In Dr Walapu v HMRC [2016] EWHC 658 (23 March 2016), the High Court rejected a claim for judicial review of an advance payment notice (APN).
Dr Walapu had implemented a tax avoidance scheme marketed by the Mercury Tax Group and known as Liberty Syndicate 21. He sought judicial review of HMRC’s decision to issue an APN. He had claimed relief against past income tax assessments in his tax return but he had not yet had his claim formally assessed. He accordingly submitted that the APN required the payment on account of an unassessed tax liability that had not yet accrued. This case therefore differed from Rowe v HMRC [2015] EWHC 2293 in which HMRC had formerly assessed the liability.
The High Court first observed that the new arrangements (FA 2014 s 222 et s.) pursued a legitimate objective, were targeted precisely upon the class of persons who engaged in the activity sought to be suppressed, and incorporated a vigorous process whereby the APN was likely to correlate to the actual tax position. The court then proceeded to reject each of Dr Walapu’s arguments.
It found that:
The rules did confer a right of representation since they created a statutory right of consultation which took effect, not before the issue of the APN but before it became effective.
There had been no violation of Dr Walapu’s legitimate expectation nor of the principle of non-retroactivity. The court, in particular, rejected the claimant’s contention that HMRC had been quiescent following the submission of the return leading the claimant to assume that no APN would be issued. HMRC had made its intention to challenge the scheme very clear from the outset. Furthermore, FA 2014 was retroactive only in the sense that it had changed the payment rules and its retroactivity, which operated at the very lowest point of severity, was justified in the context of its objective of fighting tax avoidance.
The claimant had not been denied access to a court in breach of the European Convention of Human Rights art 6. The dispute was not ‘civil’ and, in any event, there had been no violation since judicial review was available and the claimant could compel HMRC to make an assessment, which would create a right of appeal.
There had been no violation of the claimant’s property rights (enshrined in the European Convention of Human Rights art 1 protocol 1) since a dispute about tax took it out of the notion of ‘possession’ and there was no deprivation as the monies would be returned if the claimant won the case.
The scheme had been a ‘subsequent iteration of the partnership scheme’, which had already been notified. This iteration did not need to be notified but it brought the scheme within DOTAS so that HMRC had had the power to issue an APN.
Why it matters: The court robustly rejected the notion that to require a citizen to pay to HMRC a sum which was not a sum assessed for tax constituted a profound violation of the citizen's private rights. Consistently with its earlier decision in Rowe, it also rejected all arguments pertaining to the validity of the legislative scheme as well as arguments specific to Dr Walapu’s case.
In Dr Walapu v HMRC [2016] EWHC 658 (23 March 2016), the High Court rejected a claim for judicial review of an advance payment notice (APN).
Dr Walapu had implemented a tax avoidance scheme marketed by the Mercury Tax Group and known as Liberty Syndicate 21. He sought judicial review of HMRC’s decision to issue an APN. He had claimed relief against past income tax assessments in his tax return but he had not yet had his claim formally assessed. He accordingly submitted that the APN required the payment on account of an unassessed tax liability that had not yet accrued. This case therefore differed from Rowe v HMRC [2015] EWHC 2293 in which HMRC had formerly assessed the liability.
The High Court first observed that the new arrangements (FA 2014 s 222 et s.) pursued a legitimate objective, were targeted precisely upon the class of persons who engaged in the activity sought to be suppressed, and incorporated a vigorous process whereby the APN was likely to correlate to the actual tax position. The court then proceeded to reject each of Dr Walapu’s arguments.
It found that:
The rules did confer a right of representation since they created a statutory right of consultation which took effect, not before the issue of the APN but before it became effective.
There had been no violation of Dr Walapu’s legitimate expectation nor of the principle of non-retroactivity. The court, in particular, rejected the claimant’s contention that HMRC had been quiescent following the submission of the return leading the claimant to assume that no APN would be issued. HMRC had made its intention to challenge the scheme very clear from the outset. Furthermore, FA 2014 was retroactive only in the sense that it had changed the payment rules and its retroactivity, which operated at the very lowest point of severity, was justified in the context of its objective of fighting tax avoidance.
The claimant had not been denied access to a court in breach of the European Convention of Human Rights art 6. The dispute was not ‘civil’ and, in any event, there had been no violation since judicial review was available and the claimant could compel HMRC to make an assessment, which would create a right of appeal.
There had been no violation of the claimant’s property rights (enshrined in the European Convention of Human Rights art 1 protocol 1) since a dispute about tax took it out of the notion of ‘possession’ and there was no deprivation as the monies would be returned if the claimant won the case.
The scheme had been a ‘subsequent iteration of the partnership scheme’, which had already been notified. This iteration did not need to be notified but it brought the scheme within DOTAS so that HMRC had had the power to issue an APN.
Why it matters: The court robustly rejected the notion that to require a citizen to pay to HMRC a sum which was not a sum assessed for tax constituted a profound violation of the citizen's private rights. Consistently with its earlier decision in Rowe, it also rejected all arguments pertaining to the validity of the legislative scheme as well as arguments specific to Dr Walapu’s case.
