News archive

The debate over a European financial transaction tax is gathering pace.  Let’s start with terminology.  The UK Government like to refer to this as a tax on London.  What they don’t understand, or maybe they do, is that this really annoys the European proposers of this tax.   Many European leaders and commentators blame London and New York for the banking crisis and cannot understand why the UK Government should be so protective of London.  I should add the continual reference to London also annoys me as Edinburgh is also a financial centre.  London is not the UK it is just part of the UK.

The UK Government say any such tax must be imposed world wide and not just confined to Europe.  The proposers point out that you have to start somewhere and if we wait for world wide agreement nothing will happen.  They also imply that this is what the UK Government secretly wants.  Do the European proposers understand the importance of London to the UK Government?  It seems not.  To complicate matters further Ireland has said that it will not introduce this tax if the UK does not.  I wonder what a fiscally autonomous or independent Scotland would do?

This debate cannot be separated from David Cameron’s newly found European scepticism.  I am sure the French will have laughed heartily when they heard David Cameron’s joke about a cheese tax!  I also suspect that commentators will soon catch on to the analogy between the UK Government’s desire for repatriation of powers from the European Union and the Scottish constitutional debate.  The analogy is an obvious one.

We also now know a bit more about the proposed tax:

• The European Commission says the tax would be levied at 0.1% on all transactions between financial institutions when at least one party is based in the EU
• Derivative contracts – bets on movements in currencies and other assets – would be taxed at 0.01%.
• The tax would be expected to raise about £50bn a year and would come into effect in 2014

Glad to see that the UK and Scottish governments have finally reached an agreement on allowing the Scottish Government to access its own fossil fuel levy funds.  This is a tax paid by suppliers of non-renewable energy sources.  The account holds approximately £206m.  Under the agreement, £103m will go towards Scottish renewable energy projects, including wave and tidal schemes.  The remaining £103m will be made available to support the capitalisation of the proposed Green Investment Bank.

Now to HMRC and its latest staff survey.   The conclusion is that its staff still have little faith in the abilities of their senior managers.   The latest staff survey showed only 13% felt changes were usually for the better; only 15% felt change was well managed; and only 17% had confidence in the decisions of senior managers.  Although these results were better than last year, 20% of staff still wanted to leave immediately or in the next year.  The 38,416 staff who responded represented a 52% response rate.  HMRC commented: “Since our last survey results there have been improvements that give rise to cautious optimism”.  The full story can be found here.

Every taxpayer may be given online access to their tax records.  This idea is part of a UK Government consultation on making the personal tax system easier to use and understand.  Other ideas include supplying pre-filled tax returns to people in the self-assessment system, using information from employers and banks, and sending each taxpayer an annual tax statement in addition to their normal P60 form and PAYE tax code notice.  Good to see a UK Government thinking about things from the point of view from the taxpayer.

Now to a claim from a Scottish accountant that HMRC is disproportionately targeting Scottish businesses.  HMRC said it would launch nine new task forces to investigate specific industry compliance in the 2011/12 year, seven of which are already running.

One for the first task forces to launch, targeting the restaurant trade, has so far launched investigations into 531 UK restaurants with 222 (42 per cent) of those in Scotland.  This compares with just 159 investigations for the whole of London and 150 in the North West of England.  The full story can be found here.

I will end with the Scotland Bill and whether it will become an Act.  What is interesting is how commentators have suddenly woken up to the fact of how much danger the Bill is in.  The Bill could be scuppered by either the Scottish or UK Governments.

One reason for this is the supposed supporters of this Bill seem unable to defend or even explain the contraversial income tax proposal.  As Malcolm Chisholm MSP pointed out last week at Holyrood’s Scotland Bill conference, the proposers of the Bill have failed to explain why the Bill is a positive move for either the Scottish Parliament or the Scottish people.

Have a good weekend.

Outer House case concerning damage to an Indian restaurant in Glasgow following the demolition of the floors above by Glasgow City Council.

The Council demolished the first, second and third floors of a tenement on North Street in Glasgow in the autumn of 1996 after serving notice (under s13 of the Building Scotland Act 1959) on the owners. However, on 6 November part of the gable wall and chimney (exposed after the demolition) collapsed in high winds and fell through the roof of the Koh I Noor restaurant which formed the ground floor of the tenement.

The owners of the restaurant sought damages from the Council claiming that the Council knew or ought to have known that, after completing the works, they had left the former mutual dividing wall in a condition which presented a foreseeable danger to people and the adjacent property in the event of high winds.

Morag Wise QC (sitting as a temporary judge) found that it was a clear case of common law breach of duty. Whilst the Council had initially acted under the 1959 Act, after it had made the decision to demolish part of the building, a relationship was created between them and the neighbouring proprietors that gave rise to a common law duty of care.

The decision to demolish had been taken by a director of Building Control at the Council. However, he also decided to delete tying works (reducing the contract sum by about £12,000) to the exposed wall from the contract  despite having received  a survey report indicating that it would not be safe to leave the wall without tying or other stabilisation works.  Morag Wise QC came to the conclusion that the Council knew that without carrying out gable stabilisation works there was a material risk of harm to people or property in the vicinity of the wall.

The Council’s argument that they should be free of responsibility for the collapse as they had written to the restaurant owners indicating that future maintenance of the structure would be their responsibility was rejected. There was no evidence of the restaurant owners having been advised that the exposed wall lacked stability and had not been tied. The restaurant owners were entitled to assume that the Council had carried out the work in a manner that did not create a new structural instability.

The Council’s further contention that any liability had been extinguished by limitation in terms of the Prescription and Limitation (Scotland) Act 1973 was also rejected. The Council were relying on the fact that the limitation period began on the date they completed the works and left the site knowing the wall lacked stability. However, the court found that in this case the loss and damage occurred when the masonry fell through the roof of the restaurant on 6 November. Before that no relevant proceedings could have been taken.

The full judgement is available from Scottish Courts here.

(See appeal to the Inner House here.)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Let’s start with the highlight of my week.  This would have been the result of last weekend’s Gala v Melrose game but a try in the last few minutes put paid to that.  So instead it has to be speaking at Holyrood’s Scotland Bill conference.  The text of my speech can be found here.

I was very impressed with Malcolm Chisholm MSP and not just becuase he said some nice things about the fiscal power papers I had a part in drafting for Reform Scotland.  He also summed up nicely why is there is so little support for the Scotland Bill including it seemed at this conference.  His argument was a simple one.  Those who should be campaigning for this Bill are not doing so mainly because there is almost nothing positive to say about it.

Next to a worrying story from BBC News.  I am not sure what is more worrying. The fact that MPs had to put a senior official under oath or that civil servants get paid bonuses.

Members of the Commons Public Accounts committee felt they had been unable to get answers from Anthony Inglese, HMRC’s senior lawyer, so they took the highly unusual step of making him swear an oath to tell the truth.  Parliamentary staff said that nobody had been asked to swear an oath by a parliamentary committee for more than a decade.

The session before the committee was part of an inquiry into tax deals negotiated by HMRC with Vodafone and Goldman Sachs.  The full story can be found here.  An earlier story from the Guardian on the background to this can be found here.

Back to the fiscal powers debate.  Not surprised to hear that the UK Government has already ruled out giving the Scottish Parliament even partial control over corporation tax.  Graham Gudgin made the claim while giving evidence to the Scotland Bill committee.  He said he had “reliable information” that the tax power would not be given to Scotland “under any circumstances”.

As I mentioned in my speech earlier this week it seems that the UK Government is just not interested in adding any powers to the Scotland Bill or dealing with some niggly issues such as a tax exemption  for the Glasgow Commonwealth Games.

I see that the Scottish Government are again asking the UK Government to reduce VAT on home repairs and renovations.  I am wondering why they are still not referring to the situation in the Isle of Man.  If anyone from the Scottish Government is reading this you might want to have a look at this.

Now to North Sea revenue and a report by Aberdeen and Grampian Chamber of Commerce. The 15th Oil and Gas survey said confidence and investment were still being dented by the changes announced in this year’s UK Budget. More than half of oil and gas operators surveyed believe the Budget’s £2bn industry tax hike has harmed North Sea investment.  The supplementary tax on North Sea oil production rose from 20% to 32% to fund a cut in UK government fuel duty.

Have a good weekend.

This is the text of my speech to this morning’s Scotland Bill conference.

Good morning.

I recently resigned as a trustee of Reform Scotland.  Pressure of work and joining the board of the Borders Chamber of Commerce were the main reasons.  I did though also want a break from this debate.

That though has allowed me to take a step back.  What I have noticed is how quickly the debate is now moving.  The term “devo max” is suddenly everywhere.  The debate is not now confined to Scotland.  It has taken a while but London is now taking a real interest.  Then there is Eurozone crisis and the debate over how much fiscal union is needed where you have monetary union.  The analogy between the UK’s relationship with the EU and Scotland’s relationship with the UK is an obvious one.

Back to the small matter of the Scotland Bill.  My interest starts with the fact that I am a lawyer.  I want to know about the legislation.  I want to know how and by whom the tax will be collected.  Is someone asking for a right to vary a tax or to have complete control of a tax.  What about the underlying and connected legislation.  These questions should remind us how complicated devolving powers can be.

I will cover four points today.

1. The Scotland Bill is Calman minus;
2. learning from experience and is “HMRC fit for purpose”;
3. institutions as a missing element of the debate; and finally
4. there was a better option.

The Scotland Bill is Calman minus.

People forget that the interim Calman report recommended almost no fiscal or tax powers.   The final report contained a small number including the controversial income tax proposal.  The Scotland Bill is meant to be based on the Calman report but what happened to air passenger duty and aggregates levy?

Air passenger duty was not included as it seems to be under constant review; however, the UK Government has indicated that parts of air passenger duty may be devolved to Northern Ireland.

Aggregates levy was not included because of an action raised in the European Courts by a trade body.

We have been told that these minor taxes might be included at a future date.  There is no reason for a delay.  The Scottish element of these taxes should simply be carved out of the relevant UK legislation.  Then leave it up to the Scottish Parliament to decide what to do next.

In addition Calman recommended that 50% of income tax on savings and distributions was to have been assigned to the Scottish Parliament.   Why 50%?  As with the income tax proposal no-one can give any justification for that figure.  This power has been dropped from the Scotland Bill completely.

Then there is the debate over adding additional tax powers to the Scotland Bill.

The previous Scotland Bill committee said that some powers over corporation tax should be included if Northern Ireland is granted any such powers.  Up until recently it looked as if Northern Ireland would soon be getting this power.

The Scottish Government have also produced papers on adding corporation tax, alcohol duty and control over the Crown Estate to the Scotland Bill.

I think it is fair to say that none of these suggested additions have been taken up enthusiastically by the Scottish Secretary.

Some powers might actually be re-reserved such as parts of insolvency and charity law.  The Scottish Parliament is at fault on insolvency by not updating the law.

Instead of arguing about re-reserving part of our charity law why was it not agreed that when OSCR registers a charity it automatically becomes entitled to the various charity tax reliefs.  Presently you also have to make an application to HMRC.  There is a lot of talk about tax simplification.  This was an obvious opportunity missed.

So which tax powers are we left with?

Two minor taxes, SDLT and landfill tax, and an income tax proposal that some commentators think is unworkable.   I will leave it to the accountants and economists to argue back and forth on that one.  That said, as a lawyer I would not start this process with income tax unless you devolve the tax in its entirety.  Only VAT is more complicated.    The longer I have been involved in this debate the less inclined I am to argue for a tax to be shared between parliaments.

The other problem is an eggs and baskets one.   Income tax is just one economic lever albeit a major one.  We have seen what has happened to income tax receipts during the current economic crisis.

Also a right to vary a tax is not much of a power on its own.  What about the underlying law that allows you to create reliefs or vary the tax base. What about connected legislation that affects the tax legislation.  For example for income tax: the tax residency rules or employment legislation.

To change tack for a minute.  What do I like about the Scotland Bill?  The borrowing powers provisions have been improved.   The way the two minor taxes are being devolved makes sense.  They are being carved out of the UK legislation and the Scottish Government are to draft a new Scottish act.  One word of warning on the drafting.  Who is drafting this legislation? What experience do they have in drafting tax law?

I also like the fact that the Scottish Parliament will be able to create new taxes albeit with Treasury approval.

Moving quickly on.  I always think it is a good idea to see how things have been done in the recent past.  What can we learn?  Given the importance of HMRC to this process I also want to discuss whether HMRC is presently fit for purpose.

I will start with HMRC.   I do have quite a bit of sympathy for them just now.  Can you imagine them being told: “I know we are cutting job numbers and your budget.  I know we are already asking you to do a number of new things but can you also deal with the Scotland Bill.”  You can see why HMRC do not treat this matter with much if any enthusiasm.

Is HMRC fit for purpose?  The House of Commons Treasury select committee thinks not.   A further £1.6bn is to be cut from its budget over the next four years.  10,000 more job losses.  Offices are to close.  This is in addition to the cut of approximately 30% in staff numbers and budget since 2004.  I will not even attempt today to answer the question of whether the UK tax system is fit for purpose.

It is though not just staff numbers and budget.   The centralisation of the administration of various taxes is causing problems for us in Scotland.  Two examples.  Birmingham for SDLT.  Nottingham for inheritance tax.

Why is this important?  UK tax law applies English & Welsh legal principles.  Property law and succession law are governed by Scots law.  These can conflict.  In addition, as these taxes are now primarily dealt with in England the amount of Scottish expertise has declined.   One example.  The guidance for SDLT in Scotland had to be written by a sub-committee of the Law Society of Scotland’s tax committee.

Then there is the news that as part of the HMRC cutbacks the Edinburgh Stamp Office is under threat of closure again.  The Trusts and Estates office in Edinburgh is being run down.   I have not heard one Scottish politician ask questions about this.

Now three examples of why I am not confident that this will be done be well.

Remember also that these examples are from a time when HMRC was better staffed and resourced.  Also it is not just HMRC that needs to do better.  The Scottish Government also needs to raise its game.

It has been well documented as to how much of a shambles the introduction of SDLT in Scotland was.   I was at meetings where HMRC openly said they did not realise that Scotland’s property law was different to English property law.  They also made it clear that they did not have time to change the legislation.  “Don’t worry we will have plenty of time to sort things out later”, they said.  The only reason that SDLT worked in Scotland was due to the goodwill and pragmatism of the Scottish legal community.

Then there was the proposal for a UK wide planning-gain supplement.  This was also pre-recession and the debate was all about how much should developers contribute.   I remember my first meeting with HMRC and Treasury officials about this.  The meeting started well with me saying: “I hope you make a better job of this than you did with SDLT”.

Again the level of knowledge of Scots law and which powers the Scottish Parliament had was not great.  My main argument against a UK planning-gain supplement was a simple one.  This was a matter for the Scottish Parliament as planning and housing are devolved matters.   A point so obvious that they said it had never occurred to them.  Maybe, maybe not!

This debate went on for many months but finally the proposal in Scotland was dropped.

My third example is I suspect the one you are most familiar with.  The Scottish Government’s local income tax proposal.  I remember being asked about this 2007 SNP manifesto commitment.  I made three points:

1. Why do you think HMRC will cooperate and work to your deadlines?
2. What about Council Tax Benefit?  I pointed out that the Treasury have withheld attendance allowance funding since the Scottish Parliament introduced free personal and nursing care.
3. This proposal relied on the yet unused tax varying powers.  Is 3p in the pound adequate I asked? Is there even a list of Scottish taxpayers?

I was not surprised when the Scottish Government dropped, possibly temporarily, this proposal.

Ironically this proposal will be soon be possible as under the Scotland Bill the tax varying powers are increased and Council Tax benefit powers are likely to be devolved in 2013.   Whether HMRC would cooperate is of course another matter entirely.

Now to institutions.

The Scottish Parliament is going to need an Exchequer.  An Exchequer that ideally combines the functions presently undertaken by HMRC and the Treasury.   Even under the limited powers contained in the Scotland Bill the Scottish Government will need an Exchequer not just a finance department.  Hopefully the Scottish Government is already thinking about this.

Does Scotland need a separate Stamp Office, Registers of Scotland, Trusts and Estates Office and Companies House?  Of course not.  Why not create a one stop shop to combine these and other government tax, legal and registration services.   By doing this we could also have sub-offices.  Just as London is not the UK Edinburgh is not Scotland.  Remember some benefit powers are already to be devolved in 2013.  Why not create a tax and benefits office?

As far as institutions go we pretty much have a blank sheet of paper.  Let’s not waste this once in a lifetime opportunity.

A few final points.

It is all very well for me to criticise the Scotland Bill.  Do I have or rather had I a better option?  Yes I think I did.

When I started looking at the fiscal powers question my starting point was to look at which powers were already devolved.  The starting point for the Calman Commission was very different and much has already been written about that.

The imbalance in the powers of the Scottish Parliament is obvious.  The Scottish Parliament is responsible for 60% of government spending in Scotland but only has control over 7% of all tax raised in Scotland.  That is the starting point for the debate on financial accountability.

The Scottish Parliament had very few economic levers.  It only has two local taxes out of over 20 taxes and duties.

The lack of tax and fiscal powers also affects policy making.  For example the recent debate on alcohol minimum pricing.  I am sure the Scottish Government would prefer to use alcohol duty if it had the power to do so.

So what to do?

Instead of spending so much time trying to devolve income tax I would have firstly devolved the taxes and duties that are closely connected with already devolved areas of responsibility.

Some examples.

• Property law is devolved but SDLT and the property parts of capital gains tax are not.
• Succession law is devolved but inheritance tax is not.
• Environmental law is devolved but the environmental taxes are not.
• Health is devolved but alcohol and tobacco duties are not.
• Transport is devolved but transport related taxes are not.

This increases the number of economic levers and would greatly help with joined up policy development.   Almost all of the miscellaneous taxes could be devolved under this option.

I would also give the Scottish Parliament the power to decide which of, and when the miscellaneous taxes and duties are devolved.

The other advantage less commented upon is how this would simplify the taxation system of the rest of the UK as less specific “Scottish” guidance would be required.

The point of how small a percentage of revenue the Scottish Parliament raises is though not resolved.  The Scotland Bill takes us to about a third.  Devolving the majority of the minor taxes takes us to about a quarter.

Only be devolving one or more of the big “5” can this be dealt with.  VAT cannot be devolved.   National Insurance is very closely linked with benefits which is still primarily a UK matter.

That leaves corporation tax, North Sea revenue and income tax.  On balance I would go for corporation tax and North Sea revenue as income tax is so closely linked with national insurance.

On timing I also think that the miscellaneous taxes and duties could be devolved relatively quickly.    The Scottish Parliament could also agree that for a period of up to two years to not change any tax that is devolved.  That would provide a degree of certainty.

Also why does the Scotland Bill not make provision for a tax exemption for our Commonwealth Games and as is already in place for next year’s London Olympics.   Or deal with the fossil fuel levy issue.

Last point.  The Scottish Government should deal directly with the UK Government and in particular HMRC and the Treasury.   The Scotland Office is simply a further complication.

Although this is complicated it is also a great opportunity.  Is the opportunity still there?  I am not sure.  But we would not be Scottish if we did not try to snatch victory from the jaws of defeat right at the last moment.

Thank you.

Application for an administration order in respect of FM Front Door Ltd. The application followed FM’s failure to make payments under a loan from the Dunfermline Building Society obtained to assist with the purchase of flats at the Skyline development on Finniestoun Street in Glasgow.  The loan was secured by a floating charge and standard securities over each of the flats. FM’s parent company FM Developments also granted a guarantee for the loan.

Clause 13 of the loan agreement provided that the grounds for default included:

1. failure to pay sums due under the loan agreement;
2. inability to pay debts as they fall due (or deemed inability in terms of the Insolvency Act 1986); and
3. circumstances arising, which in the opinion of the building society, had a materially adverse effect on the ability of FM to perform it’s obligations under the agreement or on the value, validity and enforcement of the security or the security documents.

In terms of the loan agreement, FM were to make quarterly payments to the building society. They failed to do so timeously (in respect of payments due in July and October 2010 also January and April 2011) but on each occasion paid after they were sent reminders by the building society which noted the sum due and the bank account to which it was to be paid. However, when FM again failed to pay the sum due in July 2011, the building society wrote to FM indicating that they were in default and demanding payment of the principle sum with interest.

The defaults on which the building society sought to rely were the late payment of the July instalment, a reduction in the value of the property which in its opinion constituted a materially adverse effect on both FM’s ability to perform its obligations under the loan agreement and also on the value of the securities.  It also took the view that the administration of the guarantor, FM Development materially affected the value of the guarantee.

FM argued that it was not in default contending that the parties had varied their contract so that FM did not have to pay the quarterly instalments of interest until the building society had informed it of the sum due and the bank account into which the sum should be paid. Further, FM claimed that the building society had acquiesced in late payment and was personally barred from founding on the delayed payment in July.

Lord Hodge rejected these arguments and granted the administration order sought by the building society.

In terms of the Insolvency Act 1986, before a court can grant an administration order, it must be satisfied that:

1.  the company is or is likely to become unable to pay its debts; and
2.  the administration order is reasonably likely to achieve the purpose of the administration. 

Default
Variation of the contract
Lord Hodge was not persuaded that the email correspondence vouched for any variation of contract. It was consistent with the building society politely reminding its borrower that sums were overdue and pressing for payment. It did not establish the agreed practice claimed by FM. Also there was no suggestion that, before the default, anything occurred to cause uncertainty as to the amount due for quarterly payment. On the contrary, the sum due in each quarter remained the same and the bank account into which it was to be paid did not change. 

The loan agreement also contained a “no waiver” clause to the effect that failure or delay on the part of the building society to exercise powers or rights under the agreement did not preclude further exercise of the powers or rights. Whilst there is some uncertainty as to the boundaries of the efficacy of “no waiver” clauses, the effect of the clause was that FM could not found on a failure by the building society to assert a default when there had been a delay in making a quarterly payment in order to argue that the building society could not give notice of a default on the occurrence of a further failure to make a payment. Personal bar seeks to prevent unfairness caused by inconsistent behaviour. But in this case FM had to be taken to have been aware of the clause and thus to have known that a failure by the building society to exercise a right or remedy did not amount to an abandonment of that right on a later non-performance.

FM was therefore in default when it failed to make the payment on 1 July 2011. 

Materially adverse effects under clause 13
Lord Hodge was also satisfied that the building society has established a default under clause 13. The insolvency of FM’s guarantor, FM Developments was likely to have had a material adverse effect on the value of its guarantee.  Further, the building society was entitled to take the view that the fall in value of the flats which FM acquired was likely to have a material adverse effect on the value of its standard securities and on FM’s ability to repay the advances.  Whilst both parties relied on different valuations, whichever valuation was taken, it was clear that there has been a material fall in the value of the properties and that the outstanding balance of the loan exceeded their value. That was a position which was materially adverse to the circumstance in 2007 when the building society stipulated that the maximum that it would lend was 85% of the market value of the properties.

The administration order
Inability to pay debts
Having found that the building society was entitled to treat FM as being in default, Lord Hodge was satisfied that FM was unable to pay its debts as they fell due. FM’s failure to repay the principal sum in response to the building society’s demand and the evidence of the current value of its property portfolio demonstrated that inability.

The effect of the administration order
As to whether an administration order was likely to achieve the purpose of the administration, one of the two purposes which the intended administrators advanced was to make a distribution to the building society as a secured creditor. There is no suggestion that they would not be in a position to do so and Lord Hodge was satisfied that it was likely that that purpose would be achieved.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Let’s start with the proposal for a Financial Transaction Tax.  The Archbishop of Canterbury has now come out in support of this.   Even at this early stage there are a number of obvious questions.  Just the Eurozone countries? All of the European Union?  Wider?  Who will it apply to, buyer or seller or both? Who will collect it?  Who will administer it?  What happens to taxes such as UK stamp duty which is a financial transaction tax.  All financial transactions?  Do you look to where the parties or the assets are located?  What if any reliefs will apply?  Think that is enough for now.

Now to the fiscal powers debate.  First to Labour.  Ed Milliband said this week that “devo max” is not the right option for Scotland.  This places him at odds with other senior members of the Labour party in Scotland.  Labour MP and candidate for the Scottish Labour leadership contest Tom Harris argued that a permanent ‘Calman Commission’ should be set up to ensure devolution was constantly monitored.  Mr Harris also suggested that such a commission should have a remit that would allow powers to be handed back to Westminster.

The Liberals also announced another commission on fiscal powers for Scotland.  This one is to be named “Home Rule”.  A favourite term of the Liberals.  Between 1889 and 1914 four Bills advocating Scottish “Home Rule” were defeated.  In 1913 a Home Rule Bill passed its second reading, however World War I intervened and the idea was dropped.  Menzies Campbell is in charge of the latest commission.  One question that does need  to be asked.  Are the Liberals updating the well regarded Steel Commission or are they starting from scratch?  I also find it interesting that each of those mentioned above is an MP.

Three Scottish local authorities have been given the green light to raise funds for infrastructure projects.  The Scottish Government this week approved the schemes to be developed under the tax incremental financing model.  This allows councils to borrow against the likely business rate gains that will result from an infrastructure project.  The article from the Scotsman can be found here.

Now to air passenger duty.  It seems that this tax is in the news every week.  The Scotsman reported that aviation bosses have launched a scathing attack on a planned increase in air passenger duty.   The heads of 12 airports sent an open letter to UK Chancellor George Osborne warning that the increase next year will further stifle the aviation industry at a time when passenger numbers are flat-lining.  As I have blogged before the three Scottish airports are  supporting a campaign for air passenger duty to be devolved.

Now to the never ending battle between the UK tax authorities and those seeking to avoid paying tax.  In case you don’t realise how serious an issue this is remember the situation Greece is now in.  HMRC have created a new 200 strong team of investigators and specialists who it is said will use new and innovative risk assessment techniques to identify areas where wealthy individuals are avoiding and evading taxes and duties.  One of the first groups being targeted is wealthy individuals who own land and property abroad.

Our Private Client Bulletin for October can be found here.

If you have any questions or would like to sign up for a free trial of our bulletins please email me here.

Outer house case concerning the interpretation of conditional missives and a purification letter relating to the sale of property at Great Junction Street in Leith.

The missives were conditional on the results of ground and site examinations and environmental audits.  Clause 3.2 allowed for the purchasers to waive the conditions by giving a notice of deemed purification:

 “This Condition 3 shall be construed solely for the benefit of the Purchasers and it shall be in the sole option of the Purchasers at any time to intimate to the Sellers in writing that any or all of the suspensive conditions contained in Condition 3.1 is/are waived, in which case the Missives shall be deemed purified to that extent. This condition shall however only be purified or deemed to be purified by the Purchasers giving written notice to the Sellers to that effect.”

Condition 3.3 provided that if the conditions hadn’t been purified by 30 July 2011 then either party could resile from the missives without penalty.

On 22 July the Housing Association’s solicitors, TC Young sent Mr and Mrs Akram’s solicitors, Somerville & Russell a letter advising that the conditions could be regarded as purified in terms of clause 3.2.

Mr and Mrs Akram argued that service of the notice was invalid as, in terms of clause 3.2 of the missives, it required to be served on them and not their solicitors.  They also contended that the notice was invalid as it referred to an incorrect date of entry.

Lord Hodge did not accept either of these arguments.  With regard to service of the notice on the solicitors, the authorities on which Mr and Mrs Akram sought to rely were concerned with more precise provisions on the service of notices than those contained in the missives between the Akrams and the Housing Association.  The missives in this case had contained no precise requirements relating to the service of notices and no indication that the parties had intended that service of the purification letter on the sellers’ solicitors would not be valid.  Moreover, the other provisions of the contract did not suggest that the parties intended to draw a clear distinction between themselves and their agents. Lord Hodge said:

“I have formed the view that the very simplicity of the contractual provisions firmly points against a construction which would allow such a distinction to be drawn. Further, I do not see the practical advantage or business rationale of serving the notice on the sellers rather than on their solicitors; I would have expected the sellers immediately to take the notice to their solicitors to ascertain its validity”.

 With regard to the reference to the date of entry in the purification letter, Lord Hodge found that, assuming (there was dispute between the parties as to the correct date of entry which could not be determined at that stage) the date was erroneous; the mistaken statement did not invalidate the letter:

“In my view, the function of the purification letter was simply to intimate that the purchasers had waived the suspensive conditions …. That had the effect of deeming the conditions to be purified, as clause 3.2 provides. The contract fixed the date of entry in the definition section of the missives…. Accordingly, there was no need to specify the date of entry in the purification letter. Either the missives ruled or the parties had agreed to alter the date of entry.”

A separate question as to whether Somerville & Russell had actual or apparent authority to receive the purification letter required to be dealt with by proof.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

HMRC has published an updated Inheritance Tax Toolkit effective for deaths occurring from 6 April 2010. Updates include emphasising the importance of providing HMRC with a copy of the will and any codicils when submitting the form IHT400.

These toolkits provide guidance on areas of error that HMRC frequently see in returns and set out the steps that you can take to reduce those errors.

The toolkits can be found here.

Two main taxation topics from the SNP conference.  Not supprisingly North sea oil and gas taxation was one.  One reason for this are the recent announcements that over half of the North sea and oil gas reserves remain.  That alone ensures that this issue will play a major part in the independence referendum.  The House of Commons Energy and Climate Change select committee has also this week criticised the UK Government’s recent “£10bn raid on North Sea oil profits”.

The other taxation issue that received a lot of coverage was the independent referendum and the number of options given.  The main question will be a yes or no to independence.  It is though a possible second question that has ignited so much debate.  A possible second question is likely to be a yes or no to greater fiscal and tax powers, but short of independence, for the Scottish Parliament.  How “short” is the tricky part.  There are a lot of options between the Scotland Bill proposals and full fiscal autonomy.

The press have termed this option “devo max”.  As one of the authors of Reform Scotland’s “fiscal power” papers I can confirm that one of the hardest issues is trying to find a suitable title.  Other terms commonly used are: fiscal responsibility, “home rule” and fiscal autonomy.  It will be interesting to see this debate develop.  Lots of questions.  Some of these include:

1. what is “devo max”?

2. who is going to define it?

3. who is going to campaign for it?

4. would the UK Government abide by a vote in favour of “devo max” but not independence?

5. what are the estimated costs and timescales?

Now to Europe and the latest agreement by the Eurozone countries.  One likely outcome of this crisis is that the  Eurozone countries will begin the process to more closely align their tax and fiscal policies.  Most commentators now seem to be saying that if you have a common currency you also need similar tax and fiscal regimes.  How “similar” is going to cause a lot of debate.  The debate has of course already started.  I have blogged previously on how hard the Irish government are fighting to retain its low rate of corporation tax.   It is not difficult to see the similarities with the Scottish independence debate as the  Scottish Government’s prefernce is to retain Sterling in the event of independence.

The debate over whether to retain the 50p rate of income tax was reignited this week when Paul Walsh, chief executive of Diageo, said that: “the 50p rate threatened to cause long term damage to Britain’s competitive edge”.  Paul Walsh’s comments contrast with those of Sir Stuart Rose, the former head of Marks and Spencer’s, who has supported the 50p rate.   George Osborne has of course commissioned a study on the revenues being received from the 50p rate.  That said, the debate is much wider than just the question of how much revenue is being raised.  The debate is just as much about the perceived fairness of the UK’s tax system.  It was ever thus.

Now to the so called “Retail tax levy”.  The Scottish Retail Commission claim that the proposed levy on major supermarkets selling alcohol and cigarettes breaches the Scottish Government’s own business rules by not carrying out an impact study on any such change.  The Scottish Government responded that as the levy only affects 0.1% of retail turnover the cost of a Business and Regulatory Impact Assessment would be disproportionate.  This debate is going to run and run I suspect.

Now to Aberdeen and the news that the first phase of work to improve Aberdeen city centre has begun.  More than two thirds of firms in the area voted in favour of a Business Improvement District earlier this year.  The companies agreed to pay into a fund with the aim of raising more than £3m for work to help attract more visitors.  The first phase of work includes cleaning guttering and building facades to help improve the city centre in the run-up to Christmas.

Have a good weekend.