R (on the application of Dickinson and Others) v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judge | Charles J |
| Judgment Date | 07 July 2017 |
| Neutral Citation | [2017] EWHC 1705 (Admin) |
| Docket Number | Case No: CO/2901/2015 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 07 July 2017 |
[2017] EWHC 1705 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Charles
Case No: CO/2901/2015
James Ramsden QC (instructed by Reynolds Porter Chamberlain) for the Claimants
Gemma White QC and Aparna Nathan (instructed by HMRC) for the Defendant
Hearing dates: 14 and 15 March 2017
Index
| Paragraphs 1 to 6 | Overview and Conclusion |
| Paragraphs 7 to 33 | General Introduction |
| Paragraphs 34 to 41 | Abuse of power |
| Paragraphs 42 to 49 | The most relevant provisions relating to the APN regime |
| Paragraphs 50 to 62 | Disclosure of tax avoidance schemes — DOTAS |
| Paragraphs 63 to 66 | The policy objective or underlying intention of Parliament when enacting the APN regime |
| Paragraphs 67 to 73 | The underlying taxation issue |
| Paragraphs 74 to 87 | The range of circumstances covered by this claim — Discovery assessments |
| Paragraphs 88 to 121 | The information provided by and on behalf of the Claimants to the Revenue |
| Paragraphs 122 to 141 | The Revenue's explanation for the long delay and the change in its position |
| Paragraphs 142 to 150 | April 2013 to the giving of the APNs |
| Paragraphs 151 to 152 | The Revenue's litigation and settlement strategy |
| Paragraphs 153 to 184 | Analysis and Conclusion |
| Paragraph 185 | Result |
Overview and Conclusion
This claim for judicial review relates to the giving of accelerated payment notices (APNs) by the Defendant (the Revenue) in reliance upon Chapter 3 of the Finance Act 2014 after the Revenue had agreed to postpone the payment of the underlying disputed tax liability pending the resolution of the disputes between the Claimants and the Revenue on tax appeals to the First-tier Tribunal (the FTT).
The effect of the APNs is to reverse the effect of the postponement agreements and so the express promise made by them.
It is clear that the Revenue has the power to give APNs that have that effect and the issue is whether in all the circumstances of these cases it was an abuse of power for the Revenue to do so.
The Claimants seek to distinguish their cases from earlier ones because of the express promise made by the postponement agreements and rely on those promises and the way the Revenue has dealt with their tax affairs to found their challenge which is based exclusively on abuse of power.
So, this judicial review raises the issue: Whether, applying public law principles, it was an abuse of power for the Revenue to resile from its express promise not to enforce the payment of the tax it had assessed and which had become due pending the resolution of the disputes relating to the validity of its assessments?
Under the last heading "Analysis and Conclusion" I set out why I have decided that arguments advanced by the Revenue on this issue outweigh the Claimants' arguments on it and so the claim should be dismissed.
General Introduction
Following the hearing there was an exchange of further evidence and comment.
An APN requires the taxpayer to pay the Revenue the sum of money that a designated HMRC officer has determined to be the "disputed tax" (which is defined). For present purposes, the effect of this is that the APNs required the Claimants to pay to the Revenue sums equal to the income tax charged in their assessments that they have appealed to the First-tier Tribunal (the FTT).
The relevant assessments are discovery assessments made under s. 29 of the Taxes Management Act 1970 (the TMA) and the amounts assessed by them became due and payable. But, pursuant to s. 55 of the TMA the Revenue agreed to postpose the payment of the income tax claimed until after the determination of the appeals. These agreements (the Postponement Agreements) were made in letters. An example is a letter dated 3 February 2014 relating to Mr Dickinson and the tax year 2009/10 which is in the following 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.
So, the Revenue necessarily accepts that by the Postponement Agreements it made clear and express promises to each of the Claimants that the payment of the disputed tax would be postponed whilst their appeals were being considered.
Payments under the APNs are treated as advance payments, and so, if the relevant tribunal or court decides that the disputed tax is not due because either (i) the assessments were not lawfully made, or (ii) the Claimants' arguments on taxability are correct those sums are repaid. A similar result would ensue if there had been no Postponement Agreements, no APNs and the disputed tax had been paid prior to the determination of the appeals.
Parliament provided that APNs can be given when the taxpayer has appealed an assessment (see, in particular, s. 199 (c)(ii), s. 219(2)(b) and s. 221 of the Finance Act 2014). Also, by s. 224, Parliament addressed what was to happen if payment of the appealed liability to tax had been postponed. It did so by amending s. 55 of the TMA to provide that nothing in s. 55 of the TMA enables the postponement of the payment of the disputed tax specified in the APN. The result of that amendment is that, if the payment of the disputed tax is postponed pursuant to s. 55 of the TMA before an APN is given, it ceases to be so postponed and becomes payable pursuant to the APN regime.
This reverses the position on who holds the disputed tax specified in the APN pending the outcome of the appeal. In cases in which tax has not become due and been postponed an APN also reverses the position on who holds the disputed tax specified in the APN. So, an APN turns a disputed or putative tax liability into an immediate and actual liability that will be repaid with interest if the taxpayer wins.
If there had been no APNs or they are invalid and the disputed tax remained unpaid until the tax appeals are decided, the Claimants, if they lose the appeals, would have to pay the disputed tax with interest at (currently) 2.75%. This is higher than the rate of (currently) 0.5% payable if the amount paid pursuant to an APN has to be repaid to the taxpayers. (The current rate if the sum that becomes due under an APN is not paid is a series of 5% charges with rests (see paragraph 42 of the judgment of Simler J in Rowe cited below)).
In short, the Claimants' case is that the giving of the APNs was an abuse of power because:
(i) it breached the express and direct promise made to them by the Postponement Agreements which gave rise to a legitimate expectation that the disputed tax specified in the APNs would not be collected from them until after their appeals had been decided, and
(ii) in all the circumstances of the case that was conspicuously unfair as a matter of procedure and substance.
The Revenue accepts that:
(i) when the conditions for giving an APN are satisfied (see Conditions A to C defined in s. 219 of the Finance Act 2014) it has a power and not a duty to give an APN, and
(ii) in deciding to give the APNs to the Claimants it gave no consideration to the existence of the Postponement Agreements and so to the express and clear promises it had made by them to them, pursuant to s. 55 of the TMA that payment of the disputed tax, that had become due by the giving of the assessments, would be postponed.
On the face of it, this is a surprising approach for a Government Department to take when it decides to exercise a power that ends the effect of a clear and express promise that it has given.
The Revenue's first argument was that this approach to giving APNs, and so one that did not take into account the promises it had made by the postponement agreements, is lawful on the basis that it accords with and implements the provisions and underlying intention of the Finance Act 2014. The evidence does not indicate when this analysis was carried out by the Revenue. But this argument was not advanced on the basis that:
(i) this thought process had been gone through before the decisions to issue the APNs were made, and so that
(ii) it explained the lack of any mention or consideration of the Postponement Agreements at the relevant decision-making meetings.
This argument is effectively one:
(i) that in all cases relating to DOTAS arrangements when the power to give an APN arises the Revenue has a duty (or save in exceptional circumstances has a duty) to give it, and further or alternatively
(ii) that the language and underlying intention of the APN legislation means that postponement agreements can, as a matter of good administration, simply be ignored by the Revenue.
Alternatively, the Revenue advanced arguments to the effect that, applying the public law principles on abuse of power, in all the circumstances, including the promises made by the postponement agreement, Parliament's intention in...
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