HMRC argued that the company had set up the scheme to avoid tax and issued a follower notice amounting to a penalty for non-payment of tax amounting to £2.16m.

The follower notice was issued on the basis that the decision of the Supreme Court in UBS AG v HMRC and DB Group Services (UK) Ltd v HMRC [2016] UKSC 13 (together referred to as UBS) was a ‘relevant judicial ruling’. This was disputed by Whispering Smith, which argued that it was not liable for the tax.  

Whispering Smith (formerly Rajan Imports Limited) was incorporated in 1985 and trades in the import and wholesale distribution of fashion wear. According to the annual report for year end December 2021, the Bury-based company reported total turnover of £58.9m and an operating profit of £2.98m.