Foxton: Not making a finding of fact
A solicitor facing trial for tax fraud has failed in his claim that HM Revenue & Customs (HMRC) should return materials it seized from him because they are privileged.
Mr Justice Foxton held that the requirements for the so-called crime fraud exception (CFE) to legal professional privilege were made out.
HMRC seized the material from Mark Reid, who ran Birmingham firm Reid & Co, in February 2020 as part of Operation Ginseng.
Mr Reid qualified in 1993 and Foxton J said: “He is a person of good character, as are all the tax professionals and finance intermediaries whose conduct is in issue in this application.”
The background was the loan charge introduced in the 2017 Finance Act to clamp down on companies’ use of lifelong loans from employee benefit trusts set up to reduce the amount of income tax and national insurance payable on contractors’ remuneration.
Foxton J said Mr Reid identified the loan charge as “a commercial opportunity”. He and Reid & Co promoted a scheme under which a company called Pyrrhus Capital Ltd (PCL) made loans to individuals to pay off outstanding loan balances before the new charge kicked in. Some 58 people took out loans.
Operation Ginseng was set up to investigate whether this scheme involved a fraud on the revenue. A warrant to obtain evidence was obtained in February 2020 and executed at various premises, including those of Reid & Co.
In May 2024, Mr Reid and four other people were charged with conspiracy to cheat HMRC of public revenue. The trial is fixed for 1 March 2027.
Foxton J recounted: “HMRC’s case is that the PCL scheme involved making false representations to users of the scheme as to PCL’s provision of niche lending finance on commercial terms which had no connection to a tax avoidance arrangement, with the aim of causing the users to make incorrect self-assessment declarations to the effect that they were not liable to the loan charge, and thereby understate their tax liability.”
This could be either by misleading taxpayers into submitting false self-assessment declarations or by promoting a scheme intended to enable taxpayers to submit false declarations wrongly declaring that their outstanding loans had been discharged for loan charge purposes, when both the defendants and the taxpayers knew this was not the case.
The judge considered rival contentions about the law as it applied to the CFE exception and based on facts set out in a confidential annex – given the live criminal investigation – ruled that he was “satisfied that the CFE exception to legal professional privilege is engaged here”.
Foxton J stressed that, while he had to determine whether the alleged iniquity was made out on the balance of probabilities, he had heard no oral evidence and was not making any findings of fact.
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