John Dickinson and Others v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Peter Jackson,Lord Justice Hamblen,Lord Justice McCombe |
| Judgment Date | 18 December 2018 |
| Neutral Citation | [2018] EWCA Civ 2798 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C1/2017/2235 |
| Date | 18 December 2018 |
[2018] EWCA Civ 2798
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE,
QUEEN'S BENCH DIVISION (ADMINISTRATIVE COURT)
Mr Justice Charles
CO/2901/2015
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice McCombe
Lord Justice Hamblen
and
Lord Justice Peter Jackson
Case No: C1/2017/2235
Mr James Ramsden QC (instructed by Reynolds Porter Chamberlain) for the Appellants
Sir James Eadie QC, Ms Gemma White QC and Ms Aparna Nathan (instructed by Solicitor for HM Revenue & Customs) for the Respondents
Hearing date: 28 November 2018
Approved Judgment
(A) Introduction
This is the appeal of Mr John Dickinson and a large number of other claimants (listed by name in Annex 1 to the Appellants' Notice) from the order of Charles J of 7 July 2017 dismissing their application for judicial review of the decision of the respondent Commissioners (“HMRC”) to give to the claimants accelerated payment notices (APNs) under section 219 of the Finance Act 2014 ( FA 2014) and its associated provisions. Such notices require taxpayers (here the claimants) to pay “up front” sums alleged to be due as tax before the determination of any outstanding appeal as to the underlying liability to pay.
In the present cases, the APNs were given after HMRC had previously agreed expressly (pursuant to section 55 of the Taxes Management Act 1970 ( TMA) in its unamended form) to postpone any requirement for payment of the particular sums of tax claimed, in each case, until after the resolution of appeals by the claimants to the First-tier Tribunal (Tax Chamber) (FTT). The claimants argued before the judge that it was an unlawful abuse of power for HMRC to resile from the express promises made not to enforce payments pending resolution of the disputes as to the tax in question. However, as the judge briefly put it, at the outset of his judgment,
“…arguments advanced by the Revenue on this issue outweigh the Claimants' arguments on it and so the claims should be dismissed”.
The reference to the judge's judgment is [2017] EWHC 1705 (Admin); the judgment is available on the BAILII website. I return to the judge's salient reasoning and conclusions below. On this appeal, the claimants argue that the judge's decision was wrong.
(B) Assessments to tax and Postponement Agreements
The liability of the claimants to pay the tax in dispute arose when HMRC issued “discovery assessments” under TMA s.29. Section 29(1) is in these terms:
(1) “If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment that (a) any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax have not been assessed, or (b) that an assessment to tax is or has become insufficient or (c) that any relief which has been given is or has become excessive, then the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.”
The judge noted that pursuant to s.29(2) such an assessment cannot be made if a return had been made in accordance with the practice generally prevailing at the time but, as he said, no reliance was put on this before him; nor was it before us. Upon the issue of the assessments, the amounts claimed by HMRC became due and payable. However, as mentioned, HMRC had agreed expressly with each of the claimants to postpone payment until after determination of the appeals against the assessments. The judge gave one example of such a postponement agreement recorded in a letter of 13 February 2014 to the claimant, Mr John Dickinson, in these terms:
“I have noted your reasons for appealing and agree that we will postpone collection of the amounts shown in the table below whilst your appeal is considered. Your client's appeal will remain open whilst we continue with our enquiries and you will be provided with an update in due course
[The table shows an income tax liability of £26,077.60].
I understand that the matter of the tax liability is under discussion with AML Tax (IOM) Ltd [to whom this letter was addressed] and Mr. Andy Finch of HMRC Specialist Investigations [who has given evidence].
HMRC will continue to review the arrangements and will contact you further when the review is completed, in the meantime if you would like to provide further documentary evidence in respect of amounts received or the operation of the scheme in your client's particular circumstances then we will be happy to consider it.”
As the judge recorded, HMRC accepted before him, and they now accept before us, that by the postponement agreements, made to each of the claimants, they made clear and express promises, giving rise to a legitimate expectation, that payment of the disputed tax would not be required pending consideration of the appeals. The appellants contend that to resile from those promises amounted to an unlawful abuse of power.
On the appeals to the FTT, apart from issues as to the underlying tax liability, there are also, it seems (in some cases at least), disputes as to whether HMRC were entitled to raise “discovery” assessments at all in the circumstances of those claimants' cases.
(C) The APN Regime
By the FA 2014 Parliament introduced the regime of APNs. In the present cases, and others, the APNs were directed to recover disputed sums of tax which were claimed by the taxpayers not to be payable as a result of schemes directed specifically to avoid the taxation in question. The schemes had been disclosed to HMRC pursuant to the statutory requirements of “Disclosure of Tax Avoidance Schemes” (DOTAS), introduced by the Finance Act 2004. DOTAS was designed to require notification of schemes that potentially took advantage of perceived “loopholes” in tax legislation. Notification has no direct effect upon liability or otherwise to tax, but it gives to the legislature the distinct possibility of closing such loopholes by legislation, possibly with retrospective effect. However, an arrangement notified under DOTAS may be entirely lawful and effective under current legislation, as contended by the scheme promoters/taxpayers in any particular case, and any dispute about that can be argued out in the usual way before the FTT and further before the Upper Tribunal and/or the courts, if appropriate.
The principal provisions of FA 2014, as relevant to this case, are set out in paragraph 42 of the judgment below. In summary, the APNs were served on the basis that the three conditions (A, B and C) set out in s.219 were satisfied because: A) the taxpayers had brought, or had intimated an intention to bring, an appeal in relation to the assessment in question and to the tax claimed which had not yet been determined by the FTT; B) the claim by the taxpayers was made on the basis that an “asserted advantage” resulted from the arrangements made by them; and C) those arrangements were DOTAS arrangements which had been duly notified.
By s.221, in an APN, HMRC have to specify the extent to which they say that the “asserted advantage” (in short) does not work as the taxpayer claims and to identify the amount that is required to be paid to counteract the “denied advantage”. By s.222, the recipient taxpayer has 90 days to make representations against the notice which HMRC must then consider and, having done so, they must determine whether to confirm or withdraw the notice and/or they must determine whether a different amount should have been specified and then to confirm, vary or withdraw the notice. Payment under the APN has to be made within 90 days of the APN being given or, where representations have been made, within 30 days of the notification of the determination of the representations, if that date is later than the initial 90 day period.
By s.224 of the FA 2014, Parliament introduced a “Restriction on powers to postpone tax payments pending initial appeal” in cases where APNs have been given. It did so by an amendment to TMA s.55, introducing new subsections (8B) to (8D) as follows:
(1)“In section 55 of TMA 1970 (recovery of tax not postponed), after subsection (8A) insert—
(8B) Subsections (8C) and (8D) apply where a person has been given an accelerated payment notice or partner payment notice under Chapter 3 of Part 4 of the Finance Act 2014 and that notice has not been withdrawn.
(8C) Nothing in this section enables the postponement of the payment of (as the case may be)—
(a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates,
(b) the disputed tax specified in the notice under section 221(2)(b) of that Act, or
(c) the understated partner tax to which the payment specified in the notice under paragraph 4(1)(b) of Schedule 32 to that Act relates.
(8D) Accordingly, if the payment of an amount of tax within subsection ( 8C)(b) is postponed by virtue of this section immediately before the accelerated payment notice is given, it ceases to be so postponed with effect from the time that notice is given, and the tax is due and payable—
(a) if no representations were made under section 222 of that Act in respect of the notice, on or before the last day of the period of 90 days beginning with the day the notice or partner payment notice is given, and
(b) if representations were so made, on or before whichever is later of—
(i) the last day of the 90 day period mentioned in paragraph (a), and
(ii) the last day of the period of 30 days beginning with the day on which HMRC's determination in respect of those representations is notified under section 222 of that...
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Sheiling Properties Ltd v R & C Commissioners
...on employment income are likely in practice to be one of the targets of the APN process (see, for an example, Dickinson v R & C Commrs [2019] BTC 1), it seems unlikely that Parliament would have intended that acceleration via an APN could not be imposed on the employer. [54] A further argum......
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Sheiling Properties Ltd v The Commissioners for HM Revenue and Customs
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