R (on the application of Reid and Another) v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 03 March 2020 |
| Neutral Citation | [2020] UKUT 61 (TCC) |
| Date | 03 March 2020 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2020] UKUT 61 (TCC)
Mr Justice Nugee, Judge Jonathan Richards
Michael Sherry and Ximena Montes Manzano, instructed by Reynolds Porter Chamberlain LLP, appeared for the claimants and appellants
Aparna Nathan QC and Marika Lemos, instructed by the General Counsel and Solicitor to HM Revenue & Customs, appeared for the defendants and respondents
Income tax – Judicial Review – Whether adjustments made under TMA 1970, s. 28B(4) are closure notices – Whether requirements necessary for issue of accelerated payment notices met – Whether HMRC entitled to issue a new accelerated payment notice having withdrawn an earlier notice – TMA 1970, s. 9A, 28A, 28B – FA 2014, s. 219 – Tribunals, Courts and Enforcement Act 2007, s. 31(2A).
The Upper Tribunal (UT) dismissed an appeal against the validity of closure notices in Reid [2018] TC 06469 and dismissed applications for judicial review in relation to closure notices and accelerated payment notices (APNs).
In 2005, both Mr Reid and Dr Emblin (the appellants) participated in two tax avoidance schemes. The Corbiere Scheme intended to generate relievable losses through transactions in gilt-edged securities. The film scheme involved the appellants being members of Future Screen Partners No 1 LLP (“the LLP”). The appellants' 2004–05 tax returns included losses from both the film scheme (based on the partnership statement in the LLP's return) and the Corbiere Scheme. It was common ground that neither scheme actually produced any relievable tax losses.
HMRC opened an enquiry into the LLP's 2004–05 tax return under TMA 1970, s. 12AC. Under s. 12AC(6) this deemed to give notices of enquiry under TMA 1970, s. 9A to the appellants in relation to their individual returns.
HMRC separately opened enquiries into the appellants' personal tax returns under TMA 1970, s. 9A in respect of the relief claimed in relation to the Corbiere Scheme.
HMRC issued a closure notice under TMA 1970, s. 28B reducing the partnership losses. They also issued letters to both appellants pursuant to s. 28B(4) telling them that their returns were being amended to reflect the amendments to the LLP's return.
HMRC separately issued each of the appellants with what HMRC described as a closure notice under TMA 1970, s. 28A (the “disputed closure notices”), amending the appellants 2004–05 returns to disallow the Corbiere Scheme losses.
The appellants' appealed against the amendments to their tax returns. They submitted that as there can only be one enquiry and one closure of that enquiry, no enquiry was ever opened into their individual returns, other than through the deeming rules as part of the opening of the enquiry into the LLP's return. It followed that the disputed closure notices disallowing the Corbiere Scheme losses were not closure notices at all.
The FTT dismissed the appeals, finding that a notice under TMA 1970, s. 28B(4) does not close enquiries under TMA 1970, s. 9A, but amends the partners' self-assessment tax returns in respect of the partnership. Therefore the individual enquiries were validly closed by closure notices issued under s. 28A.
HMRC issued the appellants with APNs in relation to their use of the Corbiere Scheme. Both appellants made representations to HMRC objecting to the issue of their APN. Their representations pointed out that HMRC could only issue an APN if condition B in FA 2014, s. 219(2) was satisfied. Which required them to have been appealing against HMRC's closure notice “on the basis of a particular tax advantage … result[ing] from [the Corbiere Scheme]”. The appellants maintained that this condition was not met since the appeals were not made on the basis that the Corbiere Scheme produced any tax advantage, but rather that HMRC had not validly amended their 2004–05 returns.
HMRC initially accepted Dr Emlin's representations and cancelled his APN, but later reissued it. Mr Reid's representations were not accepted, and his APN was never withdrawn.
The issues in these proceedings concerned:
- The appellants appeal against the FTT's decision. The essence of their argument was that there was only ever a single enquiry into their individual tax returns for 2004–05 that was closed by issue of the s. 28B(4) letters (the section 28B(4) Issue).
- A claim for judicial review that:the disputed closure notices were invalid and unlawful, in case there was no power for them to raise this in the statutory appeal;there should be a direction quashing their APNs because condition B in FA 2014, s. 219(2) was not satisfied and therefore the APNs were not lawfully issued (the Condition B Issue);there should be a direction quashing their APNs because condition A in FA 2014, s. 219(2) was not satisfied and therefore the APNs were not lawfully issued (the Condition A Issue);there should be a direction quashing their APNs on the ground that HMRC failed to meet the threshold set out in R (on the application of Rowe) v R & C Commrs [2018] BTC 4 of being positively satisfied that the appellants statutory appeals would fail (the Rowe Issue); andin the case of Dr Emblin, HMRC's decision to reissue his APN once they had withdrawn it was ultra vires (the Ultra Vires Issue) or alternatively that HMRC's conduct was so conspicuously unfair as to be unlawful (the Unfairness Issue).
The UT dealt with the closure notice issue as an appeal against the FTT's decision. It concluded that the s. 28B(4) letters were not closure notices. It noted that the FTT (Judge Mosedale) reached a similar conclusion in Gibbs [2013] TC 02650 and endorsed both the reasoning and conclusion of that decision. It followed that the disputed closure notices were closure notices and the appeal was dismissed.
The UT refused both appellants permission to bring judicial review proceedings in respect of the alleged invalidity of the disputed closure notices and the Condition A Issue. It also refused Dr Emblin permission to bring judicial review proceedings in respect of the Ultra Vires Issue and the Unfairness Issue.
The UT did grant the appellants permission to bring judicial review proceedings in respect of the Condition B Issue and the Rowe Issue, finding that they were arguable. However, having done so, it dismissed the applications for judicial review.
On the Condition B Issue the UT could see no reason why a taxpayer who asserted that his or her scheme “works” as a technical matter should be in a different position from a taxpayer who makes the procedural argument that, irrespective of whether the scheme works or not, HMRC had failed to challenge it effectively.
On the Rowe issue the UT found that the officer issuing the APN could only do so properly if she was satisfied that the “procedural” argument concerning the validity of the disputed closure notices was wrong in law. The UT concluded that as the officer failed to engage with the appellants' reasons for concluding that the reliefs claimed in connection with the Corbier Scheme could conceptually cause the APNs to be invalid, however, even if the officer had turned her mind fully to the procedural arguments, it appeared to the UT highly likely that she would have concluded that those arguments would not succeed and therefore would have given rise to the same outcome for the appellants. As it could see no “exceptional public interest” requiring a different course, it considered it was obliged, by the Tribunals, Courts and Enforcement Act 2007, s. 31(2A) to refuse the appellants the remedy of judicial review.
The appeal and judicial review applications were dismissed.
This UT decision confirms that amendments made to individual partners' tax returns as part of closing an enquiry into a partnership return do not constitute closure notices in respect of the individual partners' tax returns.
[1] Dr Emblin and Mr Reid are appealing against a decision of the First-tier Tribunal (Tax Chamber) (the “FTT”) released on 25 April 2018 (the “Decision”) reported as Reid [2018] TC 06469. They are also seeking permission to challenge, by way of judicial review, closure notices and accelerated payment notices (“APNs”) that HMRC have issued. We will refer to Dr Emblin and Mr Reid, in all of their capacities, as the “Appellants”.
[2] The Appellants' claims for judicial review were joined and transferred to the Upper Tribunal by order of Holgate J on 11 October 2018. Judge Berner refused permission to apply for judicial review on the papers in a decision released on 16 November 2018. When the Appellants applied for an oral reconsideration, this Tribunal directed that there should be a “rolled-up” hearing to determine (i) the appeal against the Decision, (ii) the renewed oral application for permission to apply for judicial review and (iii) (if permission is granted) the judicial review application itself.
[3] The Appellants both submitted witness statements in connection with the judicial review claim. Peter Massey and Wendy Lee, both HMRC officers, submitted witness statements as well. No witness was cross-examined.
[4] Since the arguments before us and the parties' respective positions have clearly evolved significantly since the hearing before the FTT, we will set out our own summary of the background (focused on the position relevant to the issues now in dispute). We intend no discourtesy to the FTT in not referring in detail to its decision.
[5] In the 2004–05 tax year, the Appellants both entered into two tax avoidance schemes, both intended to generate relievable losses. The first scheme (the “Film Scheme”) involved them being members of Future Screen Partners No 1 LLP (the “LLP”). The other scheme (the “Corbiere Scheme”) involved them entering into transactions in gilt-edged securities. It is now common ground that neither the Film Scheme nor the Corbiere Scheme actually produced any relievable tax loss.
[6] The...
To continue reading
Request your trial
-
R & C Commissioners v Inverclyde Property Renovation LLP and Another
...the application of Cobalt Data Centre 2 LLP) v R & C Commrs [2019] BTC 529, para 121; and R (on the application of Reid) v R & C Commrs [2020] BTC 540, para 31–37. None of those decisions, of course, amounts to authority in favour of HMRC's contention in the present case, because the point ......
-
Mathieson
...UNISON decision provided any basis to depart from the conclusion of the Upper Tribunal in R (on the application of Reid) v R & C Commrs [2020] BTC 540 (and other decisions) that a s. 28B(4) notice is not a closure notice and cannot be appealed under TMA 1970, s. 31. Accordingly, the FTT had......
-
1) Mark Reid 2) Simon Emblin v The Commissioners for HM Revenue and Customs
...[2020] UKUT 0061 (TCC) Appeal ref: UT/2018/0075-76 UTJR/2018/002 INCOME TAX, JUDICIAL REVIEW – Whether adjustments made under s28B(4) of Taxes Management Act 1970 are “closure notices” – whether requirements necessary for issue of accelerated payment notices met – whether HMRC entitled to i......