R (oao William Archer) v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jay |
| Judgment Date | 21 February 2017 |
| Neutral Citation | [2017] EWHC 296 (Admin) |
| Docket Number | Case No: CO/1649/2016 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 21 February 2017 |
[2017] EWHC 296 (Admin)
Mr Justice Jay
Case No: CO/1649/2016
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
David Goldberg QC and Conrad McDonnell (instructed by KPMG LLP) for the Claimant
Aparna Nathan and Marika Lemos (instructed by HMRC Solicitor's Office) for the Defendant
Hearing date: 1 st February 2017
Introduction
This application for judicial review raises a point of principle regarding the effect of closure notices — given by HMRC to taxpayers pursuant to section 28A of the Taxes Management Act 1970 ("the TMA") — which fail to specify the amount of the tax HMRC contends should be paid. Further points of principle arise regarding the scope of section 114 of the TMA, in particular the ability of the court or the tribunal to correct errors in assessments and closure notices; as well as regarding the scope of the judicial review jurisdiction in the context of a system of statutory appeals.
For over a decade HMRC have been in dispute with Mr Archer (hereinafter referred to as "the taxpayer") in relation to two tax avoidance schemes, at least one of which was marketed by his advisers, KPMG. In 2009 the Court of Appeal determined that both schemes failed to achieve their intended purposes. After much delay, the reasons for which do not require examination, on 2 nd February 2016 HMRC issued two notices ("the Closure Notices") purportedly under section 28A of the TMA. These notices did not state the amounts of tax which were payable, although officers of HMRC say that the taxpayer's relevant tax returns were amended administratively. The gravamen of the taxpayer's case is that the Closure Notices are valid and effective notices but that "they do not do what HMRC hoped they would do". This is because the Closure Notices fail to amend the taxpayer's returns in line with the prerequisites of section 28A(2)(b). It follows, contends the taxpayer, that no debt is owed by him to the Crown pursuant to section 59B(5) of the TMA, and that HMRC's decision letter dated 11 th March 2016, nominally the target of these judicial proceedings, threatening to bankrupt him on the basis of such a debt is unlawful.
In order that this point of principle may be more fully understood, I should set out the essential factual background to this application.
Essential Factual Background
On 30 th January 2003 the taxpayer's tax return for the year 2001/2 was submitted by KPMG to HMRC. The taxpayer claimed a loss of £18,117,284 in respect of the implementation of a scheme for Relevant Discounted Securities ("RDS"). The correlative claim for tax relief was in the sum of £7,646,635. HMRC then opened an enquiry into the taxpayer's tax return for that year.
On 30 th January 2004 the taxpayer's tax return for the year 2002/3 was submitted by KPMG to HMRC. The taxpayer claimed a further loss of £8,297,840.75 in respect of the RDS scheme, correlating with a relief in the sum of £1,907,248.41. He also claimed an allowable loss for CGT purposes of £50,970,833 relating to the surrender of certain second-hand life assurance policies ("SHIPS"), corresponding to a relief in the sum of £5,070,904. HMRC then opened an enquiry into the taxpayer's tax return for that year.
In 2009 the Court of Appeal held that both these tax avoidance schemes were ineffective: as regards the RDS scheme, see Astall & Edwards v HMRC [2009] EWCA Civ 1010; and as regards the SHIPS scheme, see Drummond v HMRC [2009] EWCA Civ 608.
On 30 th October 2015 HMRC issued Accelerated Payment Notices ("APNs") and Follower Notices ("FNs") in respect of the RDS losses, relating to both of the tax years in issue. For the tax year 2001/2, the amount said to be due was £7,246,913.60 (i.e. about £400,000 less than the amount specified in the tax return as an allowable relief); for the tax year 2002/3, the amount said to be due was £1,907,248.41 (i.e. the same amount as that specified in the tax return as an allowable relief).
In December 2015 and January 2016 the taxpayer made applications to the First-tier Tribunal ("F-tT") pursuant to section 28A(4) of the TMA for directions that HMRC be required to issue Closure Notices in respect of their enquiries into both tax returns. The taxpayer's argument was that, given that HMRC had sufficient certainty to issue APNs and FNs predicated on the entirety of the RDS losses being disallowable, there was now no reason why Closure Notices should not ensue.
On 15 th January 2016 an APN and an FN were issued in respect of the SHIPS loss claimed in the 2002/3 tax return. The APN showed an amount due of £5,070,904 being the same as the amount specified by the taxpayer as an allowable relief in his return.
On 27 th January 2016 the taxpayer submitted representations to HMRC against both of the APNs and FNs issued on 30 th October 2015 in respect of the RDS losses. The taxpayer did not debate the amount specified of £7,246,913.60 in respect of the 2001/2 return but raised what HMRC characterises as a "technical argument" in respect of the 2002/3 return – although the arithmetic was not challenged as such, it was contended that HMRC were precluded from specifying an amount greater than £1,712,401.67. A similar technical argument was later to be levelled in relation to the APN and FN issued in January 2016. On my understanding of this correspondence, it was also being said that the instant case was factually distinguishable from the situations addressed by Court of Appeal authority.
On 29 th January 2016 HMRC wrote to the F-tT to explain that the taxpayer's applications for Closure Notices would not be resisted, and that these would be issued in the near future.
On 2 nd February 2016 two Closure Notices were issued in accordance (actual or purported) with section 28A of the TMA. Although they were dated the following day, I accept the evidence of Mrs Lynne Cook of HMRC that its system operates on that basis to allow for a short processing delay.
The Closure Notice relating to the 2001/2 tax year stated as follows:
" Information about our check of your Self Assessment tax return for the year ended 5 April 2002
I have now completed my check of your Self Assessment tax return for the year shown above. This letter is a closure notice issued under Section 28A(1) and (2) of the Taxes Management Act 1970. Thank you for your help during my check.
I have sent a copy of this letter to your tax adviser.
My decision
Relevant Discounted Security Loss Claim
No relief is due for the loss you claimed to have sustained on a relevant discounted security. [The reasons for my conclusion reflect the decision of the Court of Appeal …]. Viewing these facts realistically, and having regard to the purpose of the relevant legislation …, no loss was made in respect of a relevant discounted security.
Other issues
Benefits in kind charges arise from the use of a gardener employed by the company £4,598 and for relocation expenses £7,602.
I am amending your return to reflect all of the above.
What to do if you disagree
If you disagree with my decision, you can appeal to us. You will need to write to us by 3 rd March 2016, telling us why you think my decision is wrong. We will then contact you to try to settle this matter. If we cannot come to an agreement, we will write to you to tell you why …"
The Closure Notice relating to the 2002/3 tax year was in identical terms, save for the following one addition and one variation:
" SHIPS Loss Claim
The loss of £50,970,833 claimed in your return in respect of the surrender of non-qualifying second hand life assurance policies … is not an allowable loss for capital gains tax purposes. [The reasons for my conclusion reflect the decision of the Court of Appeal … and are based on my understanding of the material available to me].
…
Other issues
Benefits in kind charges arise from the use of a gardener employed by the company £4,563."
According to paragraphs 11–13 of the witness statement of Lynne Cook, the taxpayer's online tax returns were amended by her on 2 nd February 2016. She has explained exactly how this was done: specifically, the losses of £18,117,284, £8,297,840.75 and £50,970,833 were removed from the relevant boxes in the tax return, and the employment benefits were increased to reflect the amounts specified in the Closure Notices (totalling £16,763). As paragraphs 13 and 15 of her witness statement explain:
"When I amended the returns to reflect my conclusions, in each case I unchecked Box 18 of the returns and removed the figures from Boxes 18.3 and 18.6, the self-assessment calculation. Unchecking the box marked "self assessment: yes" results in a recalculation of the amount due. As a result, Mr Archer's self-assessment was replaced with an amended calculation reflecting the conclusions stated and amendments made by the closure notices. As Ms Musgrave sets out in more detail, these amended tax calculations were then automatically sent by our systems to KPMG …
…
After I had made the amendments to Mr Archer's self-assessment returns, I emailed the closure notices to Ms Bews at KPMG and I arranged for them to be sent by post to her as well. As Ms Musgrave states in her witness statement, as soon as I had made the amendment KPMG could have viewed the revised amount of tax outstanding for each of the years and a current version of Mr Archer's SA statement of account on the online system."
I will need to return to this evidence because the taxpayer does not accept it. He does not believe that any amendments were made to his returns on 2 nd February 2016, and he denies that KPMG were sent the amended tax calculations in early February or at all.
Noting...
To continue reading
Request your trial
-
William Archer v The Commissioners for HM Revenue and Customs [2022] UKUT 00061 (TCC)
...of the JR Proceedings. 3. The application for judicial review was dismissed by Jay J on 21 February 2017 following a hearing ([2017] EWHC 296 (Admin)). Mr Archer obtained permission to appeal from the Court of Appeal, but his appeal was dismissed on 30 November 2017 ([2017] EWCA 1962). Mr A......
-
Archer v R & C Commissioners
...notices. Mr Archer's JR application was dismissed by the High Court on 21 February 2017 in R (on the application of Archer) v R & C Commrs [2017] BTC 3 and his appeal to the Court of Appeal was dismissed on 30 November 2017 in R (on the application of Archer) v R & C Commrs [2018] BTC 1. On......
-
R Archer v The Commissioners for Hm Revenue and Customs
...not exhausted his available remedies and therefore his application for judicial review was dismissed. 3 The judge's judgment is at [2017] EWHC 296 (Admin), [2017] 1 WLR 2066. The statutory framework 4 In order to understand the rival arguments, it is necessary first to describe the nature......
-
Embiricos v Revenue and Customs Commissioners
...of the Board to issue a closure notice within a specified period. This provision was considered by Mr Justice Jay in the High Court ([2017] BTC 3) and this court on appeal, in R (on the application of Archer) v R & C Commrs [2018] BTC 1. Judgment in the High Court was in fact handed down in......