QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
B e f o r e :
|THE QUEEN ON THE APPLICATION OF DAVID PAUL ESTERSON||(CLAIMANT)|
|THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS||(DEFENDANT)|
Smith Bernal Wordwave Limited
190 Fleet Street London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
MR J SWIFT (instructed by Revenue and Customs) appeared on behalf of the DEFENDANT
Crown Copyright ©
"(1) The schedule referred to as Schedule E is as follows:-
"1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which fall under one or more than one of the following Cases- ...
"Case 2. Where that person is not resident or, if resident, then not ordinarily resident in the United Kingdom, any emoluments for the chargeable period in respect of duties performed in the United Kingdom, subject however to section 192 if the emoluments are foreign emoluments (within the meaning of that section) and subject also to section 170."
Then by section 19(1)3, this is provided:
"3. Tax under this Schedule shall also be charged in respect of any pension which is paid otherwise than by or on behalf of a person outside the United Kingdom."
Section 597 of that Act provides in part as follows:
"(1) Subject to subsection (2) below, all pensions paid under any scheme which is approved or is being considered for approval under this Chapter shall be charged to tax under Schedule E, and section 203 shall apply accordingly."
Before that time, equivalent legislation was contained in the Income and Corporation Taxes Act 1970 and the Finance Act 1970.
"57- (1) This regulation applies if a pension payer pays a pension, which does not arise wholly from an employment carried on abroad, to a pensioner-
"(a) who is not resident in the United Kingdom,
(b) who has not given Parts 2 and 3 of Form P45 to the pension payer, and
(c) in respect of whom a code has not otherwise been issued by the Inland Revenue..."
I need not read the rest of that regulation out.
"When is PAYE to be applied?
"PAYE is to be applied to all pensions paid to non residents except where the pension is paid in respect of employment carried on abroad.
"An employment is regarded as having been carried on abroad if
The last ten years service in respect of which the pension is paid was abroad
The service abroad amounted to
- half the total service in respect of which the pension is paid was abroad and
- at least ten of the last twenty years."
The version of EP8281 before me is dated as issued in April 1997.
"International Employments: Part3: Subjects needing special care: When is PAYE to be applied?
"PAYE is to be applied to all pensions paid to non-residents except where the pension arises wholly from an employment carried on abroad.
"In practice, this is extended to apply to pensions where:
the last ten years service in respect of which the pension is paid was abroad
the service abroad amounted to -
half the total service in respect of which the pension is paid was abroad
At least ten of the last twenty years."
It is said that this latest form of wording accurately reflects what is now to be found in regulation 57 of the 2003 PAYE Regulations.
"The Board here felt -
1) That we certainly can't charge non-resident pensioners whose service has been wholly or mainly abroad..."
An accompanying note said this under the heading "The Problem":
"We obviously shouldn't tax a pension if all the man's career was abroad, nor if it was mainly abroad. Where is the dividing line to be drawn?"
Mr Esterson could and did point to other documents which were of a similar tenor.
"I am, however, of the opinion that in assessing the meaning, weight and effect reasonably to be given to statements of the revenue the factual context, including the position of the revenue itself, is all-important. Every ordinarily sophisticated taxpayer knows that the revenue is a tax-collecting agency, not a tax-imposing authority. The taxpayers' only legitimate examination is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law: Reg. v Attorney-General, Ex parte Imperial Chemical Industries Plc. (1986) 60 T.C.1, 64G, per Lord Oliver of Aylmerton. Such taxpayers would appreciate, if they could not so pithily express, the truth of the aphorism of 'one should be taxed by law, and not be untaxed by concession.' Vestey v Inland Revenue Commissioners  Ch. 177, 197 per Walton J. No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary. If it is to be successfully said that as a result of such an approach the revenue has agreed to forgo, or has represented that it will forgo, tax which might arguably be payable on a proper construction of the relevant legislation it would in my judgment be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled. I said 'ordinarily' to allow for the exceptional case where different rules might be appropriate, but the necessity in my view exists here. First, it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the revenue's ruling, unless it is the same as an earlier transaction on which a ruling has already been given. It means that he must indicate to the revenue the ruling sought. It is one thing to ask an official of the revenue whether he shares the taxpayer's view of a legislative provision, quite another to ask whether the revenue knew will forgo any claim to tax on any other basis. It means that the taxpayer must make plain that a fully considered ruling is sought. It means, I think, that the taxpayer should indicate the use he intends to make of any ruling given. This is not because the revenue would wish to favour one class of taxpayers at the expense of another but because knowledge that a ruling is to be publicised in a large and important market could affect the person by whom and the level at which a problem is considered and, indeed, whether it is appropriate to give a ruling at all. Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous, and devoid of relevant qualification.
"In so stating these requirements I do not, I hope, diminish or emasculate the valuable, developing doctrine of legitimate expectation. If a public authority so conducts itself as to create a legitimate expectation that a certain course will be followed it would often be unfair if the authority were permitted to follow a different course to the detriment of one who entertained the examination, particularly if he acted on it. If in private law a body would be in breach of contract in so acting or estopped from so acting a public authority should be generally in no better position. The doctrine of legitimate expectation is rooted in fairness. But fairness is not a one-way street. It imports the notion of equitableness, of fair and open dealing, to which the authority is as much entitled as the citizen. The revenue's discretion, while it exists, is limited. Fairness requires that its exercise should be on a basis of full disclosure. Mr Sumption accepted that it would not be reasonable for a representee to rely on an unclear or equivocal representation. Nor, I think, on facts such as the present, would it be fair to hold the revenue bound by anything less than a clear, unambiguous and unqualified representation."
In my view, those observations are directly in point in this particular case. So also in my view in point are the observations of Scott-Baker J in the case of ex-parte Gallaghan  ELR494 at paragraph 41 of the judgment.