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Powers of refusal
Powers of refusal
The applicant, Monarch Assurance plc, was an English company with a head office in the Isle of Man. Its managing director, an English solicitor, specialised in tax avoidance schemes (for example, that in McGuckian v Commissioners of Inland Revenue 69 TC 1). Readers may recall that a Monarch Assurance Company also featured as a party to a partial sham document in Hitch v Stone [2001] STC 214. The Revenue refused to certify a qualifying policy under Part I of Schedule 15 to the Taxes Act 1988 a draft of an increasing term policy to be issued by the applicant, as it believed that it was part of a hidden larger scheme devised for tax avoidance.
The Revenue thought that the combined effect of clauses 5 and 6 of the policy's special conditions would enable the policyholder to carry forward the reversionary bonuses declared during the initial ten-year period to a new policy, thus extending that initial period.
The applicant applied for a judicial review, but the judge said that the Revenue was within its discretionary powers to refuse to certify the policy. He agreed, however, that the policy was a qualifying one.
The Court of Appeal judges said that the policy did not meet the statutory test for a qualifying policy. The policy was drafted obscurely, leaving room for doubt, and it did not lead to the result that the applicant contended. As to the Revenue's power to refuse to certify a qualifying policy, he said that, although under paragraph 21 of Schedule 15 to the Taxes Act 1988 the Revenue was not required to certify such policies, it seemed unlikely that its powers of discretion were widely drawn. For instance, unless the policy were not authorised under the Insurance Companies Act 1982 or was so obscure or contained so many blanks (as did certain documents in Hitch v Stone) that its legal effect was in doubt, the Revenue would not have the power to refuse to certify a policy.
The decision of the High Court was reversed.
(R (on the application of Monarch Assurance plc) v Commissioners of Inland Revenue, Court of Appeal, 9 November 2001.)
