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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Vrang v Revenue And Customs [2017] EWHC 1055 (Admin) (09 May 2017) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2017/1055.html Cite as: [2017] STC 1192, [2017] EWHC 1055 (Admin), [2017] BTC 12, [2017] STI 1197

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/05/2017

Mr Justice Ouseley:

1. This claim arises out of action taken by Credit Suisse AG pursuant to the Agreement "on Cooperation in the area of Taxation", dated 6 October 2011, between the UK and the Swiss Confederation, the Agreement, and inaction on the part of the Claimant.
2. The Claimant is a Swedish national who worked in Switzerland for Credit Suisse Asset Management between 1998 and 2005, when she moved to London. She had three bank accounts in Switzerland with Credit Suisse AG, Credit Suisse, into which she put her earnings while there and her encashed Swiss pension. The money in those accounts was to be used when she retired to Sweden. Credit Suisse sent her two letters in 2012 alerting her to this Agreement. They warned her that if she did not give voluntary disclosure of her Credit Suisse accounts to Her Majesty's Revenue and Customs, HMRC, the Defendant, Credit Suisse would take from her accounts an unspecified one-off payment, calculated by reference to a formula in the Agreement. This payment would absolve her from all past UK tax liabilities on those assets including penalties and interest. It would, in return, enable her to maintain her anonymity from HMRC, and the confidentiality of her Credit Suisse bank accounts. She took no action in response to those letters.
3. On 31 May 2013, Credit Suisse, as it had warned it would do, took a payment from her accounts. It took £56715.49, increased in December 2013 to £57865. This was the sum required to be levied by applying the formula in the Agreement. She was issued with the certificate by Credit Suisse, which she could show to HMRC should they seek tax due in the past from her in respect of those assets. The sum was passed to the Swiss Federal Tax Administration, SFTA, which intermingled it with sums levied from other people, and transferred those intermingled monies in a series of lump sums to HMRC. In normal circumstances, as was intended by the Agreement, HMRC would not know who had paid the levy, or how much, unless the person from whom the levy had been taken, had to rely on the certificate for some tax-related purpose.
4. However, the Claimant was taken aback when that money, and so much of her savings, was taken. She wrote to Credit Suisse saying that the payment had been wrongly levied but took the issue no further after it rejected that claim. In June 2013, she made what she says is the disclosure which would have prevented the levy being applied, though that is not accepted by HMRC. She wrote to HMRC, and, aided now by her tax adviser, a desultory correspondence was conducted by him with HMRC. She said that a sum, which has varied between £1000 and £7000, was due in tax and sought a refund of most of the levy from HMRC. It refused to pay a refund on 9 December 2015 of the levy less any tax liabilities due, penalties and interest.
5. She challenges this refusal. Her grounds, as reformulated in the Skeleton Argument are (1) that there is no Parliamentary authority for the levying of the sum, and so it cannot be levied, where there is no tax due in that amount; (2) if there is legislative authority to that effect, it has been misconstrued in a number of respects by HMRC and (3) that HMRC has not exercised its powers, notably its discretionary powers, lawfully. Other themes in the Claimant's arguments were that HMRC had no power to retain money which did not represent a tax liability, when the tax payer asks for it back; on the proper interpretation of the Agreement, the sums had been "wrongly levied" and should be paid back; the levy breached the provisions of Article 63 of the Treaty on the Functioning of the European Union as it was a restriction on the free movement of capital, which lacked the necessary justification, and was disproportionate; it breached Article 1 of Protocol 1 ECHR, being an disproportionate interference with the Claimant's property rights. The Skeleton Argument also raised a number of new issues.

The Agreement with Switzerland

6. Mr Godfrey of HMRC's Offshore Coordination Unit explained the background to the Agreement in his witness statement. It was one in a sequence of measures addressing the use of offshore accounts for tax evasion. The Agreement improved on the arrangements in the Lichtenstein Disclosure Facility, LDF, and is the UK's second such bilateral agreement, but it is not at the level of the exchange of financial information intended under the Common Reporting Standard from 2018. The structure of the Agreement enabled the Swiss authorities to maintain the reputation of Swiss financial services for "customer discretion", as he put it; this meant that levy payments had to be made anonymously, whilst the prospect of avoiding the levy created the potential for the UK to receive "payments or information in respect of assets held by UK residents in what was previously an extremely discreet jurisdiction." The engagement pursuant to the Agreement therefore had to be undertaken between the banker, or Swiss paying agent, and its potential levy paying or disclosing customer, and had to be governed by Swiss law. Individuals had to decide by 31 May 2013 whether to make disclosure or to pay the levy. They could gain certainty, without revealing themselves or their financial affairs, by paying the levy. The individuals were unknown to HMRC and the intermingling of the individual levies by the SFTA before transmission to HMRC meant that that would continue. HMRC could not offer advice or assess liability to tax without disclosure. But it too would have certainty as to what monies had been raised.
7. The Agreement recites the parties' desire to strengthen their fiscal relations. Article 1 tells of its scope and purpose:

"1. The objective of this Agreement is to provide for bilateral cooperation between the Contracting States to ensure the effective taxation in the United Kingdom of relevant persons. The Contracting States agree that this Agreement will achieve a level of cooperation which has with regard to taxation in respect of income and gains on relevant assets an enduring effect equivalent to the outcome that would be achieved through an agreement to exchange information about such individuals on an automatic basis.

2. In furtherance of this objective, the competent authorities of the Contracting States shall provide assistance to each other in the following main respects:

a) the tax regularisation of relevant assets held in Switzerland by or for relevant persons;

b) the effective taxation of the income and gains on relevant assets held in Switzerland by or for relevant persons and measures to safeguard this Agreement's purpose;

c) under the terms set forth in this Agreement, further exchange of information by the United Kingdom to ensure the effective taxation of Swiss residents regarding assets in the United Kingdom."

8. Four dates are referred to in the text of which three matter: appointed day 2 is 31 December 2010; appointed day 3 is 31 May 2013; appointed day 4 is 30 June 2013. This case is only concerned with Part 2 of the Agreement "Regularising the past", and not with future liabilities. The Agreement entered into force on 1 January 2013.
9. Articles 5(1) and (3) provide:

"1. Subject to paragraph 3 a relevant person who is not a non-UK domiciled individual and who held relevant assets with a Swiss paying agent at appointed dates 2 and 3 shall have the option either to instruct the Swiss paying agent to make a one-off payment in respect of relevant assets in accordance with Article 9 paragraph 2 or to authorise the Swiss paying agent to make a disclosure in accordance with Article 10.

 3. Where a relevant person fails to exercise by appointed date 3 one of the options described in paragraphs 1 and 2, then the Swiss paying agent shall levy the one-off payment in accordance with Article 9 paragraph 2."

 Articles 6(1) and 7(1) relate to the mechanics of the notification:

"ARTICLE 6

Notification of the relevant person by Swiss paying agents

1. Swiss paying agents shall within two months of the date of entry into force of this Agreement give notice to the holders of accounts and deposits in respect of which a relevant person has been identified about the content of this Agreement and the resulting rights and duties of relevant persons.

ARTICLE 7

Rights and duties of relevant persons

1. The relevant person must inform the Swiss paying agent in writing and by appointed date 3 which option described in Article 5 paragraphs 1 and 2 he or she chooses with respect to each account or deposit in existence at appointed date 3. This notification is irrevocable. Where a notification was made before the date of entry into force of this Agreement, it shall become irrevocable if it has not been revoked at that date."

10. Article 9(1) contains the obligation on the Swiss paying agent, the bank usually, and here Credit Suisse, to raise the levy:

"(1) Subject to Articles 8 and 13, a Swiss paying agent shall on appointed date 3 levy a one-off payment on the relevant assets of relevant persons."

11. The one-off payment is to be calculated in accordance with the Schedule to the Agreement. The algorithm defies simple explanation, but it takes into account the value of the asset, the period of ownership and the profile of its accumulation. The more recent the increase in its value, the higher the charge. In practice, the initial charge would be between 21% and 34% of the total asset value held by the charge payer at the relevant date, but it could rise to a maximum of 41% where assets exceeded £7m. One input is called the "capital stock", for these purposes, the money in the individual's bank account, as at 31 December 2012. So no final calculation could be done before that date.
12. Article 9(4) provides for the certificate along with (5), (7) and (12):

"(4) At the time the one-off payment is levied, the Swiss paying agent shall issue a certificate in the form prescribed to the relevant person. The certificate shall be considered approved by the relevant person, if he or she does not object within 30 days of issue.

(5) [This requires the Swiss paying agent, here the bank, at the time of the approval of the certificate to transfer the one-off payment it has levied to the Swiss "competent authority". This in turn must send the monies levied, converted into sterling, to the UK "competent authority" in monthly instalments starting on 31 July 2013 over a period of 13 months.]

(7) Subject to paragraph 12, following approval of the certificate issued under paragraph 4 the relevant person shall cease to have any liability to the United Kingdom taxes listed in paragraph 10 for the taxable periods or charges to tax referred to in paragraph 11, in relation to the relevant assets concerning which the one-off payment has been made. This clearance shall also include without limitation interest, penalties and surcharges that may be chargeable in relation to those tax liabilities. The relevant person shall also cease to have any liability to the United Kingdom taxes listed in paragraph 10 in relation to liabilities which arise from the estate of a deceased person in respect of relevant assets concerning which the one-off payment has been made."

13. The advantages of Article 9(7) are not available where the tax affairs of the person levied were already under investigation, or the investigation has concluded with a criminal conviction in the UK or where a civil investigation into assets in Switzerland concluded with a civil penalty or a requirement for full disclosure, and no interest had been declared during the investigation, and other like circumstances. In those circumstances any one-off payment is to be treated by the UK competent authority as payment on account of UK taxes or liabilities, including penalties.
14. The alternative to the one-off payment is voluntary disclosure by the individual of certain detail, which, with other information, enables the tax due to be assessed and collected. The information necessary is set out in Article 10.

"Voluntary disclosure

1. Where written authorisation by the relevant person has been given to disclose in accordance with Article 7 paragraph 1 the Swiss paying agent shall transfer the following information to the competent authority of Switzerland on a monthly basis starting one month after appointed date 3 with the last transfer six months after appointed date 3:

a) the identity (name, first name and date of birth) and address of the relevant person;

b) the United Kingdom tax reference number, if known;

c) the name and address of the Swiss paying agent;

d) the customer number of the account or deposit holder (customer, account or deposit number, IBAN-code);

e) for the time of the account's or deposit's existence between appointed date 1 and the date of entry into force of this Agreement, the yearly account balance and statement of assets as at 31 December of each relevant year.

2. The competent authority of Switzerland shall communicate the information referred to in paragraph 1 to the competent authority of the United Kingdom on a monthly basis starting two months after appointed date 3 with the last communication of such information occurring seven months after appointed date 3. Later disclosures, e.g. due to legal proceedings, shall be communicated without delay by the Swiss paying agent to the competent authority of Switzerland, which shall communicate them without delay to the competent authority of the United Kingdom.

3. Swiss paying agents shall issue a certificate in the form prescribed to the relevant person.

4. The competent authority of the United Kingdom may ask the competent authority of Switzerland for clarification or further information in cases where identification of the relevant person is not possible from the information provided."

15. Article 13(3) is instructive but not directly in point. If a person has opted for the one-off payment but there are insufficient funds for it to be paid, the equivalent of voluntary disclosure follows, and is given by the paying agent - for these purposes, the bank.
16. Finally, Article 15 makes provision where the levy is wrongly applied in these terms, which led to some debate between the two competent authorities.

"15(1). Where the Swiss paying agent does not levy the one-off payment in full owing to errors in calculation or execution, the Swiss paying agent may levy the missing amount from the relevant person. A further amount representing interest shall be added in accordance with Article 14 paragraph 2. The Swiss paying agent shall remain bound towards the competent authority of Switzerland to make the one-off payment in its entirety.

 3. Where the one-off payment in accordance with Article 9 has been wrongly levied by the Swiss paying agent, the competent authority of the United Kingdom shall, on receipt of appropriate evidence, refund the one-off payment including interest less the expense allowance."

17. There is a provision for reciprocity in Article 35 but it only covers the exchange of information, since the reason for the structure of the Agreement is to respect the confidentiality of the banker-customer relationship under Swiss law.
18. The Agreement was amended by a Protocol of March 2012, and an Exchange of Notes in April 2012. Some information about it was posted on the HMRC website.

The Finance Act 2012

19. The Finance Act 2012 in s218(1), under the heading, "Agreement between UK and Switzerland", provides:

"Schedule 36 contains provision giving effect to –

an agreement signed on 6 October 2011 between the United Kingdom and the Swiss Confederation on co-operation in the area of taxation, as amended by a protocol signed by them on 20 March 2012 and by a mutual agreement signed by them on 18 April 2012 implementing article XVIII of that protocol."

The effect of s218(2) was that Schedule 36 came into force on 1 January 2013.

20. Schedule 36 defines the agreement; it is the one with which this case is concerned. It states the four taxes affected: income, capital gains, inheritance taxes and VAT. Under the heading "Application of this Part", it provides in paragraph 3:

"(1) This part applies if-

a one-off payment is levied in accordance with Part 2 of the Agreement;

a certificate is issued under Article 9(4) to a person ("P") in respect of that payment, and

the certificate is approved by P or considered approved by virtue of that Article.

The certificate is referred to in this Part as "the Part 2 certificate"."

21. Paragraph 5 deals with eligibility for clearance:

"(1) The effect of the Part 2 certificate depends on whether P is eligible for clearance.

(2) P is "eligible for clearance" if-

- none of the circumstances listed in Article 9(13)(a) to (e) apply (tax investigations etc) and

- Article 12(1) does not apply (wrongful behaviour in relation to non-UK domiciled status).

Otherwise, P is "not eligible for clearance"."

22. If a person is not eligible for clearance, paragraph 8 provides that the "one-off payment is to be treated as if it were a credit allowable against the tax due from P taking into account qualifying amounts."
23. The Claimant was eligible for clearance. Paragraph 6 provides:

"(1) This paragraph sets out the effect of the Part 2 certificate if P is eligible for clearance.

(2) P ceases to be liable to tax on qualifying amounts."

The rest of paragraph 6 disapplies paragraph 6(2) from certain sums, which do not matter here, but reflects the Agreement.

24. Paragraph 12 does not apply but is worth noting:

"12. If a one-off payment is refunded by HMRC in accordance with Article 15(3), this Part ceases to apply with respect to that payment."

25. The Explanatory Note to the Schedule explained that there was a one-off levy which would satisfy liabilities in respect of four UK taxes, avoidable by giving authority to disclose assets, income and gains to HMRC. It did not explain that the levy could be much greater than the liabilities.

The facts

26. Ms Vrang explained that she received a letter in London from Credit Suisse AG dated "July 2012". It was headed in bold: "Important Information for Clients regarding the UK-Switzerland Tax Agreement". Although it started by saying that it would like to provide her with "further information" about the Agreement, there is no evidence as to what previous information might have been given. It confirmed that the parties were seeking its ratification so that it could enter into force on 1 January 2013. "Therefore, it is important that you consider the various options available to you with regard to PAST and FUTURE taxes potentially applicable to your assets in Switzerland."
27. The letter set out what assets, residence and on what dates made someone a "relevant person". It warned her that Credit Suisse's records and understanding of the Agreement meant "you may fulfil the criteria" for being a relevant person. "Therefore we would like to inform you of your rights and obligations in respect of any accounts falling under this client relationship number, so that you may discuss your individual situation with your tax advisers and take the necessary steps. Once the agreement has been ratified and the exact definition of relevant persons has been finalised, we will write...with a further update and will request, at that time, your decision regarding the relevant tax options."
28. Under the heading "Regularising the Past", it continued:

"The agreement offers you a choice between (a default and an alternative option) which you must expressly authorise us to carry out).

The default option is essentially a one-time payment of withholding tax to regularise the past in accordance with a predetermined formula. Assuming that the agreement enters into force as of January 1, 2013, it is anticipated that we will debit your account on May 31, 2013, in respect of the one-time payment and forward the funds anonymously to the competent Swiss authority, who will then forward the funds to the relevant UK tax authority. At this time, a certificate will be provided by the bank detailing the amounts levied, which you will have 30 days to review. If you do not instruct us to the contrary, this is the option we will implement on your behalf.

The alternative option allows you to authorise the bank to make a voluntary notification of the historical account balances on your behalf. Please note that this can only be done at your express wish. In this case, Credit Suisse will require your authorisation to notify the Swiss Federal Tax Administration (SFTA) of your account details by May 31, 2013, at the latest. The SFTA will then forward this information to UK tax authorities during the second half of the 2013 calendar year. A certificate will be provided by the bank, detailing the information shared."

29. After dealing with tax treatment for the future which does not arise here, the letter continued:

"Next Steps

As mentioned, once the agreement has been ratified and the exact definition of relevant persons has been finalised, we will write to affected clients with a further update and will request, at that time, your decision regarding the relevant tax options. Your relationship manager will be pleased to provide you with a list of recognised professional tax advisors who will be able to assist you in analysing your personal situation as well as address any questions you have.

Your relationship manager can also provide you with a provisional calculation, on a non-binding basis, of the withholding tax to be levied to regularise the past. This calculation is based on the formula in the agreement using the account valuations known at present, and is intended to serve as a guide to the approximate amount of the one-time payment to be made for each client relationship number.

In the meantime, it is important that you contact your relationship manager as soon as possible. If you are unsure how the agreement may affect you or if you believe the terms of the agreement do not apply to you. However, as Credit Suisse does not provide tax advice, we recommend that you consult a professional tax advisor in order to evaluate the options and alternatives available to you."

The Claimant took no action in response.

30. She received a second letter from Credit Suisse, dated 30 September 2012. It was headed: "Decision Required: Declaration regarding Withholding Tax and Voluntary Disclosure in Accordance with the Terms of the Tax Agreement between the United Kingdom and Switzerland". It now told her that she was a "relevant person" both for the regularisation of the past and tax treatment for the future. The stated purpose of the letter was to inform her about her rights and obligations under the Agreement, "as well as the associated consequences. This is a complex topic." Her relationship manager would be pleased to assist if she had any questions about the options described in the letter or about the Agreement in general. It said:

"We hereby enclose a form for this purpose as well as forms that you may need to complete and sign in order to notify the Bank regarding certain tax decisions as required by the Agreement. Before completing any of the enclosed forms, you should also consider the "special cases" listed at the end of this letter."

31. Under the heading "Your next steps 1. Regularisation of the Past", she was told that as she had a bank account with a "Swiss paying agent (your bank)" and was a relevant person, "you must choose one of the following options for regularisation of the past":

"You make a one-off payment in order to regularise the past. Assuming that the Agreement enters into force, the amount will be debited from your account with us on May 31, 2013, and will be transferred anonymously to the Swiss Federal Tax Authority ('SFTA') for forwarding to the relevant UK authority.

Please note:

If you choose this option (P1), you need not complete a form, but you must ensure that sufficient funds are available in your account on May 31, 2013. If there are insufficient liquid funds available in the account on May 31, 2013, we will not be able to debit the amount owed. In this case you will have eight weeks in which to make sufficient funds available. If you do not provide sufficient funds in time, the Bank will disclose your bank details including balances to the SFTA as in the case of voluntary disclosure (see below).

If you hold several accounts under the above client relationship number, we will let you know the account number that will be debited at a later time. The amount owed will be delivered to the SFTA in British pounds. If the account is denominated in a different currency, the Bank will calculate the amount owed using the applicable exchange rate and debit the account accordingly.

The one-off payment results in a clearance of tax obligations to the extent specified under the Agreement. However, the regularisation is limited to 120% of the value of your assets in your account/safekeeping account as of December 31, 2012, are greater than 120% of the value as of December 31, 2010, and these are to be regularised by means of the one-off payment, you must provide us with details of value increases and return flows.

P2) Voluntary disclosure

As an alternative, you may authorise the Bank to disclose your bank details including balances to the SFTA. The SFTA will then forward the data to the tax authorities in the UK.

Please note: if you choose this point (P2) you must expressly authorise us to pass on the required information by completing and signing the required form. You are requested to return the form to us by December 14, 2012 to allow us to process your decision in good time."

32. A box contained this summary:

"Summary of steps for regularising the past:

Option P1 – no forms required; sufficient liquid funds in your bank account on May 31, 2013.

Option P2 –complete and return the required form "Declaration Concerning Voluntary Disclosure to Regularise the Past" using the enclosed return envelope.

A note about deadlines.

You are requested to return your form to us by December 14, 2012 to ensure that we can process your decision in good time. The latest date for your decision under the Agreement is May 31, 2013. If we do not receive your correctly completed form by this date, we will automatically debit the one-off payment (option P1).

Please note that once we have received your form relating to the regularisation of the past, your decision is irrevocable as of the date of the Agreement's entry into force (January 1, 2013)."

After dealing with the future treatment of taxes and special cases, the 4 page letter ended:

"The Agreement may have significant consequences for you. It is important that you consider the options carefully before making your choices. We recommend that you consult a professional tax advisor to analyse your personal situation. Your relationship manager can provide you with a list of recognised professional tax advisors as well as a non-binding provisional calculation of your potential tax liability.

Once you have reached your decision, please send us your completed, signed forms (if applicable) by the respective deadlines using the enclosed return envelope. If we do not receive your written authorisation, we will automatically apply the default options.

We would like to support you in understanding your options under the Agreement. Your relationship manager will be pleased to assist in answering questions you may have about the Agreement and the forms, as well as the special cases described above."

33. The voluntary disclosure form was attached. It was headed: "Declaration Concerning Voluntary Disclosure to Regularise the Past". It states:

"Pursuant to the Agreement, in particular the rules concerning the regularisation of the past, Credit Suisse AG (the Bank), is obligated, as a Swiss paying agent, in respect of all relevant assets, either to levy a one-off payment for past taxes or, where written authorization has been provided by the relevant clients, to disclose their business relationship by reporting the relevant accounts and safekeeping accounts to the Swiss tax authorities, in order for this information to be passed on to the competent authorities in the UK.

The Client hereby declares that he/she elects to have his/her information disclosed for all relevant assets held under the abovementioned client number as an alternative to the payment of a one-off payment for past taxes ("Voluntary Disclosure").

By choosing the Voluntary Disclosure option, the Client authorizes the Bank to report all relevant information regarding the business relationship concerned (including the identity and address of the relevant persons, account or safekeeping account numbers, and account balances and statements of assets; cf. Article. 10(1) of the Agreement) to the Swiss tax authorities for submission to the competent authorities in the UK. As part of this voluntary declaration, the Client releases the Bank from its obligation to comply with banking confidentiality to the extent required for such disclosure, irrespective of the subsequent termination of the relationship."

It ends with the statement in bold that the declaration is governed by Swiss law.

34. The Claimant took no steps in response to this letter either. She explained why in her first witness statement. She recollected reading the first letter, but noted that there would be a further update. She did not return the voluntary disclosure form sent with the second letter so as to withhold information from HMRC. "Had I fully understood and appreciated the ramifications of the letter and/or if I had understood the consequence of not returning the forms, I would not have simply ignored matters." She had also assumed, based on her experience of working in the financial sector that "a regulated financial entity, could not offer a default option (not replying) where clients would be in a worse position than if they had acted on the letter." The letter did not say what the deduction would be nor highlight "the potential disastrous consequences of my failing to do anything." At the time, this seemed less important in the light of her then "traumatic personal circumstances": the ending of a long-term relationship with her partner, the need to move house and to resolve the administrative consequences of the split, "undoubtedly played a role in my failure to respond to this letter." Her personal circumstances were not mentioned until the pre-action protocol letter; and had not been disclosed to HMRC by the time it took the decision challenged.
35. In early June 2013, she received notification from Credit Suisse, that £56715.49 had been taken from her bank account for the purpose of regularising the past tax amount under the Agreement. She was "shocked" by this, having thought that her UK tax affairs were all in order. Any objections to the deduction had to be made within 30 days. She also received the certificate to the effect that the one-off payment had regularised her past tax affairs under the Agreement.  This explained that if an objection to Credit Suisse led to either a new certificate or to the existing one being maintained, any objection to that further decision had to be made within 30 days to the SFTA.
36. On 23 June 2013, after taking advice from her tax adviser in the UK, she completed the voluntary disclosure forms for the past and withholding tax, for the future. She also raised objection to the levy, but Credit Suisse said that it had not been "wrongly levied". She did not take the matter further to the SFTA. But in December 2013, a further notification and certificate were issued by Credit Suisse, because it said that the levy had been wrongly calculated. This was for £57865.
37. The Claimant, with her tax adviser, provided details of her accounts and tax affairs to HMRC seeking to persuade them to agree the tax she owed, and then to refund the difference between the levy and the tax she owed. This commenced with a letter in October 2013 from her tax adviser. The initial reaction of Mr Priestley, of HMRC's Offshore Co-ordination Unit, to this claim was that, harsh though the levy might appear to be, no discretionary refund should or could be paid, as it was her fault that the levy was taken because she had failed to deal with perfectly clear correspondence. At that time, there was no suggestion that she had been inadequately notified.
38. However, Mr Priestley asked the Claimant's tax adviser in June 2014, as part of the information HMRC required in order to consider a discretionary refund of the excess of levy over tax due, why she had not answered the letters from Credit Suisse.
39. Although he had received no answer, Mr Priestley reviewed the claim in October 2014 to see what further information would be required to make a provisional decision, if the policy as proposed were accepted. His provisional decision was that the claim should be rejected. He also had concerns about the 2012-13 tax return, but no full review of the taxpayer's circumstances was begun because, until a favourable decision had been made on the application for a refund, that could have been a waste of resources.
40. On 8 December 2014, HMRC wrote to the Claimant's tax adviser to explain the basis upon which discretionary refunds were being made in respect of payments which had not been "wrongly levied." Relevant information about the claim not previously submitted should be submitted without delay. A further letter would be sent in February, either with the decision or seeking further details.
41. On 26 February 2015 Mr Priestley chased him for a reply to the email of June 2014. In the absence of a reply even by July 2015, Mr Priestley wrote saying that the case was closed. A holding reply was sent, saying that the agent was still seeking information from the Claimant. She then said that a letter had gone missing. Her tax adviser's eventual reply of 23 November 2015, the delay in which the Claimant attributes in part to her adviser, stated that she "did not take action as she did not understand the implications of not returning the forms." It also said that the Claimant was not UK domiciled and there was minimal UK tax due.
42. The application for a refund, discretionary and otherwise, was refused by HMRC in its letter of 9 December 2015. The final decision on a refund was made by Mr Priestley after referral to a more senior officer. She did not qualify for a refund under Article 15(3) of the Agreement. The discretion afforded to the Commissioners for HMRC enabled them, in exceptional cases, to offer repayment in cases of "hardship at the margins", that is in "circumstances where keeping the charge in place would cause significant hardship and result in a situation which a court would view as grossly unfair to the individual paying the charge, as a result of actions entirely beyond that person's control." She did not meet that test and so the Commissioners "are unable to exercise their discretion with respect to your claim." The letter noted that she said she had taken no action because she did not understand the notifications from Credit Suisse. The bank however had given her adequate notice of her rights and responsibilities; and the deadline of 31 May 2013 for making an election could not be extended under the Agreement. It continued:

"The Agreement does not set any limit regarding the actual or relative scale of the outstanding UK tax liabilities before the one-off payment could be levied. The bank could not be expected to assess whether there were outstanding UK tax liabilities to be regularised before imposing the charge, and the Agreement did not require them to do so.

As the only person with full knowledge of your personal tax affairs, the Agreement left it for you to make a commercial decision in your own best interests. The fact that you did not do so, whilst regrettable, does not mean that the charge was wrongly levied. Further, as it is a result of your own inaction, it does not amount to 'hardship at the margins'."

43. The Claimant, it said, had not outlined what specifically she found unclear in the two Credit Suisse letters about the Agreement; HMRC thought them clear. "It was incumbent on each individual to take due care to consider their options and seek appropriate advice as necessary. Unfortunately an error, misunderstanding or oversight by you does not amount to hardship at the margins."
44. The letter concluded:

"Accordingly, we conclude that you were given sufficient opportunities to make an election for disclosure, which would have prevented the one-off payment. Whilst in your case the one-off payment may not have been the commercially best option available to you, it is unfortunately not possible for us to reverse it. The circumstances outlined in your claim do not meet the high threshold needed to establish hardship at the margins. We would therefore be stepping beyond the limited discretion available to us if we were to offer a refund in your case."

45. Mr Priestley said in his evidence that he thought it a "fairly straightforward case" which Tax Administration Policy had indicated could not be granted, and there were no extenuating circumstances: the letters, written months before action was required, were clear as to options, actions and consequences. It had not been suggested that the letters from the bank had caused the misunderstanding. Recipients had time to seek advice or to approach HMRC, whose contact details were given. No estimate of the charge was required. The bank could not give the precise amount of the charge before 1 January 2013 because it depended in part on what was in the account on 31 December 2012. The Claimant's lack of understanding did not mean that the sum had been "wrongly levied", nor did it create personal hardship such as to warrant a refund.
46. Mr Priestley also considered other issues in his statement. The Claimant's personal relationship problems would not have engaged the personal hardship discretion ground, even had she raised it with him; something altogether more severe was required. He identified tax benefits he now saw arising in regularising liabilities, though they had not formed part of his reasoning in relation to the refund.
47. The Claimant, in her second witness statement, responding to HMRC's case, said that she had not taken tax advice since she did not consider that she had any UK tax issues and so did not expect any liability to a further charge. Neither the sum itself or the basis of its calculation or its proportion to the assets involved was stated. The letters gave no indication that the lump sum could be quite unrelated to any tax due. She would have expected far clearer warnings about the risks being run if she did not answer, in view of what was at stake. The Agreement was not, she thought, aimed at those who, like her, were not tax evaders, had no tax advisers, paid their taxes and expected to be treated fairly. She assumed that the bank acted for her and not for others; failure to answer a letter from a bank could not have been expected to lead to liabilities so unrelated to tax due; liabilities to HMRC should not accrue from a failure to answer letters from a bank. Were HMRC enforcing a debt from a UK tax payer in the UK by taking money from his bank account, there would have been greater safeguards for the tax payer, including a face to face visit.
48. The evidence shows that some banks did provide forms for a positive election either way: one-off payment or voluntary disclosure, though the default provision would still apply if neither were returned. Credit Suisse had simply gone to the default option, if no voluntary disclosure form were received. Mr Mullan, for the Claimant, submitted that two forms would have reinforced the need for a positive election. But it is not contended that without two forms, the sum was "wrongly levied." And, in my judgment, it could have made no difference on the facts here.
49. There is an unresolved dispute between the Claimant and HMRC as to how much UK tax she owed. She accepts now that there is an amount due, which has varied over time and depending on advice, between, it seems to me, of the order of £7000 (her first witness statement [29] if domiciled in the UK, which she disputes) or £3000 or just under £1000. HMRC has not calculated with precision or finality what she owed, because it takes the view that that is irrelevant; it has lawfully received the levy, the certificate has been issued and subject to the exercise of discretion, that is that. For the purposes of these proceedings, it is content to accept that, on present information, it at least appears likely that the levy has very greatly exceeded the tax she would have paid had she taken the voluntary disclosure option in time. Likewise, although she states that she has made voluntary disclosure as would have been required under that option, HMRC is not in a position to say whether it accepts that or not. That is because it has not gone into the position sufficiently to reach a final view; and it has not done so because the levy was received following the lawful application of the Agreement.

General observations

50. First, it is not and could not be contended by Mr Mullan that the UK Government was not entitled to enter into the Agreement, pursuant to which it received the intermingled sums levied from those holders of Swiss assets who chose the non-disclosure options, doing so with no knowledge of their identities or tax liabilities. It received such sums in furtherance of a perfectly proper anti-avoidance measure. It is not said that the Agreement had to be incorporated into domestic law for its operation to be lawful, though it is correct that the Finance Act 2012 does not expressly incorporate the Agreement as a whole into UK domestic law. The Treaty ratification process in s20 of the Constitutional Reform and Governance Act 2010 does not apply to this Agreement, because of s218 of the 2012 Act and s23 of the CRGA 2010.
51. Second, save for an issue, far from a principal ground of challenge, over whether the sum was "wrongly levied" within the scope of Article 15(3), it is not in dispute but that the one-off payment was calculated, levied and paid to HMRC in accordance with the Agreement. She makes no claim here that Credit Suisse, the SFTA or the Swiss Government acted unlawfully. That is a matter which would be for the Swiss Courts, applying Swiss law, whether treated as a private law claim between banker and customer or a public or private law claim against a Swiss state entity. There had been an issue of sorts in Switzerland raised by the Claimant, but the Claimant has not pursued it there. HMRC will repay money "wrongly levied" within the meaning of Article 15 (3), for example, by reference to the calculation or the identity of the payer or whether the payer was a "relevant person" within the Agreement, but those points are not at issue here. So, subject to the contention that this sum was "wrongly levied", by reference to the timing and content of the Credit Suisse letters, HMRC was entitled under the Agreement to receive the levy paid by the Claimant.
52. This challenge, third, is not a private law restitutionary claim. There is force, therefore, in the underlying submission of Mr West for HMRC, that, apart from whether HMRC exercised its discretion in a legally erroneous manner, and whether the sum was "wrongly levied", there is no public law claim available against HMRC. The complaints made by the Claimant are matters for her to pursue in Switzerland against her bank and the SFTA. He said this of the charge in his Skeleton Argument at [44], accurately as it seems to me:

"It is a charge levied on assets outside the UK's jurisdiction under Swiss domestic law, pursuant to the terms of an international treaty, in lieu of making disclosure which may lead to an assessment to tax in the UK. HMRC has no ability to audit directly the actions of the Swiss paying agent but only receives reports on audits conducted by the SFTA (Article 39(4)) It takes whatever payment is remitted by the SFTA in reliance upon the [paying] agent and the SFTA having properly operated the provisions of the Agreement."

53. That approach affected his submissions on the first two issues. However, I can readily understand, though the expression of the point as an issue of public law is not straightforward, why the Claimant pursues HMRC: crudely, it has the money she says is hers, though others took it from her. So I turn to the issues raised by Mr Mullan.

A charge without express legislative authority?

54. Mr Mullan's first ground was that HMRC had no power to levy the charge because i) a charge could only be levied with the express or necessarily implied authority of legislation and ii) there was no such authority in the Finance Act 2012, the only relevant legislation. The Act did not say, as it could and should have done, that the one-off payment may be levied in accordance with the Agreement or in accordance with procedures it then set out. Parliament needed specifically to approve an arrangement whereby the sum levied could greatly exceed any tax due, and could do so with no mechanism for review and refund. At best, the Act assumed that a charge had been imposed lawfully. There was no necessary implication to that effect either, whether or not such an implication would have been reasonable. Parliament needed to confront the issue squarely, to meet the principle of legality.
55. Parliament may not have realised that this was not a contractual settlement of disputed tax liabilities with an anonymous tax payer, but the unilateral imposition of a pecuniary burden. The HMRC submission to the Exchequer Secretary on refunds policy had said in July 2013 that it had expected those who had no further tax to pay would make voluntary disclosure, unless they took a deliberate decision not to do so and to pay the lump sum, but HMRC had found that a number of compliant taxpayers had opted to pay the levy when it was not in their interest to do so. The Agreement's penal withholding charge had been aimed at those who were hiding funds and not at those who were compliant.
56. The principle is not at issue: clear and distinct legal authority is required for the levying of a tax or charge. It is not confined to a tax, properly so called. I say that because HMRC does not regard the levy or one-off payment as a tax or tax charge, or UK tax charge.
57. A few cases make good Mr Mullan's point. Attorney-General v Wilts United Dairies [1922] All ER Rep. Ext. 845, HoL, concerned a levy on milk transported from counties further west in England into Wiltshire. It was not, as the government contended, a price control mechanism but a levy of money for the use of the Crown for which the Food Controller, who levied it, required but lacked statutory authority. It did not matter whether it was a "tax" or not. In the Court of Appeal, (83) Knight's LGR 725, Atkin LJ said:

"The intention of the Legislature is to be inferred from the language used; and the grant of powers may, though not expressed, have to be implied as necessarily arising from the words of a statute; but in view of the historic struggle of the Legislature to secure for itself the sole power to levy money upon the subject, its complete success in that struggle, the elaborate means adopted by the representative House to control the amount, the condition and the purpose of the levy, the circumstances would be remarkable indeed which would induce the Court to believe that the Legislature had sacrificed all the well known checks and precautions, and not in express words, but merely by implication, had entrusted a Minister of the Crown with undefined and unlimited powers of imposing charges upon the subject for purposes connected with his department. I am clearly of opinion that no such powers, and indeed no powers at all, of imposing any such charge are given to the Minister of Food by the statutory provisions on which he relies."

The House of Lords agreed. Lord Buckmaster said:

"However the character of this payment may be clothed, by asking your Lordships to consider the necessity for its imposition, in the end it must remain a payment which certain classes of people were called upon to make for the purpose of exercising certain privileges, and the result is that the money so raised can only be described as a tax the levying of which can never be imposed upon subjects of this country by anything except plain and direct statutory means."

58. In a more modern vein, Lord Wilberforce described this as a "familiar principle" in W. T. Ramsey v Inland Revenue Commissioners [1982] AC 300:

"1. A subject is only to be taxed upon clear words, not upon "intendment" or upon the "equity" of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle. What are "clear words" is to be ascertained upon normal principles: these do not confine the courts to literal interpretation. There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded."

59. Those submissions do not show, in my judgment, that HMRC required express authority to receive and retain the one-off payments taken by the paying agent and forwarded by the SFTA pursuant to the Agreement, with any complaint about the taking of the money from the Claimant's account being addressed to Credit Suisse and to the SFTA. The Finance Act does not say in so many words that HMRC is entitled to receive the levies, and I do not see why it needs to do so for their receipt and retention to be lawful for the reasons set out above in my general observations.
60. The purpose of Schedule 36 to the Finance Act is to give domestic effect to the consequences of the payment of the levy; s218, above, states that Schedule 36 contains provisions giving effect to the Agreement. Mr Mullan is right that it assumes that the Agreement is lawful, as it is. Paragraph 3 refers to the one-off payment and to its consequences, the issue and effect of the certificate for those eligible: the recipient ceases to be liable to tax on qualifying amounts. In the absence of legislation, the receipt of the money would not have had the intended effect on the payer's tax liabilities; the effect of payment of the levy and of a certificate had to be provided for.
61. However, if specific provision is necessary, I accept Mr Mullan's submission that what is required is a necessary inference as a matter of logic from the express words used; R (Morgan Grenfell & Co Ltd v Special Commissioners [2003] 1 AC 563. But here it is an unavoidable inference, from the provision made for the consequences of their receipt, that Parliament knew of and approved, in primary legislative form, the receipt of those sums which would lead to the very operation of paragraph 6 of Schedule 36. Parliament could not sensibly enact provision for the consequence of the receipt of the levied sum without accepting the parts of the Agreement which provide for the levy. In reality, it approved the operation of the Agreement according to its terms.
62. Moreover, Parliament did so when it must have been plain that, the identity of the individual relevant person being unknown to HMRC and there having been no assessment of tax due by individuals, there could be no predictable or fixed relationship between the levy paid and the tax due were disclosure to be made. It was obvious that it was in the hands of the potential levy payer to reach a decision as to which course of action was better for him or her: disclose or pay. It was obvious that there would be no assessment of the tax liabilities of those who paid the levy and received the certificate, and that there would only be an assessment of the liabilities of those who made voluntary disclosure. It was also obvious that if there were no voluntary disclosure, the levy would have to be taken, otherwise the Agreement would be ineffectual at the option of those with most to hide.
63. The absence of provision for refund is also an inevitable consequence of the agreement, rather than of Parliamentary oversight: those who opt for voluntary disclosure need no refund provision; those who do not opt for voluntary disclosure need no refund provision, "wrongly levied" sums apart, because they have the certificate resolving any tax liabilities in return for the levy. It is a refund provision, for example where there was a large difference between levy and tax due, which would have betokened a misunderstanding of the Agreement. Neither the Act nor the Agreement provide for a refund for those who have paid the levy and received the certificate, apart from sums "wrongly levied". There is a specific but inapplicable refund provision in paragraph 10 of the Schedule, and another in paragraph 12 for sums "wrongly levied." But that is the extent of refund provision. Nor is there provision for the amount or payment to be re-opened by late voluntary disclosure. In view of the Schedule's provisions for the certificate and its effect, it would have needed express provision in the Schedule for that process to be re-opened and deprived of its effect, and for sums to be treated as paid on account or refunded pending or after disclosure and assessment.
64. Ministers may not have anticipated that the generally compliant tax payer would have failed to opt for voluntary disclosure where that was in their interests, but that supports rather than confounds the view that Parliament and government understood how the legislation was framed and intended to work. Mr Mullan's description of the levy as the unilateral imposition of a pecuniary burden is simply wrong: the liability to a levy was notified and was avoidable by simple steps of which the payer was told with ample time in which to react. Parliament must by inevitable implication have approved the receipt of the levy, and the absence of any more general refund provision. Any other outcome would simply have undermined the effect of the Agreement.
65. Mr Mullan accepted that if a levy-payer had signed a form positively electing to pay the levy rather than to make voluntary disclosure, the payer could not then seek a refund if the levy turned out to be very much larger than his view of the tax liability, nor could he seek to change his position. He would have consented to the position in which he found himself. That, he appeared to accept, was the position which Parliament and the Agreement had achieved. But this position, which so far as it goes is unavoidable, shows to my mind that his argument for the Claimant cannot be right, for the simple reason that, in the absence of the default provision contained in the Agreement, a relevant person's refusal to take a decision would prevent the operation of the Agreement. So a default position was necessary, and must have been obvious to and accepted by Parliament. In reality, the failure positively to opt for one or other was treated under the Agreement and in the Schedule and as opting for, consenting to, the levy. The Credit Suisse letters made that consequence perfectly clear. Mr West is right to submit that what Mr Mullan seeks is in substance a rewriting of the Agreement and of the Schedule to fit the Claimant's circumstances.
66. Mr Mullan made much of the position of those who fell outside Article 9(7) of the Agreement because their tax affairs were under investigation or had concluded with a conviction or, in Switzerland, a civil penalty, as provided for by Article 9(13), and given effect in paragraph 8 of the Schedule: if a levy paid by such a person, including criminals, is treated as a payment on account, why should the Claimant's levy be treated less favourably and not as a payment on account? Or as he also put it: why would Parliament not assume that "the innocent victims of a failure to disclose" were not simply also making a payment on account. The initial appeal of such an argument does not survive examination. First, there is no equivalent of such a provision for the relevant person who has paid the levy and is entitled to the advantages of a certificate. The inaptness of the language of "innocent victim" apart, the express provision to treat the payment of the levy as a payment on account in certain circumstances, shows that it was not otherwise to do so. The option to pay the levy was clearly not a mere option to pay a sum on account while awaiting the resolution of tax liabilities following voluntary disclosure. Mr Mullan is straining to obtain an outcome which requires a rather different Agreement and Schedule. Second, the purpose of the provisions he referred to is to prevent payment of a levy impeding investigation, and what may be a very intensive and prolonged investigation, of tax evasion or jeopardising criminal proceedings. That is not remotely akin to the position here. Third, a general provision that the levy was a payment on account, but at the option only of the payer, would confer a significant rather one-sided advantage.
67. Mr Mullan referred me to Revenue and Customs Commissioners v Apollo Fuels Ltd [2016] EWCA Civ 157, [2016] STC 1594, as an example of the strict approach to construction which was adopted towards taxing provisions; but it seemed to me not to be based on some markedly demanding strictness, so much as making the rather more conventional point, and it seems good whatever the nature of the case, that if the HMRC argument was at odds with normal usage of language, the Court would apply the normal usage of language because it would have expected Parliament to make the contrary point express.
68. I do not accept that Mr Mullan can gain assistance by pointing out, whether he is right or wrong on which I make no finding, that Parliament had not followed certain of its procedures for permitting the levying of a tax. He was not inviting the Court impermissibly to rule that Parliament had failed to do what its procedures required it to do, but submitting that these omissions showed that the Act did not permit the raising of a tax. But the levy, or charge or one-off payment is not a tax; and it does not become a tax because the effect of its payment and of the certificate is to absolve the recipient from tax liabilities.
69. In my judgment, the principle in Attorney-General v Wilts United Dairies and W.T. Ramsey v IRC, above, if applicable, is satisfied. This first ground must fail.

Ground 2: the construction of the Act

70. Mr Mullan raised a number of issues under this head, not all of which fit readily under it, largely with the aim of showing that the Act should be construed so as to authorise repayment "where the taxpayer has not given informed consent" to the payment. There is of course no such provision in the Act, or in the Agreement, though there are provisions in the Agreement aimed at ensuring that, the decision, positive option or default, is reached on an adequately informed basis.
71. I take first the question of whether the sum was "wrongly levied" in this case, and so should be refunded in full. There is no definition of that phrase in the Agreement. I have referred to the approach adopted by HMRC, that it relates to failures by the Swiss paying agent in the performance of its part in the Agreement, and I agree with that approach. Although these do not of themselves exhaust the scope of the definition, the phrase is clearly confined to an error in the interpretation or application of the Agreement by the paying agent or SFTA. A sum cannot in my view be regarded as "wrongly levied" therefore where the relevant person has received the information which the agreement requires her to receive, or on the grounds that it is disproportionate to the tax she says is owed, or where the payer has made no decision and the default option has been applied by the paying agent, or on the grounds that no form was provided by the paying agent for expressing a positive decision to pay the levy, or where HMRC provided no pro forma letter for the paying agent to enclose to potentially relevant persons, further alerting recipients to the fact that this was not just another letter from a bank which could safely be ignored, or that the sum levied might bear no relationship to any tax owed. These were complaints made by Mr Mullan about the way the scheme had been operated in the Claimant's case, but there was nothing in those points which could show that the sum was "wrongly levied."
72. The Agreement did not require such steps. Article 7 was said to require Credit Suisse to tell the Claimant that she had to make a positive choice of option and notify them accordingly; but Credit Suisse wrote that if choosing to pay the levy, no form needed to be completed. Some paying agents had provided two different forms. But first, this imposes no duty on the individual levy payer in reality. Its function is to protect the paying agent bank from any liability to its customer where disclosure is made or levy paid. Second, this needs to be read with Article 5(3), the default position. If no option for voluntary disclosure is sent, the levy is paid. The option to pay the levy needs no form. The form would only serve as an alert; yet the effect was clearly spelt out in the letters. I do not accept the proposition that the fact that the letter stated that no form was necessary if opting for the levy, would make people think that not filling in the voluntary disclosure form would have no consequences. Indeed, the real problem for the Claimant was that she did not pay attention to the letters when received, or for months thereafter because she did not read the first and was distracted when the second arrived, and did not attend to it. It seems to me impossible to conclude that, once read with even modest concentration, it was not readily understandable. A second positive form, opting to pay, could have made no difference. It is difficult to see on what basis she could have thought that the levy would be commensurate with tax liabilities when the whole purpose of the letters is to deal with those whose tax liabilities, and even the existence of their Swiss bank accounts, are unknown to HMRC.
73. It would not have been possible for any letter to spell out the relationship of tax to levy, since the amount of tax potentially owed could be known only to the recipient, nor could the precise levy be known until it was finally calculated, which could not happen before 1 January 2013. The fact that there could be a marked disparity between the two could have been stated, and the potential range of the levy, 21%-41%, could have been stated. The language of the letters made it clear, however, along with the voluntary disclosure form itself, that this was a matter concerning UK tax, with consequences, and not just some letter from the bank. The need to seek advice on the options, advice which could also indicate, roughly, the range of the levy, was spelt out. More than enough time was given in which advice could be sought. There was no requirement to do more, and I see nothing which could make the levy "wrong" in what was done by Credit Suisse.
74. Mr Mullan's reference to Hallamshire Industrial Finance Trust Ltd v IRC [1979] 1 WLR 620 is off the point. It holds that the payer should be told what tax he has to pay and not just given information from which a skilled adviser can work it out. The paying agent here, however, would not able to tell the payer what the precise levy would be before the end of December 2012. The payer, upon receipt of either Credit Suisse letter, could go to an adviser for an indication as to the levy range and compare that with potential tax liability, so that advice could be given and a decision made about the option to take, or put on hold to await a precise calculation and more precise comparison being made after December 2012.
75. Mr Mullan made much of the fact that, had the letters from Credit Suisse been subject to the Consumer Protection from Unfair Trading Regulations 2008 SI No.1277, CPUTR, they would have breached it through omitting material information, because they did not state the amount of levy owed, and providing information in an unclear manner. Some of the points I have referred to above were repeated under this head. Mr Mullan accepted that the Regulations did not apply. He submitted that they were relevant by analogy to the task of judging when a sum had been "wrongly levied." But, in my judgment, the letters were perfectly clear, if read, and would have alerted the ordinary reader to the fact that they needed to address a particular problem, with financial consequences. HMRC had no role in their drafting; these were indeed letters from banker to customer. They did not answer all possible questions, but did advise that advice be sought and say how that could be done. I cannot accept her suggestion that her experience in the financial sector meant that the Claimant thought that the default option could not be worse than the positive option, and that that should inform how the letters are judged, without bringing into play the fact that someone with her status, Vice-President in a financial institution and former employee of Credit Suisse, and her twenty years' experience, would have been able to read the letters, and on doing so, understand quite clearly that something significant was afoot and she needed to be do something about it. The problem was not the content or clarity or layout or bold print of the letters, but the state of mind of this Claimant who barely read them, and then put them aside. Parliament had not provided for that; it cannot have expected it.
76. There is one point of construction under this head, properly so-called. It was not a principal point but needs consideration. Article 6 states that the Swiss paying agent must give notice to account holders about the content of the Agreement and their rights and duties "within two months of [1 January 2013]…" Article 7 then states that the relevant person shall notify the paying agent in writing by 31 May 2013. Notifications made before 1 January 2013 become irrevocable if not revoked by 1 January 2013. The letters were written to the Claimant before 1 January 2013. So, submitted Mr Mullan, they were not written "within two months" of 1 January 2013. Indeed, they were not written within two months either side of that date.
77. That does not show that the Agreement was not complied with. I accept Mr West's submission that this would not cause the sum to have been "wrongly levied" if the notifications were otherwise what the Agreement required. The nature of the problem and risk, though not the percentage range of levy, and the need to take advice, and the options and effect of default were amply clear. And on the facts, it is difficult to see that a further reminder would have had any different an effect on the inaction of the Claimant. Moreover, what the Agreement is providing for is the latest date upon which notification may be given, and to give three months, if no earlier notification had been given, in which the potential payer could seek advice and reach a decision on the option to follow. It is not removing the effect of earlier letters as satisfying the Agreement. The language of Article 7 expressly provides for a decision to be made before 1 January 2013, and permits it to be changed before 1 January 2013. The default option does not bite until 31 May 2013. The obvious probability is that a revocable decision, made before 1 January 2013, would only have been made because of notification, in a letter by the paying agent, of the prospect of levy without voluntary disclosure. So, it is not requiring a further letter within two months after 1 January 2013, regardless of what has gone before.
78. The only further information which a letter written after 1 January 2013 could contain is the precise amount of the levy, on the basis that the paying agent would know what sums were in the accounts at 31 December 2012, the last input. The calculation is not simple, and it would take some time for the banks to perform it, and to work through each relevant customer. There is however no obligation on the paying agent to give the precise or even an approximate figure to the payer. That is not the purpose of the notification at any stage, nor the purpose of this requirement in Article 7. Nor was it the Claimant's complaint to Credit Suisse or to the SFTA.
79. I was not persuaded that there was anything in Mr Mullan's reliance on Article 63 of the Treaty on the Functioning of the European Union or on Article 1 of Protocol 1 of the ECHR, to which I now turn.
80. Article 63 prohibits the restriction by Member States on the movement of capital between Member States and Member States and between Member States and third countries, and although it is permissible under Article 65 to distinguish for tax purposes between taxpayers in different places of residence and different places where capital is invested, arbitrary discrimination and disguised restrictions on the free movement of capital are not permitted. Switzerland is not subject to any such prohibitory obligation.
81. Mr Mullan contended that the Agreement or the taking of the levy was, of itself, an interference with the free movement of capital between the UK and Switzerland, or vice versa, contrary to the TFEU. Also, the interference alleged was the risk that a levy would be taken which was so much greater than the tax due. Mr Mullan submitted that it was no answer that it was open to the Claimant to opt to make voluntary disclosure and so avoid it. While the tax-related objectives of the Agreement and Finance Act might provide justification for the levy, that justification did not extend to the levying of a disproportionate sum, and the interference was not proportionate to the objective either once the potential tax payer had made prompt voluntary disclosure. No failure to respond to a bank letter should cost a private individual £50000; a private individual facing that sort of risk should have information as clearly stated as for a consumer transaction covered by the CPUTR, notably the amount of the levy, or its range, or an indicative amount. A mistake by a levy payer in not dealing with the letters should be capable of correction; there was no change of mind; she had not consented to the payment of the levy, and payment of what was due would avoid loss to HMRC. The same arguments applied to ECHR Article 1 Protocol 1.
82. Mr Mullan referred me to Welte v Finanzamt Velbert [2014] 2 CMLR 11 CJEU 3^rd Chamber to show how broad was the concept of a restriction on free movement of capital: a higher rate of inheritance tax payable by German nationals on their property in Germany because they were resident in Switzerland breached Article 63. This was also illustrated by X v Staatssecretaris van Financien [2009] STC 2441 ECJ; an extended tax recovery period for taxpayers resident in the Netherlands in relation to assets held outside made it less attractive to transfer money to another member state. But this also considered proportionality of a restriction which could in principle be justified. Although fiscal supervision and preventing tax evasion could justify the restriction, it had to be proportionate: appropriate for meeting the objective and not going beyond what was necessary to meet that objective. But an extended period was proportionate where the taxing state did not know of the assets, and the state in which they were held did not know of them either, and mutual assistance was not available to investigate. Etablissements Rimbaud SA v Directeur general des Impots [2010] STC 2757 ECJ is to much the same effect, notably in relation to the lack of mechanisms for finding out about the asset- in Lichtenstein: a tax advantage can be justifiably refused, though the refusal amounts to a restriction on free movement of capital, if the advantage requires information from a third country, the third country is not bound to provide it, and it is impossible to obtain it.
83. Mr Mullan also referred me to Hunnebeck v Finanzamt Krefeld C479/14 CJEU 8 June 2016. This, he submitted, showed that the ability to opt out of a measure did not of itself make the measure lawful. A gift tax which breached Article 63, was still unlawful as an incompatible measure of taxation, even if there was a provision which enabled the tax payer to opt out; and even more so where, as was the case there, the opt out was conditional on or qualified by the application of an alternative adverse measure, aggregation of gifts.
84. Mr West submitted that it was the Swiss, not subject to the TFEU, who implemented the restriction, if such it was; the Agreement, and provision for payment of the levy, did not affect the movement of capital in or out of Switzerland. Assets had to be held on 31 December 2010, appointed day two, for the Agreement to apply to them, and that date preceded the entry into force of the Agreement and so could have not affected the movement of capital into or out of Switzerland from or to the UK. Assets could be moved from Switzerland to the UK before 31 May 2013 without being subject to the levy, and would only have been subject to UK tax. The alternative of voluntary disclosure could not of itself be regarded as a restriction outlawed by Article 63 unless justified.
85. I accept Mr West's submissions. There was no restriction on the free movement of capital to and from Switzerland by the UK in the Agreement or provision for the levy, and, if so, it was not one which breached Article 63. It is also clear that the purpose of the Agreement and its provisions is a legitimate one in the interests of preventing the avoidance of tax and enabling the collection of tax due. It is clearly proportionate. The payer can opt to make voluntary disclosure or, if not, must pay the levy; a default provision is essential. There is nothing disproportionate in that. The potential payer is given notice of the potential levy, and time to seek advice which she is advised to obtain. Whilst an unlawful restriction cannot be made lawful by an option to avoid it, the Agreement and provision for a levy are not said to be in breach of the TFEU, even if it did apply. The focus of the argument is on the effect of a disproportionate levy. The option, notified and advised on, is clearly part of what would make the structure of the Agreement proportionate, if Article 63 did apply and it involved a restriction. The fact that HMRC does not know and cannot know what the tax position, in the absence of voluntary disclosure, is also relevant. A timetable for voluntary disclosure and for the issue of a certificate is proportionate. The Agreement makes provision for refund where the sum is "wrongly levied". The provision is not disproportionate simply because a careless potential levy payer, who does not respond to perfectly clear letters, pays very much more than she probably would have done had she opted for voluntary disclosure. Nor is it disproportionate because it contains no provision for refund by those who make late disclosure. Nor does the absence of a broader discretionary policy put the Agreement or the levy in breach of Article 63.
86. On Article 1 Protocol 1 ECHR, Mr Mullan referred to Sporrong v Lonnroth v Sweden 5 EHRR 35, 1982. A local authority was permitted to acquire two properties compulsorily and meanwhile to prohibit their development. It did not in fact acquire them. The properties however were blighted by the permits for 12 and 25 years. No remedy was available whether in the form of compensation or reduction of the period during which the properties were liable to be acquired. This was not expropriation without compensation but was an interference with property rights, in which the fair balance had not been struck in the absence of some remedy for such a long period of blight. Mr West is however quite right to point out the clear and consistent jurisprudence of the ECtHR on Article 1 Protocol 1 that it accords a wide margin of appreciation to the national assessment of how the balance between the individual's property rights and the interests of the public should be struck. He also is also right that any interference had been carried out in Switzerland by the Swiss paying agent, the lawfulness of whose actions she could have challenged but has not done so. The Claimant had no property in the sum transferred by the SFTA to HMRC. An expectation of consideration of an administrative discretion did not fall within the Protocol's concept of a possession or property right; R (Carvill) v IRC) No.2 [2003] EWHC 18532 (Admin), [2003] STC 1539.
87. For the purposes of the ECHR, essentially the same points as justify the restriction, were it one, and show it to be proportionate for Article 63, also show that the public interest in the payment of tax due, and the need to regularise the position, on a one-off basis, in relation to tax liabilities arising in a country where assets were held by bodies who would not give disclosure and whose laws did not require it, mean that the Agreement struck a fair and proportionate balance between the public and private interests. The Agreement protected the levy payer against "wrongly levied" payments. A default provision was necessary. Reasonable steps were taken to enable the potential payer to disclose, which is not a restriction or unreasonable, or decide to pay a levy. It was not disproportionate to expect the payer to obtain the information about the possible degree of charge in the light of the information notified to them. There was no requirement that, to be proportionate, a late and careless levy payer should be able to disclose free of the structure of the Agreement, and then claim a refund.

Ground 3: The development of HMRC's discretionary refund policy and the lawfulness of its exercise

88. This Claimant was not the only one to make late voluntary disclosure and to seek a refund in respect of a levy payment which was said significantly to exceed what their tax obligation was likely to be. Their circumstances varied widely. HMRC's Offshore Coordination Unit took the view initially that sums "wrongly levied" were for the Swiss paying agent, the bank, or for the SFTA. There was no legislative provision for a refund. So HMRC had directed those who sought refunds back to their banks or to the SFTA. But differences of opinion arose between HMRC and the Swiss about how the Agreement should work in respect of claims for refunds. In January 2014, HMRC agreed with the Swiss to receive the applications for refund requests under Article 15(3). There was also some press attention and Ministerial complaint on the basis that there was no recourse to an appeal if the levy seemed to be like double-taxation. HMRC therefore began to seek detailed information from applicants for refunds as to why they had not made voluntary disclosure.
89. Mr Priestley tried with Mr Godfrey to categorise the broad grounds being raised to justify a refund; they came up with twenty categories. Eight fitted into the category of payment "wrongly levied", within Article 15(3), on grounds relating to the performance by the Swiss paying agent of the tasks assigned to them under the Agreement, such as late notification or the wrong person being notified, or error in calculating the levy by the Swiss bank or paying agent, in respect of which HMRC would make a refund. But most applicants had not paid a sum "wrongly levied", and this Claimant was not said to fall into that category either. HMRC's evolving approach to refund claims by those who had not paid a sum "wrongly levied" was to be pragmatic, where possible, according to Mr Priestley, but not to extend refunds to applicants where the levy was paid as a result of their inaction or error. This led to HMRC considering the extension of its Collection and Management discretion to cases of "hardship at the margins."
90. Mr Priestley elaborated on that phrase. It covered "extreme economic consequences" for the individual, such as bankruptcy, loss of family home or the inability to pay for life-saving medical treatment. These were categorised as forms of "financial hardship", but could rarely be established where an individual was left with at least 59% of the balance of their Swiss bank account, plus whatever else they had. They then developed the notion of "personal hardship", where serious illness or mental capacity had made proper consideration of the election extremely difficult. These were factors already considered by HMRC in debt management, and in assessing "reasonable excuses."
91. Mr Priestley prepared a paper on the use of the Collection and Management discretion for policy consideration. The guidance in HMRC's Admin Law Manual showed the discretion to be "extremely limited". The task of HMRC was to apply the law correctly, and to manage the collection of tax revenues "in the most effective way to achieve the highest net return to the Exchequer." It could not act differently simply because the law seemed unfair or unreasonable; but the exercise of discretion, as to the best means of obtaining for the national exchequer the practicable highest net return having regard to the staff available and the cost of collection, was permissible. The Manual cited R (Wilkinson) v HMRC ([2005] UKHL 30, [2005] 1 WLR 1718).
92. Mr Priestley appended his suggested categorisation of applications for refunds. One category which should not receive refunds was a change of mind after a positive decision. There were three categories of personal hardship, including where age, health or lack of capacity led to misunderstanding or inaction by the payer. But merely "possible" personal or financial hardship should "possibly" not receive refunds, nor mere misunderstanding. There was therefore perhaps scope for the Collection and Management discretion to be exercised, where the facts met the appropriate thresholds on merits and on hardship. Two categories might apply to the Claimant: those who assumed that the charge would take account of past compliance and would only therefore apply to money due; those who understood the process, but failed to act in time. Mr Priestley was to find that the Claimant fell into that second category but not because of health or lack of capacity, (age was withdrawn as a factor), nor did she suffer personal or financial hardship within the tight scope given to those concepts. There was also a category of those who sought to rectify their error immediately, where the wrong election had been made accidentally.
93. No category was suggested for those who had paid the levy, which had turned out to exceed what the refund applicant may have assumed or calculated his unpaid liabilities to be. This was because the formula in the Agreement did not relate to the existence or amount of tax, interest or penalties due; and only the individual, not HMRC, would know of or could ascertain those liabilities. (And, I add, only the individual could obtain at least a rough guide as to the likely amount of the levy or tax due.) The individual had had until 31 May 2013 to make the election. The individual also retained anonymity, if paying the levy. Those who paid the levy as a result of their own inaction could not be said to be suffering personal hardship. There was otherwise a risk of undermining the Agreement, harsh though it might be.
94. His paper described the overriding principle for the policy for discretionary repayment as being that "an administrative court would consider it 'grossly unfair' not to repay even though there was no statutory basis for doing so." The policy recognised that there would be cases in which refunds would be refused where the levy payer had made errors or had misunderstood matters and which could attract adverse publicity if a compliant taxpayer were perceived as being penalised.
95. Mr Priestley's paper was discussed among Tax Administration Policy officials, along with specific cases to illustrate the extremes of the various categories, so that the Commissioners could adopt a policy, and authorise the Collection and Management Unit to devolve the exercise of the discretion to the Offshore Coordination Unit. The discussion of the category of those who had failed to take time to read the paying agent's letter carefully was short: this was not what they considered to be "personal hardship" of itself, sufficient to warrant a discretionary repayment. The Commissioners approved the policy proposed, at the end of November 2014. It was reflected in the letter of 8 December 2014. There is also procedural guidance of June 2015.
96. Between December 2014 and 1 September 2016, HMRC paid refunds totalling nearly £2.9m to 129 individuals; it refused refunds to 87 individuals totalling just over £2.3m. Some cases are not yet resolved. Mr Priestley's approach, he said, was to be "pragmatic within the scope of the legal authority available" to him. Over 25000 people had made voluntary disclosure.
97. Mr West referred to the practical difficulties involved in extending the discretion to cover cases such as the Claimant's: error undoubtedly by the levy payer, prompt disclosure after the payment of the levy, seemingly, of what she would have disclosed instead of paying the levy, and at least a case to be investigated that there was a very substantial difference between tax due and the sum levied.
98. None of the usual routes for the reduction of disputed tax liabilities would be available. Mr Mullan provided me with a helpfully agreed note on those routes: the s31 Taxes Management Act 1970, where the taxpayer had a right of appeal to the First-tier Tribunal against an assessment to tax, or against a penalty. A restitutionary claim could also be made in the High Court where the charge was made without legal authority. There is no provision in the UK tax code imposing a charge to tax against which there is no right of appeal.
99. I was concerned about these practical difficulties as the basis for the distinctions drawn by the refund policy because, in any case in which HMRC's discretion was exercised in favour of a refund, HMRC would still go through the process of seeking disclosure and then assessing the tax liabilities, just as it would have done had disclosure been made under the Agreement without payment of the levy. Mr West put in further evidence about these practical difficulties, to which Mr Mullan replied, also raising some new points, to which Mr West replied on 15 February 2017.
100. Mr West's further submissions for HMRC made the following points: (1) it was for HMRC to define the limits of the exercise of its discretion, controlled by public law principles. Its application of policy was also challengeable on public law grounds. It acted lawfully in deciding that refund required economic or personal hardship. (2) HMRC did not accept that such a category as that into which the Claimant would fall should be created. It could not be reasonably defined. It would be unfair on those who had dealt timeously with their correspondence but who also now might wish to change their minds, but cannot. No special consideration was warranted. (3) Even a short period for a change of mind after payment of the levy would be neither fair nor workable. Disclosure from the Swiss banks could no longer be obtained under the Agreement once the levy had been taken. That could create problems for verification, and problems because the certificate would now be in existence. I turn to Mr Priestley's original and further evidence on these difficulties.
101. First, the supply of information. Article 10 of the Agreement provided for disclosure by the Swiss bank via the SFTA of annual account balances at 31 December for ten years 2002-2012 which provided a reliable picture of the movement of funds through each account over time, and valuable in its exposure of the source of the deposits. The full details of the holdings over the ten year period was critical for the appropriate assessment of tax, penalties and interest. HMRC could not seek or receive such disclosure directly from the Swiss bank, and the Agreement provided no relevant scope for an extension of time for such disclosure by the bank. The Claimant did not make disclosure under the Agreement. The value of disclosure under the Agreement was that it came from the third party against which the disclosure by the taxpayer could be measured; and it confirmed the extent of and annual movement in the individual's relevant assets in Switzerland, which would provide a sound foundation for any subsequent investigation as to the basic extent of the assets, which could not be matched by voluntary disclosure or subsequent inquiries. There was no satisfactory way, outside the mechanism of the Agreement, of obtaining the level of information equivalent to that which was obtained under it. He identified the difficulties with other possible avenues of approach, their limitations, complexities and timescales.
102. Contact with and the direct supply of information by Swiss banks to HMRC is rare, even if Credit Suisse were willing to do so. Here the Claimant had been unable to obtain late disclosure from Credit Suisse, although she authorised it. A refund while the certificate was in force risked a "double-refund", which could have happened when Swiss banks had reversed a payment before transfer to HMRC but had not retrieved the certificate. HMRC had experienced problems checking that the refund claimants had not already been refunded by the Swiss bank – no bank had answered HMRC directly, even when the customer had requested they should; sometimes there were long delays in the customer obtaining it, and sometimes it came in an email of uncertain integrity.
103. Second, validating information. Even when information was obtained, it had to be validated for use. This was relatively straightforward with a simple cash account; omitting assets would not be easy without direct justification. However, as bank accounts were not confined to cash assets, but all assets held were relevant for the operation of the Agreement, it could not be assumed that any statements, outside the Agreement, would be in a format enabling the extraction of equivalent information as under the Agreement. HMRC could not tell readily whether full information had been provided, and it would require the time of experienced Inspectors.
104. Third, timeframes. Where HMRC accepts that a case falls within the scope of its policy on refunds, HMRC first obtains the surrender of the rights under the certificate, then pays the refund, and then proceeds on the basis of whatever disclosure has been made, constrained by the relevant time limits; this was justifiable in cases of true hardship. The Claimant contemplates a different procedure under which HMRC would retain the money, the certificate would remain in force, and yet a process equivalent to an assessment would be undertaken. Schedule 36 however, provides for the circumstances in which the sum levied is to be treated as payment on account; there is no provision for the sum levied to be treated as a payment on account in circumstances such as these. The certificate system cuts both ways; HMRC cannot go behind it where it considers that the one-off payment was considerably less than the tax, interest and penalties due.
105. If the levy were retained, it would co-exist with the certificate. The Claimant has the certificate, which prevents the issue of a protective assessment, significantly limiting the time which HMRC has to assess true liabilities. HMRC might be out of time to make an assessment at all. The assessment timeframe would still be running. In the absence of extended time limits for assessment in cases of deliberate evasion, or careless acts, or error not attributable to the taxpayer, income and capital gains tax transaction fall out of assessment after four years. VAT and Inheritance Tax liabilities are also covered by the certificate. Time limits for assessing VAT are shorter. It was important for timeframes to be adhered to, so that those who had the opportunity to choose levy or disclosure could not have an advantage over other UK taxpayers by deciding to change their position if later it became advantageous to do so. It could enable levy payers to manipulate the position. HMRC's assessment time limits could be abused.
106. Mr Priestley also pointed to the difficulties created by the death of a levy payer who sought a refund. There had been claims by executors, in which the evidential basis for an asserted mistake is difficult to assess. There is a maximum period of 6 years of assessment before death, and a restriction on penalties being levied on an estate for pre-death liabilities.
107. It would probably be considerably more than 6 months from refund claim to resolution of liabilities. Mr Priestley pointed to the length of time this Claimant had taken to deal with simple requests, and disputes had not been resolved. It would be wrong to assume that all liabilities to tax would be straightforward in resolution, or that HMRC would be in a position to make all the necessary assessments, which it could have done had disclosure been made under Article 10 of the Agreement or that HMRC could retain the money even if some assessments were out of time. A dispute over tax could easily lead a tax payer to argue that an assessment would be out of time.
108. It would also be unfair to set, retrospectively, a time limit within which claims for refunds could be made after payment of the levy, even, say, at 6 months, because of those who could have but did not make a claim in that now expired period. The position vis-à-vis the Swiss bank and sums "wrongly levied" had not been resolved for some time, and the refund policy had not been resolved till November 2014.
109. Fourth, difficulties in defining a class. There would be considerable difficulties in the definition and objective assessment of causes and degrees of carelessness and misunderstanding which could merit consideration for a refund. Claims continued to come in long after the payment. It would be impossible to challenge any claims based on assertions of carelessness, whereas hardship involved objectively verifiable specific circumstances. The Claimant's circumstances would not amount to a "reasonable excuse" for not submitting a tax return, which is a ground for appealing against a penalty. It would be difficult to frame a policy, even where it was desirable to do so, by reference to some difference between levy paid and tax due.
110. What the Claimant was really seeking to do was to create a new class of refund claimants or a bespoke arrangement applicable to her own particular circumstances, and perhaps only suitable for them. Yet for such a new category to be defined, it was necessary to consider all the circumstances which might arise within such a class. The basis of this class, carelessness, was not objectively verifiable. Others, not in the same situation, but also able to argue that their circumstances merited a refund could also argue that they were entitled to a bespoke arrangement. The Claimant was "seeking to supplant the entire mechanism of an international agreement…with a different scheme of her own devising."
111. Mr Priestley concluded:

"42. In view of this, it is difficult to envisage a time-frame for disclosure that would not have jeopardised assessable tax. Individuals could receive the benefit of regularisation until such a time as they surrender the regularisation on refund of the charge. The exercise of any discretion necessarily comes with this risk, which becomes greater as more individuals have the ability to bring themselves within the scope of that section and the later that discretion is exercised. Discretion must necessarily be tightly drawn, relating to objective criteria that can be evidenced."

112. HMRC had given careful thought to the discretion because of risk to its reputation, but its aims in formulating policy were "to try to achieve fairness to the taxpayer, retain the integrity of the Agreement and exercise [its] powers carefully when authorising payments out of Treasury funds". It was inevitable that a line had to be drawn, and some Claimants would fall on its wrong side.
113. Mr Mullan contended in his written submissions that the difficulties described by Mr Priestley applied to those in whose favour HMRC was already willing to exercise its discretions. Its own 2013 guidance on the disclosure process under the Agreement showed no material differences from the process where HMRC exercised discretion. HMRC, even with disclosure under the Agreement, was still essentially dependant on further information from the taxpayer before making an assessment to tax.
114. Article 10 disclosure would only put HMRC on notice as to the need for investigation rather than provide all the information to proceed to an assessment; it would provide a base from which to invite disclosure or commence investigations. There is no reason why HMRC could not investigate and collect tax in relation to Swiss assets disclosed other than under the Agreement. The difficulty arises where a taxpayer relies on banking secrecy to erase self-assessment or investigation.
115. Difficulties in obtaining disclosure or in investigating a case did not justify or permit a charge to tax which was greater than that authorised by law. Even if someone were suspected of fraud, HMRC's policy was to permit full disclosure to obviate a criminal investigation. However, the Claimant was willing to give all the disclosure required.
116. HMRC had much of the relevant information from the Certificate itself, issued by Credit Suisse; and it did not need the information about the years preceding 31 December 2012 in order to raise an assessment. But this information could be provided directly by the Claimant, and Credit Suisse was willing to provide it directly to HMRC, as the bank had confirmed to her. She was then in the same position as those who had made disclosure under the Agreement, and HMRC could experience just the same difficulties, except that she and the bank were seeking to do all that was necessary for disclosure. The delays would be just the same as for disclosure under the Agreement.
117. As a new ground of challenge, Mr Mullan submitted that it would be irrational of HMRC to refuse to accept disclosure on the basis of credible material which the Claimant had or would supply, and to refuse a refund on the basis of disclosure difficulties if the Claimant had disclosed all that would have been disclosed by her under the Agreement. The Claimant was only asking to be taxed in the same way as anyone else, including those who had made disclosure, save that the HMRC had the advantage of having the money already rather than waiting for the completion of the assessment. Indeed, where HMRC actually held the taxpayer's money, as here, no assessment was needed to collect it; the time limits on assessment were irrelevant and did not give rise to the problems asserted by HMRC. Payments by those who are not eligible for clearance under Schedule 36 are treated as payments on account and they cannot evade tax liabilities by saying that the time for raising an assessment has passed.
118. There needed to be a legal basis upon which someone can reclaim money from HMRC; it was not enough to show that the money was not tax lawfully due: Woolwich Equitable Building Society v IRC [1993] AC 70. There had to be a public law claim, a mistake of law or a restitutionary claim. No claim could succeed without regard to the availability or use of the power to assess, nor could it succeed to the extent it represented unpaid tax. So HMRC would not risk being compelled to refund money which was due to it in tax, interest or penalties.
119. Mr Mullan also submitted that the policy was unlawful if it had been based on a failure to realise that the refund could not be claimed without acceptance of the need for tax liabilities to be paid, following all disclosure necessary for assessment, though he suggested that some of the difficulties arose from an ex post facto justification rather than being part of the formulation of policy in the first place. It had been concerned with publicity rather than fairness. It had adopted a blanket formulation to avoid payment where there was taxpayer carelessness, though the consequences to this Claimant were severe. Basic information had been omitted from the Credit Suisse letter. It was unfair for there to be no process for disclosure after the levy had been deducted.
120. In reply on 15 February 2017, Mr West pointed out the Claimant was raising a number of new points. The basis upon which the restitutionary claim could be put forwards was not accepted, and too complex for the sort of issue which this exchange of submissions was intended to be addressing.
121. I turn to my conclusions on this issue. HMRC accepted that it had a discretion which it could exercise where a levy had been paid, not "wrongly", but in accordance with the Agreement, and a repayment was sought. This discretion was not said to derive from the powers in s9 of the Commissioners for Revenue and Customs Act 2005 for the Commissioners to do "anything which they think (a) necessary or expedient about the exercise of their functions or (b) incidental or conducive to the exercise of their functions."
122. Both sides instead relied on Wilkinson, above, citing Lord Diplock in R v Inland Revenue Commissioners Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, 636. He said of s1 of the Taxes Management Act 1970 that it gave a "wide managerial discretion as to the best means of obtaining for the national exchequer from the taxes committed to their charge, the highest net return that is practicable having regard to the staff available to them and the cost of collection." Lord Hoffmann, at [21] of Wilkinson, said:

"This discretion enables the commissioners to formulate policy in the interstices of the tax legislation, dealing pragmatically with minor or transitory anomalies, cases of hardship at the margins or cases in which a statutory rule is difficult to formulate or it enactment would take up a disproportionate amount of parliamentary time."

123. That is undoubtedly the basis for the powers which HMRC exercised in relation to developing and applying its policy for the refunds which it has been prepared to make, though it has emphasised that the levy is not a tax at all. It also follows that it has not construed the Agreement and Act as precluding the making of a refund where the levy has been paid, and not "wrongly levied." Refunds do not therefore of themselves necessarily undermine the Agreement and Act. This presumably is because it is the HMRC which is the financial beneficiary of the Agreement and Act, and can decide that sums which it has lawfully received can be repaid if it considers that other legitimate objectives require it: hardship at the margins, and the difficulty of promulgating a statutory rule for all the circumstances in which a refund might arise for consideration.
124. HMRC has developed a policy to deal with refunds, and I have set out its history. It is obviously not suggested that the policy is too wide for the collection and management discretion. The Claimant contends that it is unlawful because it is not wide enough. I do not see this as a failure on the part of HMRC to understand the true width of its discretion, and I see no evidence of material factors ignored or irrelevant ones relied on. Mr Mullan said that the Guidance of June 2015 wrongly referred to the levy as irrevocable; but that was correct or at least reasonable as the expressed starting point for consideration of the refund. The Agreement did not provide for the levy to be a payment on account at the later election of the payer, nor did the Finance Act. The Agreement describes the election as "irrevocable".
125. Mr West did seem to suggest that it would be unlawful for the discretion to be extended to cover cases such as that of the Claimant, because to make a refund simply on the grounds that the payer had made late voluntary disclosure, or that there may well have been a large disparity between the sum levied and the tax likely to be due, would be to undermine the Agreement. If so, I do not accept that.
126. In my judgment, Mr Mullan must either show that the discretionary policy has been formulated unlawfully, and rationally must extend to cover those in the situation of the Claimant, or that it has been applied unlawfully according to its terms, or that an exception to the policy was not considered. While I have considerable sympathy for the Claimant, tempered by the fact that she had ample opportunity and notice to obtain advice and decide what to do, I cannot accept Mr Mullan's arguments on discretion.
127. I cannot accept that the formulation of policy can only be rational if the discretion extends to those in the Claimant's position. HMRC considered a range of circumstances, including those into which the Claimant would fall, and came to a judgment which was for it, as to where it would draw the line, including what it regarded as hardship cases, and excluding those where the responsibility for their difficulties lay squarely with the levy payers.
128. Mr Mullan is right, in essence, that the difficulties of post levy disclosure, dealing with a certificate which is in force and a refund, would not be so very different if a refund were paid here, if different at all, from those which HMRC is prepared to accept in those cases where it does make a refund. I accept the HMRC evidence about the difficulties which arise in all those circumstances. It is the lack of sound justification for all the difficulties, time, effort and risk required to resolve those difficulties which is the true basis for the drawing of the line between those cases which merit the refund/late disclosure process and those which do not. That is a lawful basis for drawing the line where it is drawn.
129. It is rational to have a policy based upon the view that each refund claim which is acceded to creates considerable practical difficulties and risks, which take resources of time and manpower to resolve, and which may or may not be adequate in the end to ascertain all the tax due. It is rational, in consequence, to draw a line marking the boundaries of the policy by reference to the degree of responsibility which the refund claimant bears for the position and the hardship which is faced: hence those who were not capable of understanding what they were presented with, and those who faced rather more serious hardship than does the Claimant, are on one side, and she is on the other.
130. Mr West is right to point out the difficulties of defining a group to which the Claimant might belong, unless the policy is to be no more than a series of ad hoc decisions, a definition which HMRC is entitled to reject. Is the group to be defined by reference to timing of voluntary disclosure, (speedy after the levy was taken) or answering of HMRC's questions for the purpose of considering a refund, (dilatory) or disparity (unresolved), inaction, incapacity or carelessness, percentage of assets levied taken (the parties differ between 32% and 41%), source of assets, timing of making known to HMRC the specific personal circumstances relied on, (here after the decision at issue), or are other factors to be considered for the new definition to be rational?
131. It is not realistic to have a group which is just defined by reference to this Claimant's circumstances; that would provide no guide for deciding who else should be covered by it. It was reasonable to conclude that the Claimant could not be treated more favourably than those who made a positive election to pay the levy, but who might also have failed to read the material provided, or who might also assert a significant disparity between levy and tax due. Those such as the Claimant would also be no worse off, and might be better off than those who made voluntary disclosure in accordance with the timescales in the Agreement.
132. It is also reasonable to define the characteristics required by reference to some more readily verifiable evidence than the mere assertion of inaction, late and for reasons not disclosed for some time, and by their nature not readily objectively verifiable.
133. I also accept that the larger the scope for claims for a refund, and the more it approximates to those who have paid more in levy than they now believe they would owe in tax, the more claims for refunds would emerge, which would rather undermine the operation of the Agreement with its process of a date for decision, default, and disclosure under the voluntary process with the involvement of the paying agents. Whatever the customer's instructions, there appears to be actual and potentially reduced co-operation from the Swiss banks once disclosure is sought outside the scope of the Agreement. HMRC is entitled to ask why this should be done for those who are responsible for the position in which they find themselves, as here. HMRC were entitled to approach the exercise of their discretion on the basis that it could not be used to undermine the Agreement. The test of whether the Administrative Court would regard the refusal of a refund as so unfair in the circumstances as to be unlawful, may have an element of circularity, but brings in what a hypothetically fair minded person would think just should not be done, which is not a bad measure of the point at which a refund should be made, and where refusal clearly would be morally dubious or unduly harsh.
134. HMRC did not fail to consider the circumstances of the Claimant, but concluded that the policy should not be extended, which is another way of concluding that no exception to the exception should be made. That decision was made, taking into account all that the Claimant had made known to them at the date of the decision challenged, and nothing subsequently explained has caused them to change their mind, though I think it evident that it has been considered. The decision is the outcome of the rational application of a rational policy.
135. Mr Mullan is only partly right when he says that the public interest is in the collection of the correct tax and not in the collection of windfalls. The Agreement itself reflects the fact that when assets are held in Swiss banks, normal routes to obtain the correct tax are somewhat inhibited, and other measures are required. But there must be consistency of treatment of those who are subject to the operation of the Agreement, whichever option they took. That is the point at which the disparity becomes accepted in the process, by those who do not opt for voluntary disclosure. A tax payer might accept the disparity to maintain anonymity, or because it was negligible or to his advantage.
136. Accordingly, this third ground is dismissed.
137. I have not dealt with a number of issues which Mr Mullan raised in his skeleton argument but not in his Statement of Facts and Grounds, and upon which Mr West said that HMRC would have wished to put in evidence were they pursued: the Claimant's domicile, where Mr Priestley said that she was too late to certify that status for the purpose of the Agreement, the relevance or irrelevance of the double taxation agreement with Switzerland, which seems to turn on whether the levy was a charge on capital or a tax, a legitimate expectation argument, which seemed to me but a less persuasive variation of arguments which I have already rejected.

Overall conclusion

138. This claim is dismissed.