England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		26/01/2016

Mrs Justice Whipple:

INTRODUCTION

1. This is an application for judicial review brought by nine claimants, all of whom operated Employee Benefit Trust schemes ("EBTs") at the relevant time.  The Claimants challenge the decisions dated 14 August 2014 (the "Decisions") by Her Majesty's Commissioners of Revenue and Customs (the "Commissioners") to limit the benefits available to each of them under the Liechtenstein Disclosure Facility ("LDF") in relation to their EBTs.  They say that the Decisions are so unfair as to amount to an abuse of power on the part of the Commissioners.  The Claimants articulate that unfairness in four different ways, which overlap but are as follows: (1) the Claimants were led up the garden path by the Commissioners, and induced to believe that they could benefit from the full benefits of the LDF, but at the 11^th hour and without warning, the Commissioners withdrew many of the benefits previously available under the LDF; (2) the treatment which the Commissioners imposed on the Claimants (ie the LDF on limited terms) was contrary to HMRC's own published policy; (3) the Decisions in fact reflected a decision in principle made six to twelve months earlier. This backdating was retrospective in effect; and (4) the Decisions were discriminatory because others in a materially identical situation to the Claimants were not subject to it, but were permitted to benefit from the LDF without limitation.  The Claimants also argue that the Commissioners failed, generally, to take all the relevant considerations into account or to give proper prominence to those considerations which favoured the continuation of the full LDF benefits for the Claimants in reaching their Decisions.  
2. The Commissioners resist this judicial review on the basis that the Decisions constitute a lawful exercise of the Commissioners' statutory powers, and disclose no abuse of power.  

COMMISSIONERS' POLICY STATEMENTS

3. Two policy statements published by the Commissioners are relevant to this case.  

LDF

4. The Government of Liechtenstein and the Commissioners entered into a Memorandum of Understanding on 11^th August 2009 (the "MOU").  The Preamble described how UK taxpayers with assets in Liechtenstein could be assessed to UK tax on the basis of the "special disclosure facility" limiting the penalty and the applicable period of assessment and offering a composite rate of tax in certain circumstances.  
5. By paragraph G of the MOU, the purpose of the LDF was explained as follows:

"It is the parties' intention that by the conclusion of the five-year taxpayer assistance and compliance programme under this MOU, there will, as a result of the procedures contemplated by this MOU, be no relevant persons with a beneficial interest in relevant property who are liable to taxation in one party but are using the laws of the other party to disguise such liability without paying appropriate tax in the manner contemplated by this MOU.  The measures which the parties intend to take and which are described in this MOU are intended to achieve that objective."

It is evident that the purpose of the LDF, at the outset at least, was to bring into tax in the UK liabilities which were "disguised" by the laws of Liechtenstein. These would, by their nature, be liabilities of which the Commissioners were not aware, unless and until they were disclosed under the LDF.  

6. Schedule 4 to the MOU set out a certification procedure, by which the Commissioners were to be notified under the MOU, in response to which the Commissioners were to assign a disclosure reference number and issue a registration certificate to that taxpayer, within 60 days of receipt of notification.  Schedule 7 set out a summary of the terms of the disclosure facility, including a shortened limitation period for the application of UK tax, the option to pay a single composite rate of UK tax at 40%, and limited penalties in respect of any liability to UK tax, namely 10% of the tax payable, or no penalty at all in cases of "innocent error".  The taxpayer was required to disclose full details, including details of previously undisclosed UK tax liabilities, and was offered a "bespoke service" which included initial anonymous contact to discuss with the Commissioners the particular case on a "no names" basis, and contact with a single point of contact within the Commissioners' specialist team to ensure consistency of treatment.
7. The MOU was supplemented by the Commissioners' publication entitled: "Liechtenstein Disclosure Facility: Frequently Asked Questions (FAQs)" containing guidance for taxpayers.  The FAQs told taxpayers to contact the HMRC Liechtenstein desk to notify an intention to make a disclosure, and indicated that: 

"if you are eligible, HMRC will send you a registration certificate within 60 days of receiving your notification … if HMRC do not accept you into the disclosure facility they will write to you explaining why and tell you what you should do next."

8. A number of joint declarations provided updates on the working of the LDF.   The Fourth Joint Declaration was issued on 14 August 2014.  In it, the Commissioners (with the agreement of the Government of Liechtenstein) announced restrictions to the LDF in certain cases, in the following terms:

"These further circumstances include cases:

Where the relevant person enters the LDF to settle liabilities HMRC is already aware of

Where the issue being disclosed has already been subject to an intervention that started more than three months before the date of application

Where there is no substantial connection between the liabilities being disclosed and the offshore asset held by the relevant person as at 1 September 2009. 

In cases where any of these circumstances apply the person making the disclosure will not be eligible for the shorter limitation period, the fixed penalty or the composite rate option under the LDF."

9. These restrictions caught all the Claimants, whose liabilities (although disputed and the subject of appeals to the First Tier Tribunal) were known to the Commissioners, and were already subject to an intervention by the Commissioners of long standing.  The Decisions under challenge in this case (detailed below) were also dated 14 August 2014, and implemented the limitations contained in the Fourth Joint Declaration in the Claimants' cases.    

EBTSO

10. The Commissioners were faced with a number of tax issues arising out of EBTs, which had become widely used by employers to remunerate employees.  The Commissioners published an "Employee Benefit Trust, Settlement Opportunity" ("EBTSO"), which was supplemented by "FAQs" published in August 2012.  By the EBTSO, the Commissioners stated that any settlement would be based on the "right tax liability", and would be consistent with their Litigation and Settlement Strategy ("LSS"), a document published by the Commissioners setting out their policy on litigation and settlement of tax disputes.  The EBTSO did not offer any shortened limitation period, fixed penalty or composite rate option as an incentive to settle, and was very different in character from the LDF.  
11. On 14 August 2014, the same date as the Fourth Joint Declaration and the Decisions, the Commissioners also published the closing date for settlement under the EBTSO.  Taxpayers were directed to register their intention to settle under the EBTSO by 31 March 2015, and to finalise settlements by 31 July 2015.  

FACTS

Evidence

12. The Claimants filed two witness statements, both from Lynne Pearson, tax principal of BDO LLP ("BDO"), dated 11 November 2014 and 10 November 2015, together with exhibits comprising (in the main) the correspondence between BDO and the Commissioners leading up to the Decisions. The Commissioners relied on statements dated 16 October 2015 from each of Mr Christopher Barlow, officer of the Commissioners and Coordinator of the LDF up to November 2013, Mr Geoffrey McDonald Lewis, officer of the Commissioners who took over from Mr Barlow from December 2013, and Mr Edward Troup, Commissioner with responsibility for tax assurance, and second Permanent Secretary.  The following account of the facts is taken from those witness statements and the documents exhibited.  Subject to one issue which I will address below, the facts were not disputed.   

Discussions between BDO and the Commissioners

13. On various dates between 2002 and 2010, the Claimants entered into EBTs, acting on advice from BDO, a well-known firm of chartered accountants.  In or around 2006, the Commissioners opened enquiries into the tax returns of certain individuals who had implemented these EBTs.  More generally, the Commissioners sought to challenge EBTs as constituting tax avoidance schemes, designed to enable employers to remunerate employees without incurring a liability to national insurance contributions ("NICs") or income tax.  In 2011, representatives of BDO engaged in correspondence with the Commissioners about whether the LDF could be used to settle disputed tax liabilities arising out of these EBTs.  Although the LDF had originally been designed to bring into UK tax those tax avoiders with assets in Liechtenstein, it had by this time become more widely used, with the Commissioners' consent, as a means of regularising UK tax liabilities for those with assets held offshore (not just in Liechtenstein).  
14. The first meeting to discuss the application of the LDF in the context of EBTs took place between BDO and the Commissioners on 7 December 2011.  Following this meeting, BDO wrote to the Commissioners on 24 January 2012 confirming their understanding of the tax position should any of their clients wish to enter into the LDF to finalise any outstanding UK tax liabilities.  A particular issue addressed in that letter was the application of paragraph 59, Schedule 2, Finance Act 2011, specifically, the possibility of a tax credit on winding up the option structure within these EBTs.   The Commissioners responded with an encouraging email dated 5 April 2012 indicating that the writer (Steve Symonds, then the head of the unit dealing with the LDF) was "able to confirm my belief that in principle a credit can be given provided the terms of the specific LDF settlement satisfy the requirements of the legislation".  He went on to say that considered thought would be required, and so "I would strongly recommend that you consider taking full advantage of the Bespoke service provided by the LDF team …".
15. On 7 June 2012, BDO (Fiona Fernie, partner) submitted a first sample report on a "no names basis" to the Commissioners (Mr Symonds).  This concerned one company, X Co, (as it was referred to), and was submitted with a view to a meeting taking place, to enable BDO to discuss with the Commissioners "whether this is the correct way of approaching the 'test cases' or if there is anything further you would like us to do".  
16. The foreshadowed meeting took place on 2 July 2012, between BDO (Ms Fernie), the Commissioners (Mr Symonds) and others.  There was discussion of the composite rate applicable under the LDF.  BDO argued that by paying the composite rate, all liability to UK tax on the EBT share options would be extinguished.  The position on interest and penalties was also discussed.  Following this meeting, on 6 July 2012 BDO (Ms Pearson, a member of the BDO team dealing with the negotiations on this matter) sent an updated report on X Co, still on a "no names basis", with the technical argument section of the report expanded to reflect the discussion to date.  
17. On 18 July 2012, a telephone conference call took place between BDO (Edward Magrin, tax partner, Ms Fernie and Ms Pearson) and the Commissioners (Andy Lorimer and Maureen Chong).  It was noted that BDO's clients had three options open to them: LDF/Option settlement, EBTSO, or litigation.  It was further noted that LDF was intended for fraud cases, and that there was some difference of view within the Commissioners as to whether LDF could be used to settle tax liabilities for EBTs.  This was noted by Ms Pearson, apparently recording what she was told by the Commissioners:

"? Issue dropping to 40% within HMRC.

Some within HMRC fundamentally disagree that such arrangements can enter LDF…"

18. On 23 July 2012, BDO (Ms Fernie) sent the Commissioners (Mr Symonds) details of two more cases, on a "no-names basis" (Y Co and Z Co), with commentary on the application of the LDF in those cases.  
19. A further telephone conference call took place on 26 July 2012.  BDO's note of that meeting records the Commissioners (Mr Symonds) saying:

"Lobby in HMRC keen to develop enquiries through EBT process & aghast that LDF available.  But it is available.  Entirely possible that it could be changed in the future ? accepted within HMRC that it is available."

The cases of Y Co and Z Co were discussed.  

20. On 27 July 2012, BDO (Ms Pearson) emailed the Commissioners (Mr Symonds) asking for clarification of two points, the first being whether a particular issue had been agreed on a without prejudice basis "for all of our clients who might wish to enter the LDF…" to which Mr Symonds responded, on 3 August 2012, that the issue: 

"… has been agreed on a 'without prejudice' basis for the three cases we have specifically discussed.  It is highly likely that we may be able to extend this treatment to other identical / similar cases but at this time I suggest that we deal with each as they arise based on the facts applicable".

21. A further meeting took place on 26 September 2012.  By this date, BDO had submitted reports on a further 4 companies on a "no-names basis" (A1, A2, C and F Cos).  There were further technical discussions.  On 2 November 2012, Ms Pearson reported internally a recent telephone conversation she had had with the Commissioners (Simon Randall, who was by now also dealing with the LDF negotiations), in which Mr Randall had asked how many cases BDO was expecting to settle; and that Ms Pearson had said she would revert, but that his department would not be "immediately inundated" but there was likely to be a steady stream of work.  
22. A telephone conference call took place on 12 November 2012, and then a further call on 14 November 2012, between BDO (Ms Pearson) and the Commissioners (Bob Cooper, Simon Randall and Neil Voke).  Ms Pearson noted this:

"? can now proceed to submit clients' reports on agreed basis". 

23. On 19 November 2012, BDO submitted reports for five of its clients on a "named" basis, in the agreed format.  All of these clients were subsequently registered within the LDF, and received registration certificates from the Commissioners by the end of 2012. 
24. A further meeting took place on 12 December 2012 between BDO (Ms Pearson) and the Commissioners (Andy Barnett, Mr Lorimer and Ms Chong).  Ms Pearson noted that:

"AL/AB [of the Commissioners] confirmed that the deal is consistent & agreed across all relevant departments". 

25. On 17 December 2012, the Commissioners (Mr Barnett) emailed BDO (Paul Eagland, partner) suggesting a process for handling the BDO cases, to ensure that they were turned around quickly.   
26. Early in 2013, the Commissioners requested a telephone meeting.  That meeting took place on 3 January 2013 between the Commissioners (Mr Barnett, Mr Lorimer, Joe Cavanagh – new to the LDF team - and Ms Chong).  The Commissioners raised certain problems with the LDF applications which had been submitted by BDO, saying that they were too complex for the Commissioners to accept, amongst other things.  BDO explained that the Commissioners' advice had been sought throughout and that the applications were in an agreed format.  Ms Pearson noted that BDO (Ms Fernley) said this:

"At the meeting in December we were talking about key fundamental technical issues, we were not aware of LDF process issues. 

Certain clients wanted to go ahead & possibly jumped the gun a bit [because] wanted to file on named basis & make payments. 

Appears there has been a misunderstanding as to where we are/were in the process".

The conclusion of the meeting was noted by Ms Pearson as follows:

"Do not send any more reports until they [the Commissioners] revert.  

Will be onto it this week".

27. Further meetings took place in January 2013, and on 22 January 2013 BDO had a telephone conversation with the Commissioners (Mr Barlow, head of the Commissioners' LDF unit), who confirmed that the Commissioners' main concerns were now resolved and LDF claims could be made, although details about the format of the letters of offer and accompanying information had yet to be resolved.  Discussions continued relating to format and technical issues.  The Commissioners (Mr Cavanagh) emailed BDO (Ms Pearson) on 4 July 2013, confirming that a number of outstanding issues of process and substance were now resolved, and indicating that "The LDF is an opportunity to address all irregularities for all periods 1999-2009 and beyond, the favourable terms applying to 1999-2009".  The matter was further discussed between the same individuals in a telephone conversation later that day, during which Ms Pearson noted: 

"Their understanding that will work with us to reach settlement and will do so …".  

28. On 29 July 2013, HMRC (Mr Cavanagh) emailed BDO (Mr Magrin, partner at BDO, and others) with an update on certain outstanding issues.  
29. On 31 July 2013, Ms Pearson from BDO received a telephone call from Mr Cavanagh of the Commissioners.  Her note of that call records that Mr Cavanagh said he had just received a message that afternoon that the availability of the composite tax rate under the LDF (the "CRO") was under review:

"Currently reviewing if CRO is allowable deduction within LDF terms and other matters are being discussed.  ? cannot advise re further cases registering within LDF.

Other [accountants] getting same message.

This is the only information Joe has."

The suggestion of a review marked a shift in the Commissioners' approach.  

30. After this conversation, each of the Claimants nonetheless submitted applications to be registered under the LDF.  The First Claimant's application was dated 9 September 2013.  The Second Claimant's application was dated 10 September 2013. The Third Claimant's application was dated 23 December 2013.  The Fourth Claimant's application was dated 6 September 2013.  The Fifth Claimant's application was dated 18 November 2013.  The Sixth Claimant's application was dated 3 September 2013.  The Seventh Claimant's application was dated 18 October 2013.  The Eighth and Ninth Claimants' applications were dated 30 August 2013.  
31. The Commissioners put the Claimants' applications "on hold" pending the Commissioners' review. None of the Claimants received a registration certificate within 60 days, or indeed at any time before the Decisions on 14 August 2014.  
32. The Commissioners' review took place.  The Commissioners (Mr Lewis, who had by now taken over from Mr Barlow) wrote letters in identical form to each of the Claimants on 14 August 2014. These are the Decisions.  Those letters stated that the full favourable terms of the LDF would not be available to those Claimants because in each of their cases there was, at the time they applied to enter the LDF, an ongoing enquiry into their EBT arrangements which began more than 3 months earlier.  It continued:

"To be clear, the full favourable terms that will not be available are those that can lead to a reduction to the amount paid to HMRC.  These are:

A 10 per cent fixed penalty on the underpaid liabilities (for periods to 5 April 2009)

Assessment period limited to accounting periods/tax years commencing on or after 1 April 1999

The option to choose whether to use a single composite rate of 40 per cent or to calculate actual liability on an annual basis (for some years after 2008/09, a Single Charge Rate)

There will be no restrictions on access to the limited favourable terms:

Assurance about criminal prosecution

Single point of contact for disclosures."

33. Despite BDO's remonstrations on behalf of their clients, the Commissioners could not be persuaded to alter their stance in relation to those Claimants who had applied for registration for the LDF after 31 July 2013.   The Claimants issued their Claim Form on 12 November 2014 seeking judicial review of the Decisions.  

The Commissioners' internal discussions

34. Details of the Commissioners' initial stance, the progress of their internal review and the reasons for their Decisions in August 2014 emerge from the Commissioners' evidence, summarised in the paragraphs below.  
35. Until November 2013, Mr Barlow was coordinator for the LDF.  In early July 2013, he was asked about the interaction between the LDF and EBT settlements by a colleague at HMRC, Judith Knott, then the Director of Corporation Tax, International, Stamps and Anti-Avoidance. She had been asked a question about this matter at a social event.  Mr Barlow replied on 3 July 2013 with his view that the LDF was indeed available for EBT settlement.  
36. Discussion followed (mostly by email) about the availability of the LDF in these cases and the management of EBT cases if there was now to be a review by the Commissioners.  In one email on 28 August 2013, Mr Barlow noted:

"What concerns me most is the possibility of having to backtrack on the BDO cases, although I remain hopeful that we won't have to do that."

37. When BDO did in fact submit two applications for registration under the LDF on 30 August 2013, Mr Barlow advised the relevant team leader on the same date to:

"Hold fire please.  This is tricky.  I imagine BDO are looking to come in because of the treatment we have previously indicated they would get in the cases that are already in.  I thought they were aware that recent developments have thrown that treatment into doubt but by the sound of it we need to have another conversation with them.  …"

38. Mr Barlow's evidence is that various stakeholders at HMRC decided that the matter should be considered at a meeting of the Business Tax Contentious Issues Panel and the Personal Tax Contentious Issues Panel ("BTPTCIP").  I assume that the decision that the matter should be reviewed by the BTPTCIP was made in July 2013, shortly after he had been contacted by Ms Knott.  Once it had been decided that a review was necessary, Mr Barlow took the view that negotiations with advisors about settling their clients' EBT liabilities in this way would have to be put on hold, and so the message was disseminated widely to accountants and advisors that no further advice could be given on the use of LDF for EBT cases pending an internal review (this would fit with the message received by BDO on 31 July 2013 – see above).   
39. Mr Barlow prepared a paper for the BTPTCIP meeting, in which he recommended that the full benefits under the LDF should be available for EBT users.  His summary in that paper included this:

"…the fact is that since the LDF commenced in September 2009 we have accepted that when an existing enquiry case enters the LDF, all open issues can be settled via the LDF disclosure and our internal guidance and procedures have been predicated on that basis.  If we seek to treat EBT cases differently we will be open to challenge..."

40. The BTPTCIP met on 6 November 2013, and expressed reservations. Several people present at that meeting were noted to be "not convinced" that EBT settlements should proceed under the LDF.  The BTPTCIP resolved to refer the broader question, namely whether EBTs and other marketed tax avoidance schemes should be eligible for entry into the LDF, to the Commissioners.  
41. Three Commissioners (Mr Troup, Tax Assurance Commissioner and Second Permanent Secretary, Jim Harra, Commissioner and Director General of Business Tax, and Jennie Granger, Commissioner and Director General of Enforcement and Compliance) considered the matter at a meeting on 3 February 2014.  They considered various papers prepared in advance, including a paper from Mr Lewis, who had by now taken over from Mr Barlow, setting out his team's view that settlement of EBTs was permitted under LDF; a paper setting out the tax implications of collecting the tax considered to be due from EBT users (represented by BDO and otherwise) via the LDF, as opposed to pursuing the tax via the EBTSO; and a cost analysis prepared by the Commissioners' Knowledge, Analysis and Information department ("KAI"), analysing yield implications of various possible options available to the Commissioners, which, amongst other things, estimated a loss for 2014/15 of £85 million if EBT users were able to settle via the LDF instead of the EBTSO, and indicated that the impact in terms of tax loss for all years would be between £214 and £256 million.  Mr Troup records in his witness statement that two specific concerns were expressed at that meeting: (i) that the LDF was being used as a means of reducing or minimising tax due from EBT users, but it was not leading to disclosure of any tax liabilities which the Commissioners did not already know about, and that this was contrary to the original purpose of the LDF; and (ii) that there was a potential unfairness to other EBT users whose circumstances were identical except that they did not have any offshore assets in 2009 – a precondition to the application of the LDF.  Mr Troup and his colleagues decided that the tax liabilities of EBTs should not be settled under the LDF and that no further EBT users should be permitted to register.  The Commissioners were aware that this represented a change in practice, and they identified four categories of EBT users requiring consideration in the face of such changed practice: (1) EBT users who had registered under the LDF and whose liabilities had been finalised.  It was agreed that no change would apply retrospectively, and that therefore any EBT user in this category would be permitted to retain the full benefits of the LDF.   (As it turned out, there were no taxpayers in this category.)   (2) EBT users who had already registered to use the LDF but whose affairs were not yet settled.  The Commissioners were aware at the time that there were 13 such taxpayers.  (3) EBT users who had applied for registration but whose applications were currently "stockpiled".  The Commissioners were aware that there were 11 such taxpayers.  This category included all of the Claimants.  (4) EBT users who had not yet made any application to register under the LDF.  There were likely to be many taxpayers in this category.  The Commissioners decided that taxpayers in Category 4 were not to be permitted to benefit from the full terms of the LDF.  Categories (2) and (3) were identified as "transitional categories", requiring careful consideration, because the Commissioners' practice on LDF was now set to alter whilst those taxpayers had LDF applications outstanding.  
42. I pause here to note that even though the Commissioners were resolved that there would be no further EBT user registrations permitted under the LDF, and a review of the two transitional categories was underway, there was no public announcement, and in consequence, neither the Claimants nor other EBT users were aware of this change of policy or the ongoing review.  Mr Brennan QC for the Commissioners frankly accepted that this aspect of the Commissioners' deliberations could have been handled better.  I agree.  The Claimants and other affected taxpayers should not have been left in the dark for so long, once these decisions to alter existing policy had been made.  But I also accept that this area of concern is unrelated to the merits of the Claimants' cases. I put it to one side.  
43. The Commissioners sought further information and legal advice on the transitional categories, and discussed these categories at a meeting on 29 April 2014 (same three Commissioners).  At that meeting the Commissioners confirmed their view that Category 1 cases would not have their arrangements disturbed and that Category 4 cases would not be permitted to settle on favourable terms under the LDF.  In relation to Category 2 cases, Mr Troup's evidence was this:

"[18] … We also decided that cases where HMRC had already accepted LDF registrations but which would not fall to be excluded (category 2 cases), should also be permitted to settle on the favourable terms; they had been given assurances from which HMRC could not withdraw…"

But in relation to Category 3 cases, the Commissioners sought more detailed information and also further legal advice on legitimate expectation before reaching a final decision.  

44. An exchange took place by email in the days following 8 May 2014.  Further documents were provided to the Commissioners, including a paper setting out detailed information about the Category 3 cases, and outlining the three options open to the Commissioners in handling them: (i) accepting that all Category 3 cases should benefit from the full favourable terms under the LDF (putting them on an equal footing with Category 2 cases); (ii) accepting that those taxpayers who could demonstrate detrimental reliance could benefit from the full favourable terms but otherwise restricting the full favourable terms; or (iii) rejecting all Category 3 applications for the full favourable terms under the LDF, on the basis that those applications had not yet been accepted, the relevant taxpayers could have no legitimate expectation that the applications would be accepted, and the Commissioners were at liberty to change their policy in the meanwhile.  Further legal advice was also provided (which the Court has not been shown).  Mr Troup's evidence was this:

"[21] … On 28 May 2014, having reviewed the legal advice and considered the matter further, I emailed the other Commissioners explaining that I did not consider it consistent with our agreed policy or even-handed in the treatment of the taxpayer population as a whole to allow settlement under favourable terms to Category 3 taxpayers…."

The other two Commissioners agreed with that view. So it was that the third option was adopted in relation to Category 3, and the full favourable terms were withdrawn.    

45. Mr Troup addresses one more important issue, that of legitimate expectation as it affected the transitional categories.  In his evidence, he says this:

"[23] We recognised that, in some circumstances, it could be unfair for HMRC to act in such a way as to defeat a legitimate expectation.  It was for that reason, as explained above, that we decided not to reverse the settlements of those users of marketed avoidance schemes who had already settled through LDF or to alter the position of those EBT users who had had their applications for registration in the LDF accepted.  However, it was our view and conclusion that the present claimants (who had their applications for registration put on hold pending our consideration of the availability of the LDF for EBT users) were in a materially different position and that it would not be unfair or improper, nor would it defeat any legitimate expectation, to refuse their applications to register for the favourable terms of LDF.  Like all other EBT users they would, of course, still be able to avail themselves of the settlement opportunity under the EBTSO, or to litigate their positions before the Tax Chamber of the First-tier Tribunal in the ordinary way."

46.  It was necessary to formalise and publicise the Commissioners' decision to exclude Category 3 cases from the full benefits of the LDF.  Mr Lewis' statement details the subsequent exchanges with the Government of Liechtenstein in order to produce a joint declaration, which was in the event agreed and published as the Fourth Joint Declaration on 14 August 2014, along with further "FAQs" which explained the changes. As I have noted, the Decisions were made on the same date.  

Factual dispute

47. There was one disputed issue of fact. The Commissioners contend (by Mr Barlow in his witness statement and in their Detailed Grounds) that their discussions with BDO were at all times on a "no-names basis".  This suggestion is disputed by Ms Pearson of BDO in her second witness statement, where she gives examples of BDO contacts with the Commissioners referring to certain taxpayers by name.  I do not believe that this dispute of fact is material, but in any event I do not think there is any inconsistency between the evidence, carefully reviewed.  It is right that BDO corresponded with individual officers at HMRC about the LDF's applicability to EBT users, in some cases using the user's name(s).  BDO had no reason not to: the Commissioners had already opened enquiries into these schemes and knew the names of the EBT users.  But at the same time, the discussions conducted by BDO aimed at negotiating a generic compromise were conducted on a "no names basis", with the companies' names used only, formally, once the main issues of principle raised in the negotiations were agreed.  
48. There was nothing wrong in BDO approaching the negotiations in this way: the MOU expressly invited it as part of the "bespoke service", and a "no-names" discussion was suggested in terms by Mr Symonds on 5 April 2012.  In summary, therefore, although I agree with Mr Brennan that the character of the negotiations was on a "no-names" basis, I also accept that some individual taxpayers were named in correspondence with the Commissioners during the same period.  BDO was not trying to hide anything: it was just trying to negotiate on behalf of its clients and arrive at a general understanding of the position, so that it could advise its clients accordingly.    

HISTORY OF LITIGATION

49. The Claim Form was issued on 12 November 2014 and sought a declaration that the Decisions were unlawful and in breach of the Claimants' legitimate expectations.  The Commissioners filed their Acknowledgement of Service and Summary Grounds on 4 December 2014.  Rose J refused permission on the papers, setting out the chronology of events in brief and concluding that there was no basis to contend that the Claimants had a legitimate expectation, given that none of them could point to a specific representation (by words or practice) that the LDF would indeed extend to them.  The Claimants applied to renew their application for permission, and the application came before Collins J on 10^th March 2015, who granted permission, on the basis that the Claimants had an arguable ground for challenging the effective withdrawal of LDF from them without notice (this is a different point from the legitimate expectation ground).  The Claimants subsequently amended their Grounds to remove references to legitimate expectation, advancing instead their argument that the refusal to permit the Claimants to regularise their affairs under the LDF was "conspicuous unfairness" amounting to an abuse of power, relying on R v IRC ex p Unilever plc [1996] STC 681.  Permission to amend was given (by consent) on 14 September 2015.  Detailed Grounds of Resistance were lodged by the Commissioners on 16 October 2015.
50. Each party filed a skeleton argument.  Mr Gordon and Ms Montes Manzano for the Claimants prepared a written reply which I was given on the second and final day of the hearing.  Mr Brennan QC and Mr Nawbatt for the Commissioners submitted a short answer to that document, as I permitted them to, a few days after the hearing.  I was greatly assisted by these various documents, and by the oral submissions of Mr Gordon and Mr Brennan at the hearing.  
51. I was told that a number of Claimants have now settled their disputes about EBTs with the Commissioners, but Mr Gordon says that all Claimants maintain this claim for judicial review regardless of any settlement, and many who have settled will look to unpick those settlements if they succeed in this judicial review.  I note that (i) no application has been made to strike out any of the claims; and (ii) it is common ground that the Fifth Claimant has not reached any agreement and that, for the Fifth Claimant at least, this claim is not academic.  It follows that this claim plainly requires adjudication, whatever the status of the claims brought by the Claimants other than the Fifth Claimant.  

LAW

Conspicuous Unfairness

52. There was little dispute on the applicable legal principles.  The Claimants' case is centred on Unilever, a case decided by the Court of Appeal in 1996.  The Commissioners had refused the claimant company's claim for loss relief on grounds that the claims had not been made within the statutory time period.  The Court granted judicial review of the Commissioners' decision, because (it held) there was unfairness amounting to an abuse of law in treating the claims as time-barred in circumstances where the Commissioners had permitted such claims to be made outside the statutory time period routinely for the preceding 20 years, and had given no notice that the practice would now cease.  The Court accepted that the Commissioners' conduct in the preceding 20 years did not amount to a clear, unambiguous and unqualified representation (applying R v IRC, ex p MFK Underwriting Agencies Ltd [1989] STC 873, [1990] 1WLR 1545), and thus that this was not a case where the taxpayer had a legitimate expectation.  Rather, Lord Bingham MR emphasised that "the categories of unfairness are not closed" (p 690 f), and that the rejection of Unilever's claims was so unfair as to amount to an abuse of power (p 691 g-h).  Simon Brown LJ (as was) rejected the Commissioners' proposition that all challenges had to be confined to the MFK formulation of legitimate expectation, and said this (p 695 a-c):

"'Unfairness amounting to an abuse of power' as envisaged in Preston and the other Revenue cases is unlawful not because it involves conduct such as would offend some equivalent private law principle, not principally indeed because it breaches a legitimate expectation that some different substantive decision will be taken, but rather because either it is illogical or immoral or both for a public authority to act with conspicuous unfairness and in that sense abuse its power. As Lord Donaldson, MR, said in R v ITC ex parte TSW: 'The test in public law is fairness, not an adaptation of the law of contract or estoppel'.

In short, I regard the MFK category of legitimate expectation as essentially but a head of Wednesbury unreasonableness, not necessarily exhaustive of the grounds upon which a successful substantive unfairness challenge may be based."

53. Simon Brown LJ provided further assistance in measuring "conspicuous unfairness" when he noted that there was a "border" between (p  697 c):

"…  on the one hand mere unfairness - conduct which may be characterised as "a bit rich" but nevertheless understandable — and on the other hand a decision so outrageously unfair that it should not be allowed to stand."

54. The language of "conspicuous unfairness" has been adopted in subsequent cases, it was adopted by all advocates in this case, and I use it in this judgment, as a shorthand to describe unfairness which amounts to an abuse of power.  
55. The concept of conspicuous unfairness is not limited to tax cases.  In 2001, by way of example, the Court applied the Unilever approach in R v National Lottery Commission, ex p Camelot Group plc [2001] EMLR 3, a challenge to the Commission's decision not to award a licence to either of two bidders in an open competition run by the Commission (Camelot was one bidder), but instead to abandon the open competition and adopt a new procedure involving exclusive negotiations with the other unsuccessful bidder, TPL, for one month.  Richards J granted the application for judicial review and concluded:

"[72] … Such a marked lack of even-handedness between the rival bidders calls for the most compelling justification, which I cannot find in the reasons advanced by the Commission in support of its decision.

…

[82] … I come back to the broader and central issue of fairness.  …  In my judgment the case is most appropriately dealt with by reference to the Court of Appeal's reasoning in Unilever.  The Commission's decision to negotiate exclusively with TPL was, in all the circumstances, so unfair as to amount to an abuse of power.  Unilever itself was an exceptional case, but this case, too, can properly be regarded as exceptional." 

56. In another non-tax case, R (on the application of London Borough of Lewisham and others) v Assessment and Qualifications Alliance and Others [2013] EWHC 211 (Admin), the claimants complained of unfairness in the Defendant's decision to shift the boundary between C and D grade for GCSE English between January and June 2012.  The unfairness was alleged to consist in the fact that pupils competing in the same examination were not treated equally.  In relation to the Unilever variety of unfairness, Elias LJ said this:

"[111] Logically, if there is a doctrine of conspicuous unfairness as a substantive head of judicial review which is to be treated as a distinct form of abuse of power, it must be for the court to decide whether in any particular case the decision–maker has infringed that principle since the court must decide whether power has been abused. It is no different from a court deciding that a decision has been exercised for an improper purpose or that an irrelevant consideration has been taken into account. But I do not believe that Unilever has formulated a fresh head of review conferring on the court a wide discretion to substitute its view of the substantive merits for the decision-maker. In order to constitute conspicuous unfairness, the decision must be immoral or illogical or attract similar opprobrium, and it necessarily follows that it will be irrational. I would treat this concept of conspicuous unfairness as a particular and distinct form of irrationality, which in essence is how it was viewed by Sir Thomas Bingham in Unilever. There are no doubt cases, of which Unilever is one, where the concept of fairness, and an allegation of conspicuous unfairness, better captures the particular nuance of the complaint being advanced than the concept of irrationality. Indeed, I think that is typically so in any case where the alleged unreasonable behaviour involves a sudden change of policy or inconsistent treatment. It is more natural and appropriate to describe such conduct as unfair rather than unreasonable. But in my view it is only if a reasonable body could not fairly have acted as the defendants have that their conduct trespasses into the area of conspicuous unfairness amounting to abuse of power. The court's role remains supervisory."

Comparative Unfairness – Tax Cases

57. In 2001, Elias J (as he then was) considered Unilever and other cases in the context of alleged discrimination between the claimant and other taxpayers, in R (on the application of British Sky Broadcasting Group plc) v Customs and Excise Commissioners [2001] STC 437.  In that case, the claimant taxpayer complained that the Commissioners' decision to treat its listings magazine as part of a single supply of broadcast services subject to VAT at the standard rate was unfair because similar treatment had not been imposed on BSkyB's competitors who had continued to treat their listings magazines as separate zero-rated supplies with the Commissioners' knowledge and approval.  It emerged from evidence that the Commissioners, by one of their officers, had taken the view that the competitor broadcasters were in a materially different position from BSkyB, because of differences in the manner of production and distribution of the competitors' magazines; it was only after BSkyB had appealed its "single supply" ruling to the Tribunal, unsuccessfully, that it became clear that the distinction drawn by the Commissioners was a false one, and that all the listings magazines fell to be treated in the same way for tax purposes.  At that point, the Commissioners altered their policy with prospective effect, so that the treatment of the competitor companies aligned with that applied to BSkyB.  But that revised treatment could not be imposed retrospectively, so the difference in treatment remained for the past.   
58. Elias J accepted that the duty to act fairly, which applies to the Commissioners in their dealings with taxpayers, can be infringed where the taxing authorities treat similarly placed taxpayers differently, citing National Federation of Self-Employed and Small Businesses Ltd [1981] STC 260 and Unilever.  He also noted that the threshold of unfairness amounting to an abuse of power is a high one, citing Preston v IRC [1985] STC 282 (the same point is made in Unilever).    
59. He rejected BSkyB's arguments.  His approach was, first, to confirm that the starting point on the facts for such a challenge is that the Commissioners knew or ought to have known that there was an allegation of discriminatory treatment:

"[14] … In my judgment it ought to be an essential element of any allegation of unfairness based on different treatment that the authorities either knew of, or at any rate plainly ought to have been aware of, the alleged disparate treatment relied on".

60. In BSkyB, the Commissioners had indeed been alive to the equal treatment issue, and that essential element was present. BSkyB advanced two arguments. First, BSkyB argued that on an objective analysis, it was in a materially identical situation to its competitors. This argument depended on the later findings by the Tribunal which revealed that the Commissioners' understanding that there were differences between BSkyB and its competitors which warranted different tax treatment was wrong as a matter of law. Elias J rejected this argument: 

"[16]   In my judgment this way of putting the case is wrong in principle and is a recipe for chaos in practice. Judicial review is about testing the legality of administrative action; save in exceptional cases, such as if jurisdiction is in issue, that can only properly be judged in the light of the factors which were known or ought to have been known by the administrator when the decision was taken. Of course, it may be necessary for an administrator to reconsider the decision if new facts emerge, but the legality of his action is not to be judged by material of which he was not, and could not be expected to have been, aware. Mr Pannick's argument amounts to saying that a body will be at risk of acting unfairly if it makes a rational and defensible decision as to the effect of the law in a particular situation and a court subsequently holds that the legal analysis was wrong. In my view that cannot be right. The argument equates a lack of fairness with an erroneous analysis of the law, at least where that mistaken analysis has led to the different treatment of persons in a legally identical position. In my judgment that expands the concept of fairness well beyond its established or legitimate limit".

61. The important point, and the reason for rejection of this argument, was that the Commissioners' decision was "rational and defensible" on the basis of what was before the Commissioners when they made that decision.  The fact that it was subsequently shown by the Tribunal to be wrong in law did not diminish its rationality and defensibility at the relevant time, when the decision was made.  
62. BSkyB's alternative argument was that the Commissioners had (in fact) perceived BSkyB to be in a materially identical position to its competitors.  BSkyB relied on evidence that one officer within the Commissioners had not considered there to be a material difference between BSkyB and its competitors, thereby disagreeing with his colleague who had thought such a difference existed. Elias J rejected this argument also: 

"[29]  … the fact that an officer has reservations about the ruling which another officer has given in respect of a different company cannot in my opinion create a duty on the commissioners to treat the two cases the same".  

63. He concluded that the alternative argument failed on the facts, because BSkyB had failed to make out on the evidence that the competitors were perceived by the Commissioners to be in a materially identical position to BSkyB (paragraph 30).  
64. For these reasons BSkyB lost the case.  But it is necessary to record an argument advanced by the Commissioners which Elias J also rejected.  The Commissioners argued that BSkyB's complaint of inconsistency of treatment had to fail, for the simple reason that the Commissioners were now unable to levy the tax which had, in law, always been due from the competitors, because those competitors' past tax treatment (in reliance on a zero-rating ruling) was protected by the "Sheldon statement". The Commissioners argued that the principal duty of the Commissioners was to collect taxes, and it would undermine that basic objective if fairness were to require that they should treat BSkyB as though it had been given a ruling on the same date as the competitors, when as a matter of fact it had not been. 
65. The Sheldon statement was at that stage published by the Commissioners as an extra-statutory concession (it has since been withdrawn in that form). It was in the following terms (recorded by Elias J at para 5):

"If a Customs and Excise officer, with the full facts before him, has given a clear and unequivocal ruling on VAT in writing or, knowing the full facts, has misled a registered person to his detriment, any assessment of VAT due will be based on the correct ruling from the date the error was brought to the registered person's attention".  

As is clear from its terms, the Sheldon statement prohibits the Commissioners from collecting tax where they have given a ruling or direction to the effect that that tax will not be due. It is based on the principle that the taxpayer has a legitimate expectation, arising out of the ruling or direction, that he, she or it will have the benefit of the promised treatment, at least for so long as the ruling or direction remains in place. The tax treatment can therefore only be altered with prospective effect once the error has been brought to the taxpayer's attention.

66. Elias J did not accept that the Commissioners' inability to collect the tax from the competitors was, in and of itself, a material difference between the competitors and BSkyB justifying the difference of treatment. He said this:

"[33]   The essence of the challenge on unfairness in this context is disparate treatment as between identically placed taxpayers. … … If such unfairness exists, it is not altered by the fact that the Sheldon principle may prevent equal treatment being achieved by backdating the time from which the cable companies must pay VAT on the magazine supply.  Conduct which is unfair and an abuse of power absent the Sheldon principle cannot become a proper exercise of power because the Sheldon principle has been adopted. …" 

67. I would order the various points made by Elias J in BSkyB in the following way: (1) first, it is necessary to establish whether the Commissioners knew or ought to have known of the alleged disparate treatment at the time the decision was made.  If not, the challenge surely fails.  (2) If that knowledge or constructive knowledge is established, then it is necessary, secondly, to establish as a matter of fact whether the Commissioners considered there to be a material difference or differences between the two groups of taxpayers, justifying the different tax treatment.  If no material difference was identified, then it is difficult to see how the Commissioners' decision can stand (although issues may arise about differences which have since been identified – not an issue in BSkyB or this case).  (3) If a material difference was identified by the Commissioners, then, thirdly, the Court should examine that asserted difference to determine whether it was "rational and defensible", or alternatively, "material", such as to justify the different tax treatment.  There are a number of notes to append to this third step, all of which emerge from Elias J's judgment: (a) the Court's analysis is to be undertaken based on the material which was before the Commissioners at the time of their decision.  (b) The Court is exercising a supervisory jurisdiction, testing the legality of the decision and not substituting its own decision.   (This was confirmed by Elias LJ, as he became, in AQA, referred to above.)  (c)  The fact that the Commissioners are prohibited from collecting the tax from other taxpayers who were in a similar position does not, in and of itself, amount to a "material" difference between the two groups of taxpayers.  
68. I agree with Elias J's analysis and find it helpful in resolving this case.   I will come back to it later in this judgment.  
69. Two more cases on comparative unfairness were mentioned in the course of argument.  First, I was reminded of the passage from the judgment of Moses J (as he then was) refusing permission in R (Weston) v Commissioners of Inland Revenue 76 TC 207, cited with approval by Davis J in R (Esterson) v Commissioners of Inland Revenue 77 TC 629, as follows:

"[10] … But the mere fact that two taxpayers arguably in the same situation have not in fact been charged tax does not raise a case of unfairness without more.  If there was some evidence, which it would be incumbent on Mr Sherry's client to produce, to show that there had been some unfairness; a basis for distinguishing between the taxpayers; some favour shown to the Inspector which caused the Revenue to charge his client to tax but not the others; if there was some specific basis to show that the decision made was based upon some caprice or discriminatory reason; why, then the case would be different.  But it is not, in my judgment, open to a taxpayer, simply because one taxpayer has been charged and another has not, simply to raise the contention and then expect the Revenue to respond requiring them to disclose the private affairs of other taxpayers".  

This passage requires some clarification.  First, I believe that the Judge must have meant to say 'a lack of basis for distinguishing between the taxpayers', for it is only then that the taxpayer is likely to have a complaint at all.  Secondly, it appears that the taxpayer in Weston was demanding disclosure of confidential details relating to other taxpayers, in which case the judge's dismissive response is readily understandable: a request for disclosure goes much further than a complaint of comparative unfairness, alone.  Thirdly, it is a serious matter for a taxpayer to be charged tax when his competitor, in an apparently identical situation, is not charged tax.  I do not believe that Moses J was saying anything different.  The point he was making is that the disadvantaged taxpayer cannot raise a case of unfairness just by pointing to the difference in treatment; there must be something more to mount a challenge. This would accord with Elias J's first step in BSkyB.

70. Finally, on the day before I heard this case, I handed down judgment in R (Hely-Hutchinson) v Commissioners for HM Revenue and Customs [2015] EWHC 3261 (Admin).  That case involved a challenge by a taxpayer based on comparative unfairness.  I granted the taxpayer's application for judicial review and quashed the Commissioners' decision.  Both parties addressed me briefly on Hely-Hutchinson, but neither sought to place particular weight on that case, not least given the possibility of an appeal.  I wish to record one observation about Hely-Hutchinson, which became clear (at least to me) in the course of hearing this case.  One of the problems in Hely-Hutchinson was the lack of evidence filed by the Commissioners to demonstrate their reasons for a change of policy in 2009, on which revised policy they relied in making the decision under challenge in 2014.  In this case, by contrast, the Commissioners provided a full and frank account of their internal discussions leading up to the change of policy in 2014, on which revised policy they relied in making the Decisions under challenge, and so I had a clear view of the underlying policy and the reasons for changing it.  This evidence was important to both parties' arguments, and to my overall evaluation of the merits of the case.  Where comparative unfairness is alleged, the Court is likely to be heavily dependent on the evidence provided by the Commissioners.  The evidence provided in this case provides the better working model.    

ANALYSIS

Legitimate Expectation

71. The analysis must start with the Claimants' concession, correctly made in my view, that they had no legitimate expectation to any substantive benefit under the LDF.  The LDF is a statement published by the Commissioners to the world at large, and to that extent is capable of engaging the doctrine of legitimate expectation (see Bingham LJ in MFK Underwriting: "…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" at 1569C).  But the LDF is an invitation to taxpayers to apply for registration; it offers no promise that the application will be accepted.  It is only if the relevant taxpayer is granted a registration certificate by the Commissioners that the taxpayer might have any expectation of entitlement to the benefits described within the LDF.  This has two consequences, which are important for the determination of this case: first, a taxpayer who does not have a registration certificate does not have any legitimate – or other – expectation of any benefits at all under the LDF; this is so whether the taxpayer has applied for a registration certificate (but not heard back from the Commissioners) or has not yet made an application.  Secondly, there is a material difference between taxpayers who have been registered under the LDF, who have applied and who have had their applications accepted - they do (at least arguably) have a legitimate expectation that the substantive benefits of the LDF will be extended to them - and those who have not been registered, who have no such expectation at all.  
72. The Commissioners represent in the FAQs that they will respond to any application for registration within 60 days.  That did not occur in this case, where the Claimants' applications for registration were on hold for many months.  But the Claimants do not claim to have (and nor could they) any legitimate expectation of certification within 60 days, or any expectation of a substantive benefit under the LDF in default of an answer within that timeframe.  The failure to respond within the promised time is, at its highest, an administrative default by the Commissioners, which does not have any consequence which is relevant to this claim for JR.  
73. As I have already noted, the claim was originally advanced in reliance on the doctrine of legitimate expectation.  In the light of Rose J's refusal of permission on the papers, and Collins J's grant of permission on a different ground, the Claimants wisely amended their grounds, to forgo any case based on legitimate expectation and to rely instead on Unilever "conspicuous unfairness", always pleaded as an alternative but now advanced as the sole ground.  But the abandonment of legitimate expectation gives rise to a problem for the Claimants: the doctrine of legitimate expectation has developed to address complaints of unfairness in the State's refusal to confer promised benefits (the promise being contained in a publication, either of a generic sort, to the world at large, or to the individual in a specific ruling).  Once the Claimants have accepted, as they must, that they had no legitimate expectation arising out of the LDF, they will inevitably struggle to show conspicuous unfairness in the refusal to bestow the LDF benefits, because they had no expectation (of a "legitimate" sort, giving rise to a right protected in law) that they would get those benefits in the first place.  
74. But Mr Gordon argues that conspicuous unfairness can be found even where there is no legitimate expectation (Unilever being just such a case). He is right, at least in principle, so I move on to address his arguments.  

Claimants' Grounds of Challenge

75. I shall deal with each of Mr Gordon's four aspects of conspicuous unfairness before stepping back to consider the picture overall.
76. First, Mr Gordon complained that the Claimants were led up the garden path by the Commissioners, and induced to believe that they could benefit from the LDF, but at the 11^th hour and without warning, the Commissioners withdrew many of the benefits previously available to the Claimants under the LDF.  I conclude that there is some truth in the assertion that the Claimants were led up the garden path.  The Commissioners did encourage the Claimants (by BDO) to use the LDF, the Commissioners did at one point give BDO the 'green light' for applications, following which a first batch were submitted.  The Commissioners did create a specific process to handle these applications to ensure that they were turned around quickly.  And the Commissioners did, on 3 January 2013, ask BDO not to send any more applications for the moment, while some process issues were sorted out at the Commissioners' end.   Indeed, the tenor of the Commissioners' own evidence is one of acceptance that BDO had been encouraged to believe that their clients could use the LDF to settle their EBT liabilities.  It was against that background that the three Commissioners considered the case very carefully, and acknowledged that their decision would involve a change in the Commissioners' position.
77. Mr Brennan argued that the Claimants were all engaged in tax avoidance, and were intent on establishing the best possible terms for settlement before registering under the LDF; that was why they held off applying, and as a result they have only themselves to blame for their misfortune in finding that the terms on offer under the LDF had changed in the meanwhile.  But tax avoiders or not (and I make no finding about that), the Claimants understandably delayed in making their applications for registration within the LDF.  There were a number of issues relating to how the LDF would apply to the Claimants, and the process of discussion and negotiation between BDO and the Commissioners took many months, until November 2012 when BDO was told by the Commissioners that the applications for registration could now proceed.  Until that point, it was reasonable for the Claimants to hold off making any sort of application: they did not know what they were applying "for".  Within a short time after the November 2012 green light, on 3 January 2013, the Commissioners asked BDO to hold off making any more applications, due to issues at the Commissioners' end.  There followed around 6 months of further discussion between the Commissioners and BDO.  The Claimants did not make any application during this period because the Commissioners had asked them not to, and because the terms of application of the LDF remained unclear.  By mid-July 2013 the way was again clear for applications to be made. Shortly after that, the Commissioners imposed their "cut-off" on 31 July 2013.  The Claimants' applications were all made shortly after that date, by which time it was too late. Given this sequence of events, I reject the Commissioners' suggestions that the Claimants should be criticised for delaying making their applications.    
78. However, the Claimants do not, in my judgment, get anywhere near showing that the Commissioners treated them with conspicuous unfairness.  Although BDO were encouraged to think that the LDF would be available to their clients, no guarantee or promise to that effect was given, at any time, to BDO or to any named Claimant.  There was not even any guarantee that the terms of the LDF would remain unaltered, or would remain available to the BDO clients.  The Commissioners were at liberty to withdraw the benefits at any time, because the Claimants had no legitimate expectation of any substantive benefit under the LDF (see above).  
79. The Claimants did not even have any legitimate expectation that they would be given a warning if the full benefits of the LDF were to be withdrawn.  The Court has accepted that a warning is required in cases where a legitimate expectation of particular tax treatment exists, see for example R (Cameron) v HMRC [2012] STC 1691, where the Court agreed with the following proposition:

"[71] … if a taxpayer has acquired a legitimate expectation that he is entitled to the benefit of a particular concession, he also has a legitimate expectation that such concession will not be withdrawn retrospectively and that any withdrawal will be managed fairly.  … the [Commissioners] should give reasonable notice of any withdrawal or alteration of a concession so as to allow the taxpayers time to make any necessary adjustments to their affairs…"

Thus the right to be warned of any withdrawal or alteration of a concession is a means of safeguarding the legitimate expectation of that treatment.  If there is no legitimate expectation, I can see no basis for demanding that there should be advance warning before the promised treatment is withdrawn or altered.  Further, I accept that in this case, to give such a warning could have risked frustrating the underlying purpose of the change of policy, which was to deny the LDF to EBT users for wider reasons of fairness.  

80. In the end, the Claimants can only put their case on the footing that they were 'led up the garden path', and cannot go further to contend that they were given any guarantees or promises: they were not.  Being led up the garden path might be characterised as treatment which is "a bit rich".  But without a guarantee or promise, the refusal to confer the particular tax treatment sought is not "so outrageously unfair that it should not be allowed to stand" (see Simon Brown LJ in Unilever-cited above).  This argument therefore fails.  
81. Secondly it is argued that the treatment which the Commissioners imposed on the Claimants (ie the LDF on limited terms) was contrary to HMRC's own published policy.  It is correct that at the time the Claimants applied for registration, the LDF was in different and more advantageous terms than post-August 2014.  But the Claimants were not, prior to the August 2014 changes, registered under the LDF.  There was no arguable unfairness, let alone conspicuous unfairness, in refusing to apply the full benefits of the LDF to a taxpayer who was not registered under the LDF. In fact, that was precisely what the LDF envisaged by requiring registration.  This argument is therefore misconceived and must be rejected: the LDF itself (by the MOU, the Joint Declarations and the FAQs published by the Commissioners) at all material times stipulated that the full LDF benefits would only be available to a person who was registered.  The Claimants never were.  To deny them the full benefits of the LDF was not a departure from the Commissioners' stated policy.
82. Thirdly, it is argued that the Decisions were backdated by six months (and not intimated to the Claimants for 12 months after they had been made), and smacked of retrospection.  This argument fails for the same reasons as the second argument: the benefits conferred by the LDF were conditional on registration under the LDF.  At all material times up to August 2014, the Claimants remained unregistered.   There was no "backdating".  There was a change in the terms of the LDF available with prospective effect to those who became registered after that date.  
83. Perhaps the real complaint which underpins the second and third arguments is not so much that the Commissioners refused to confer the full benefits of the LDF on the Claimants (who were unregistered at the time), but rather that the Commissioners failed to process the applications for registration more quickly, so as to secure the full LDF benefits for the Claimants before the August 2014 changes.  But for reasons set out above, this complaint, if this is how the Claimants' case is put, is not a valid basis on which to challenge the Decisions.  The 60 day promised turnaround time was a procedural or administrative matter; failure to comply with it does not result in the Claimants being able to claim a substantive benefit (or otherwise to complain of conspicuous unfairness).
84. Fourthly, it is argued that the Decision was discriminatory because others in a materially identical situation to the Claimants were permitted to benefit from the LDF without limitation.  The Claimants compare themselves with the Category 2 taxpayers, and contend that those taxpayers are not materially different, because the only thing that distinguishes them is the timing of their applications, which (so they argue) is not "material".  The answer to this point is that the Category 2 taxpayers were, in fact and law, in a different position, not because of the timing of their applications, but because the Commissioners had accepted their applications and issued registration certificates to them.  It was not the date of application which divided them, but the fact of registration within the LDF.  This was a difference of fact, certainly.  But it was more: it meant that Category 2 taxpayers did have a legitimate expectation of receiving the full benefits set out in the LDF in its unaltered state, because their applications had been accepted and their eligibility for those benefits had been confirmed.  
85. Elias J had rejected a similar proposition, based on a legitimate expectation (protected by the Sheldon statement) in BSkyB. But the facts in BSkyB were different. In that case, BSkyB's competitors had a legitimate expectation of preferential tax treatment (zero-rating) which had been generated by a ruling. That ruling was itself the source of BSkyB's complaint of unfairness, because BSkyB maintained that it was in a similar position to the competitors when the ruling was given, and so in effect should have the benefit of a similar ruling at that time too. In that case, the legitimate expectation was simply the consequence of the alleged unfairness. For that reason, the Commissioners could not use its existence to justify the different treatment, because that would beg the very question to be answered. This case is different. Here, the legitimate expectation held by the Category 2 taxpayers is consequent on the fact of their registration. Their registration puts them in a fundamentally different position from the Claimants.  So in this case, the existence of the legitimate expectation is a valid discriminator, because it is a reflection of the different position enjoyed by the Category 2 taxpayers as a result of registration under the LDF: a difference of fact. I conclude that the existence of a legitimate expectation on the part of an advantaged category of taxpayers can be a valid discriminator, depending on the reason for that legitimate expectation, and the facts giving rise to it.  
86. Applying the BSkyB approach to this case: I am satisfied that the issue of comparative unfairness in relation to Category 2 taxpayers was identified by the Commissioners (step 1).  They concluded that there was a material difference between Category 2 and Category 3, namely the fact that Category 2 taxpayers had made applications to the LDF which had been accepted, whereas the Category 3 taxpayers were not in that position.  The consequence was that the Category 2 taxpayers had a legitimate expectation that they would receive the full LDF benefits, whereas the Category 3 taxpayers did not (see paragraphs 18 and 23 of Mr Troup's witness statement, set out above).  That was the Commissioners' reason for deciding that different treatment was justified (step 2).  I conclude that this was a rational and defensible distinction to draw: the difference of fact and law was "material".  The Category 2 taxpayers were not true comparators at all.  There was no inconsistent treatment (step 3).    
87. I am therefore unable to accept that the Commissioners were conspicuously unfair in any one of the four ways relied on by the Claimants. 
88. The Claimants also argued, as an additional point beyond the instances of comparative unfairness challenged outlined above, that the Commissioners overlooked relevant factors or gave insufficient weight to those factors which favoured the Claimants in deciding to limit the LDF. It was in this context that the Claimants relied on Hely-Hutchinson, where the Commissioners' decision was quashed because it failed to take account of all material factors. It is therefore necessary to consider the various factors taken into account in this case by the Commissioners, as set out in the Commissioners' evidence, summarised above. Amongst the many factors considered by Mr Troup and his colleagues, were: (i) the significant adverse tax yield implications of permitting any of the EBT users to settle by means of the LDF; (ii) the interests of taxpayers generally, that tax will be collected in accordance with the statute, noting that if tax is not collected, then the burden of making up any deficit in collection will rest on the shoulders of other taxpayers; (iii) the purpose of the LDF, which was to enable the Commissioners to reach settlements and realise tax from taxpayers whose liabilities had previously been unknown to the Commissioners, noting that the Commissioners were already well aware of the EBT liabilities of the Claimants and other EBT users; (iv) the possible reputational damage to the Commissioners, and the possibility of legal action, if the Commissioners permitted the LDF to be used for EBT settlements; (v) the Commissioners' litigation and settlement strategy, which set out the Commissioners policy on reaching settlements with taxpayers, amongst other things; (vi) the comparatively less advantageous terms of the EBTSO, through which many EBT users had already settled; (vii) the non-availability of the LDF to those EBT users who did not have any foreign assets at the relevant date.  These were powerful factors in favour of limiting the LDF benefits available to the Claimants and other unregistered EBT users.  The Commissioners were well aware of the overtures which had been made by the LDF unit to BDO, and that any refusal to confer the full LDF terms would constitute a change in policy: these were factors taken into account, which tended in the opposite direction. 
89. In light of the full analysis undertaken by the Commissioners and evidenced in this case, I am unable to conclude that any material consideration was left out or given inappropriate weight. This was a difficult decision for the Commissioners. They undertook a careful review of the many public interest and private interest factors engaged. I cannot identify any fault in their approach or evaluation.

CONCLUSION

90. The Decisions are not conspicuously unfair in any one of the ways argued by the Claimants, or in any other way I can identify. Moreover, the Commissioners took account of all relevant considerations, and balanced the various public interest and private factors to arrive at the Decisions. There was no abuse of power or error of law.
91. I dismiss this application for judicial review.