the question, what is “tax avoidance” in this context?

Mr. Ferrier relied strongly on the decision of the House of Lords in Inland Revenue Commissioners v. Duke of Westminster [1936] A.C. 1. The issue in that case was whether arrangements entered into between the Duke and his servants were covenants providing for payments to those servants or contracts of employment providing for their remuneration. If the former, the payments were deductible for the purposes of surtax: not otherwise. Their Lordships, by a majority, held the documents on their proper construction to be covenants. It was in that case that Lord Tomlin, at p. 19, delivered the much quoted sentence: “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be.” I comment that the words “if he can” are sometimes conveniently forgotten. So, said Mr. Ferrier, tax planning to reduce the incidence of tax is a legitimate exercise. I accept that as a proposition. The question is whether it was on the facts here legitimate. [*989]

Mr. Ferrier invited my attention to the distinction drawn between tax evasion and tax avoidance in Whiteman and Wheatcroft on Income Tax,2nd ed. (1976), para. 1-15. He then took me to a line of authority which, far from giving to the “supposed doctrine” that in revenue cases the court looks at the substance of the matter, ignoring the legal position, the quietus for which Lord Tomlin hoped, made it clear that the court will now look at the substance of transactions to see what the reality was. The fact that the motive for a transaction may be to avoid tax does not invalidate the transaction, unless a statute so provides: per Lord Wilberforce in W. T. Ramsay Ltd. v. Inland Revenue Commissioners [1982] A.C. 300, 323E. His Lordship there went on to consider the Duke of Westminster’s case. If a transaction is genuine the court cannot go behind it to look at some supposed underlying substance, but if there is a composite transaction it can look to see if there is some underlying purpose. So too in Inland Revenue Commissioners v. Burmah Oil Co. Ltd. (1981) 54 T.C. 200 and Furniss v. Dawson [1984] A.C. 474.

In the former of those cases the principle was formulated by Lord Diplock and adopted expressly by Lord Brightman in the latter. There must be a pre-ordained series of transactions. It may or may not include the achievement of a legitimate commercial object. There must be steps inserted which have no commercial purpose apart from the avoidance of tax. If these conditions exist, the inserted steps are to be disregarded for fiscal purposes. The court must then look at the end result after they are disregarded. These cases are far from the present case. This was, says Mr. Ferrier, a genuine gift from wife to husband; a real transaction between living people.

Finally, he invited my attention to the recent decision of the Privy Council in Commissioner of Inland Revenue v. Challenge Corporation Ltd. [1987] A.C. 155. The appeal was from New Zealand where the taxing statute provided that every arrangement, the purpose or effect of which was tax avoidance, was void against the commissioner. “Tax avoidance” was defined in section 99(1) of the New Zealand Income Tax Act 1976 in the following terms:

“‘Tax avoidance’ includes – (a) Directly or indirectly altering the incidence of any income tax: (b) Directly or indirectly relieving any person from liability to pay income tax: (c) Directly or indirectly avoiding, reducing, or postponing any liability to income tax.”

It is right also that I should read further on in section 99 to make the point clear. Subsection (2) provides:

“Every arrangement made or entered into, whether before or after the commencement of this Act, shall be absolutely void as against the commissioner for income tax purposes if and to the extent that, directly or indirectly, – (a) Its purpose or effect is tax avoidance; ...”

I need not read the remainder of the section.

Lord Templeman distinguished tax evasion, tax avoidance, and what was called tax mitigation. He said, at p. 167: [*990]

“Tax evasion also can be dismissed. Evasion occurs when the commissioner is not informed of all the facts relevant to an assessment of tax. Innocent evasion may lead to a re-assessment. Fraudulent evasion may lead to a criminal prosecution as well as re-assessment. In the present case the taxpayer fulfilled its duty to inform the commissioner of all the relevant facts.”

Nobody suggests here that there is any question of tax evasion. He continued:

“The material distinction in the present case is between tax mitigation and tax avoidance. A taxpayer has always been free to mitigate his liability to tax.” He then quoted the sentence of Lord Tomlin in Duke of Westminster’s case [1936] A.C. 1, 19, that I have already read. “In that case however the distinction between tax mitigation and tax avoidance was neither considered nor applied. Income tax is mitigated by a taxpayer who reduces his income or incurs expenditure in circumstances which reduce his assessable income or entitle him to reduction in his tax liability. Section 99 does not apply to tax mitigation because the taxpayer’s tax advantage is not derived from an ‘arrangement’ but from the reduction of income which he accepts or the expenditure which he incurs. Thus when a taxpayer executes a covenant and makes a payment under the covenant he reduces his income. If the covenant exceeds six years and satisfies certain other conditions the reduction in income reduces the assessable income of the taxpayer. The tax advantage results from the payment under the covenant.”

Mr. Ferrier seeks to bring himself within that and submits that this was, as I have said, tax planning for the purpose and with the intended effect of mitigating capital gains tax. Lord Templeman continued, at p. 168:

“Section 99 does apply to tax avoidance. Income tax is avoided and a tax advantage is derived from an arrangement when the taxpayer reduces his liability to tax without involving him in the loss or expenditure which entitles him to that reduction. The taxpayer engaged in tax avoidance does not reduce his income or suffer a loss or incur expenditure but nevertheless obtains a reduction in his liability to tax as if he had.”

Lord Templeman said, at p. 169:

“In an arrangement of tax avoidance the financial position of the taxpayer is unaffected (save for the costs of devising and implementing the arrangement) and by the arrangement the taxpayer seeks to obtain a tax advantage without suffering that reduction in income, loss or expenditure which other taxpayers suffer and which Parliament intended to be suffered by any taxpayer qualifying for a reduction in his liability to tax. In Inland Revenue Commissioners v. Duke of Westminster [1936] A.C. 1 the Duke avoided tax by reducing his assessable income without reducing his income by the method of substituting an annuity for a wage payable to his gardener. So long as the gardener continued to work, the Duke [*991] gained a tax advantage over other taxpayers who paid wages to their working gardeners.”

Mr. Moses submitted for the revenue that the rubric was to be construed as part of the concession, and I have already indicated that I so regard it. As I have said before the rubric is part of each concession and is so to be read. I am reinforced in that view by his submission that if they give a concession the commissioners are entitled to take reasonable steps to prevent the abuse of the concession. They must act fairly and evenhandedly in the administration of the scheme, but there is no abuse or excess of power if they do what they have done here. It is not without significance that neither Mr. Fulford-Dobson in his affidavit, nor the accountants in the correspondence ever suggest unfair treatment or discrimination.

As to tax avoidance, Mr. Moses submitted, Mr. Fulford-Dobson and the accountants in the passages I have already read from the affidavit and the correspondence make it abundantly clear that the purpose and intent of what was done was to avoid tax. What the Duke of Westminster did was, according to Lord Templeman, tax avoidance. Questions have been raised as to whether that case would now be decided in the same way. Whatever the answer to those questions be, Mrs. Fulford-Dobson is very much, said Mr. Moses, in the position of the Duke. If she had not given Hardings Farm to her husband and the auction had continued while it was still in her name, she would undoubtedly have been chargeable to tax on her gain. The clear inference from the papers was that that was in contemplation until her husband was offered the job in Germany. Then, on advice, things moved quickly. Although Lord Templeman uses the word “arrangement” repeatedly in the course of his speech, the word “arrangement” clearly encompasses both the complicated arrangements described, for example, in W.T. Ramsay Ltd. v. Inland Revenue Commissioners [1982] A.C. 300 and Inland Revenue Commissioners v. Burmah Oil Co. Ltd., 54 T.C. 200 cases, but also the very simple arrangement here, that is to say, the gift to the husband, the departure of the husband to Germany, and the sale four days afterwards.

The question, I am bound to say, remains in my mind: did the advisors recognise the significance of the rubric? The trigger to the whole arrangement or operation, misconceived as I am now satisfied it was, was the prospect of saving the capital gains tax on the sale of the farm once the husband was to become non-resident before the date of the auction. That was the tax advantage which could not otherwise be secured. The gift, as Mr. Moses put it, lacked all elements of bounty. It was part of a scheme devised by the accountants and the bankers to avoid tax.

It seems to be plain as a pikestaff upon the facts that this was tax avoidance as that term is used in the rubric. The taxpayer here, Mr. Fulford-Dobson, suffered no reduction in income, suffered no loss, incurred no expenditure (save his professional advisers’ fees and expenses), nothing which, in Lord Templeman’s words on the legislation there in point, Parliament intended to be suffered by any taxpayer [*992] qualifying for a reduction in his liability for tax. I repeat that from the passage I have already read at p. 169 of his judgment.

I return to Lord Tomlin’s much quoted sentence in the Duke of Westminster’s case [1936] A.C. 1, 19: “Every man is entitled if he can” and again I stress those three words “if he can” – “to order his affairs so as that the tax attaching... is less than it otherwise would be.” It is plain to me, using the same words, that on the facts here it cannot be done, or, more accurately, that the taxpayer, Mr. Fulford-Dobson, could not so order his affairs as to attempt to use concession D2 to avoid tax. What was done was done deliberately for the admitted purpose of tax avoidance, but in total disregard of the clear words limiting the availability of the concession.

Finally, I turn to the last submission that was made, that is to say, that there was a procedural impropriety in the way the matter was handled. In the skeleton argument which he very helpfully provided, Mr. Ferrier claimed that the breaches upon which he relied were that no proper hearing was given to the taxpayer; that there was no effective appeal to an independent arbiter; and that there was secrecy surrounding the procedures which resulted in the taxpaying public and their advisers not knowing the attitude which the revenue was likely to take in cases in which the concession was sought to be applied. This, he said, was not conducive to public confidence in the operation of the extra-statutory concession scheme.

Taking those points in turn, I was invited to consider, first of all, the decision of Reg. v. Criminal Injuries Compensation Board, Ex parte Lain [1967] 2 Q.B. 864. In that case, Mr. Ferrier said, there was a code and it was sufficient if the board followed their code. Here, he said, and this is linked with the later point, there is no code or scheme other than appears from the booklet. To my mind, that of itself does not give any ground for saying that there was procedural impropriety.

I was also invited to consider the decision in Chief Constable of the North Wales Police v. Evans [1982] 1 W.L.R. 1155, where their Lordships, and in particular Lord Brightman, analysed the obligations essentially under two headings. (1) Did the constable there subject to disciplinary proceedings know what the allegation against him was? (2) Did he get an opportunity to answer it? On the facts there it was held that he had not had that opportunity. However, here, first of all it is accepted by Mr. Ferrier that the word “hearing” encompasses consideration of written representations. Here it is perfectly clear from the correspondence that the taxpayer knew perfectly well what was being said against him, and the correspondence makes it abundantly clear that he had every opportunity, and took it through his professional advisers, to answer the charges.

So far as appellate procedures are concerned, the answers are twofold. One is that on the material here the applicants did not have, and concede that they did not have, access to the normal appellate procedure under the legislation. They have the right to come to this court to seek judicial review, but there is nothing which ought to be written into the code as I see it, and I do not think Mr. Ferrier goes so far as to suggest [*993] that there should be some additional appellate procedure available in cases which are not within the statutory code.

Finally, so far as secrecy is concerned, I suppose in the broadest possible sense it might be said that tax advisers would like to know what, on a variety of different sets of facts, the revenue is likely to do in the given set of facts I did not get any real assistance from the reference over to the value added tax tribunals, but of course against that broad desirability, if that is an appropriate phrase, the other side is that the revenue is dealing in each particular case confidentially with the tax affairs of an individual taxpayer. I cannot find that there is anything contrary to procedural propriety in not issuing a series of judgments or decisions on particular sets of facts, and I reject that as a charge of impropriety.

Mr. Ferrier argued, relying to an extent on the decision already cited, H.T.V. Ltd. v. Price Commission [1976] I.C.R. 170, that if the administrative body (there the Price Commission) changed the rules or the practice in mid-stream, or as he graphically put it, moved the goal posts while the shot was being taken, that can be, and was there regarded, as an unfair practice and procedurally improper. There is not a shred of evidence to suggest here that the case of this taxpayer was treated in any way inconsistent with the practice of the revenue in dealing with such cases.

In all the circumstances, on the facts and the law, I decline to give the relief sought and the application is dismissed.

I have, of course, to consider one other matter and that is this. The decision here was given on 19 October 1984. The application for judicial review was not launched until 21 May 1985. There is an explanation given, as it has to be given, on form 86A. It reads:

“The delay in making this application is due to the necessity to consider alternative courses of action and take legal advice thereon and the applicant’s illness, and consequent matrimonial upheaval.”

That matter is amplified in Mr. Fulford-Dobson’s affidavit at paragraphs 11, 12 and 13. Paragraph 11 reads:

“In October 1984” – that is the month of the decision – “I was temporarily estranged from my wife and suffering from over-addiction to alcohol. 12. I am informed and I believe that on 28 January 1985 my wife and her solicitor were advised by counsel that an appeal to the commissioners against the decision of the board would be unsuccessful in view of the terms of section 2 of the Capital Gains Tax Act 1979 that ‘a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment during any part of which he is resident in the United Kingdom’ but that decision was subject to judicial review by this Honourable Court.”

I should add that the point then apparently considered by Mrs. Fulford-Dobson, the solicitor and counsel had been plainly put to the accountants in a letter of 21 November 1983 from the inspector of taxes. It is a little surprising that over 12 months elapsed before Mrs. Fulford-Dobson, [*994] who in many respects and in reality seems to be the prime mover behind this arrangement, sought that advice. In paragraph 13 Mr. Fulford-Dobson says:

“I completed residential treatment for my alcoholic addiction and re-united with my wife at the end of April 1985. However before documentation could be sent to me the matrimonial situation deteriorated and I am now temporarily residing away from the matrimonial home until our difficulties can be sorted out.”

That affidavit, as I have said, is dated 21 May 1985.

I have had some hesitation over this question because the rules are perfectly clear that proceedings must be brought promptly or within three months of the decision and this application is seven months after the decision. There is power in the court to extend time. It may perhaps be academic in view of the decision I have reached on the facts and the law. I am inclined to the view, but reluctantly, that in the absence of any real investigation of the reasons for the delay that I cannot in discretion refuse relief on the ground of delay alone. I think there are matters on both sides. I do not think the point was taken before the judge who granted leave and I do not think it would be right now on that ground alone to refuse relief, although I express my disquiet at the time which it took to get these proceedings launched.

Application dismissed with costs.