In R (on the application of City Shoes Wholesale Ltd) v HMRC [2016] EWHX  107 (Admin) an application for judicial review was denied to nine EBT operators who were refused the benefits of the LDF.

The Liechtenstein Disclosure Facility (LDF) ended in December 2015, it offered taxpayers with undeclared offshore assets exceptionally generous terms to allow them to bring their tax affairs up to date. This was provided that they disclosed their income according to HMRC’s disclosure requirements.

  • The taxpayers all set up EBTs for tax avoidance purposes between 2002 and 2010, and HMRC had opened enquiries into each scheme.
  • The taxpayers' adviser BDO, in lengthy discussion with HMRC had intimated that they could use the LDF and so applications to join the LDF were made.
  • It was claimed that other EBT operators and tax avoiders had used the LDF in its earlier stage.
  • HMRC's commissioners met and they estimated that that the losses in allowing EBTs to use the LDF would come to around £2.5 million. In any event the LDF was to promote the disclosure of previously undeclared income, and they knew about the EBTs alreadym besides which it would be unfair for other EBT users if they were not given the same opportunity. HMRC had by then created the EBT settlement opportunity (EBTSO).
  • The taxpayer's applications to register to use the LDF were turned down.

The EBT operators applied for judicial review of HMRC's refusal to proceed claiming that they had a legitimate expectation to use the LDF.

The High Court conceded that HMRC had led the taxpayers “up the garden path” in allowing them to think that the LDF would be available to them, however it noted that HMRC had never provided any guarantees. Since the registration to the LDF had never been accepted, the taxpayers could not complain that they had been treated unfairly.


There is an equitable maxim: "He who comes into equity must come with clean hands", no doubt the popular press would be outraged if it were decided that tax avoiders were able to use a scheme designed to allow fraudsters to "clean their slate". Whilst we joke about that conundrum, one of the most alarming aspects of this case is the fact that other EBTs may have been allowed to use the LDF and the vast majority of accountants would never have realised that was possible. Certainly many original scheme promoters did not mention it.  


City Shoes Wholesale Ltd, R (on the application of) v HM Revenue and Customs [2016] EWHC 107 (Admin) (26 January 2016)