Vrang v Revenue And Customs

A levy imposed under an international tax agreement may be received and retained by HMRC where domestic legislation gives effect to the levy’s consequences and necessarily implies Parliamentary approval of the arrangement. A payment is “wrongly levied” only where the Swiss paying agent or Swiss authority has materially misapplied the Agreement. It is not wrongly levied merely because the payer failed to elect voluntary disclosure, received no separate form to elect payment, was inadequately advised in her own view, or paid substantially more than the tax ultimately due.

HMRC may operate a narrow collection and management discretion to refund payments made in accordance with the Agreement. A policy confined to objectively verifiable hardship and circumstances substantially beyond the payer’s control was lawful.

The claimant held Swiss bank accounts while living and working in Switzerland and later moved to London. Under the UK-Switzerland tax agreement, Credit Suisse notified her that she could either authorise voluntary disclosure or allow a default one-off payment to be levied. She took no action by the contractual deadline, and Credit Suisse deducted approximately £57,000.

The claimant later disclosed information to HMRC and sought repayment of the difference between the levy and her estimated UK tax liability. HMRC refused, concluding that the payment was not wrongly levied and that the circumstances did not meet its discretionary hardship policy. The claim for judicial review challenged the legality of the levy, its compatibility with European and Convention rights, and HMRC’s refund policy.

1. Legislative authority. The principle that a pecuniary charge requires clear statutory authority applied, whether or not the payment was technically a tax. Sections 218 and Schedule 36 of the Finance Act 2012 gave domestic effect to the consequences of the Agreement. It was an unavoidable inference from the statutory provision for certificates and the discharge of tax liabilities that Parliament had approved receipt of the levies and the absence of any general refund mechanism.
2. Meaning of “wrongly levied”. Article 15(3) concerned errors in the Swiss paying agent’s or SFTA’s interpretation or application of the Agreement. The payment was not wrongly levied because the claimant ignored clear correspondence, failed to make voluntary disclosure, received no positive-election form for payment, or considered the levy disproportionate to her eventual tax liability. The Agreement did not require the bank to calculate or state the precise levy in advance.
3. European and Convention rights. The levy scheme pursued the legitimate objectives of preventing tax avoidance and securing tax collection. The opportunity to make voluntary disclosure, the notice given, the time allowed to obtain advice, and the refund protection for payments wrongly levied made the scheme proportionate for the purposes of article 63 TFEU, even assuming that provision applied. The same considerations established a fair balance under article 1 of Protocol 1 to the ECHR. The claimant had no relevant property right in the money transferred to HMRC or in an expectation that HMRC would exercise its discretion in her favour.
4. Refund discretion. HMRC possessed a collection and management discretion to make refunds in exceptional cases, including hardship at the margins. It was entitled to formulate a policy requiring serious financial or personal hardship and circumstances substantially beyond the claimant’s control. It was rational to exclude cases founded on ordinary carelessness, failure to read clear correspondence, or late voluntary disclosure where extending the policy would undermine the Agreement and create significant evidential and administrative difficulties.
5. Outcome. HMRC had considered the claimant’s circumstances and rationally applied a rational policy. The claim was dismissed.