Another ‘Accelerated Payment’ case, another loss for the taxpayers

Accelerated Payment Notices (‘APNs’) and Partner Payment Notices (‘PPNs’) have since 2014 been clogging up the Administrative Court. A rough estimate suggests that up to 87 cases have been petitioned for review.[1] In fact, there are currently 4,116 applicants or potential applicants seeking interim relief from APNs/PPNs which HMRC’s records show amount to a total sum in excess of £756m.

In order to understand why, one need simply to understand what an APN (or a PPN) does. It accelerates the payment of ‘disputed’ tax. The APN/PPN regime broadly requires that taxpayers pay disputed tax upfront, before being able to challenge HMRC’s assessment through the normal channels. APNs may be issued where the following conditions are present:

  1. Both an enquiry and appeal are in progress;
  2. A tax advantage accrues from the particular arrangements; and
  3. A follower notice has been issued; the arrangements are DOTAS notifiable (section 311 of the Finance Act 2004); or a GAAR counteraction notice has been issued (paragraph 12 of Schedule 43 of the Finance Act 2013).

Once an APN has been issued to the taxpayer, the money becomes payable within 90 days. There is no right of appeal against the APN, but merely the right to make representations to HMRC, as a means only of objecting to either the satisfaction of the conditions or to the amount submitted to be due. After taking into account the representations, HMRC may refuse to withdraw the APN. If an APN has been issued to a taxpayer who entered into the once seemingly popular film schemes, the amount due could well be into the hundreds of thousands. Taxpayers are left with little option but to fight the APN, but without any right of appeal against the APN available, the only route which can be taken is through the Administrative Court. PPNs are almost identical to APNs but apply to parties who have invested through partnerships.

This blog has covered the emergence of the APN/PPN regime and the cases concerned in several posts (see: here and here). To date, no taxpayer has been successful in the JR applications to have the APN/PPN set aside (the closest has been minor successes in acquiring interim relief).

It should come as little surprise then that the latest judgment to be produced from the Administrative Court concerning the APN/PPN regime also found against the taxpayers. In R (VVB Engineering Services) v HMRC, three cases were heard together in which the claimant taxpayers sought an interim injunction against HMRC enforcing APNs and PPNs. As the law currently stands, the claimants would be entitled to relief if they could establish “hardship” (ie that they would be unable to trade/run their businesses in the manner in which they ordinarily operate). The claimants however argued that they were entitled to relief without having to establish hardship on the basis of deleteriousness of HMRC’s part and the administrative burden which arises where conditions are attached. This argument was rejected by the Court on the basis that the balance of convenience lay in not granting the injunction having particular regard to the fact that Parliament purposefully enacted the APN/PPN regime and that the taxpayers themselves entered into tax schemes accepting the risk that tax could become payable in the future. The Court also rejected the argument that the hardship test created too high a burden, again having particular regard to Parliament’s intention in enacting the regime.

This case then will offer little comfort to the thousands seeking relief from APNs/PPNs. There are two cases that will be heard this year, Rowe and Walapu, by the Court of Appeal which are the ones to watch closely. The High Court judgments in those cases, from Simler J and Green J respectively, were so comprehensive and robust that they effectively closed off the possibility for a successful challenge at the High Court level (or at least created a significant hurdle for High Court judges to overcome if they choose to depart from these cases. None so far have chosen to do so).

However, with so many cases coming before the Administrative Court concerning APNs/PPNs where the taxpayers are seeking a judicial review in an instance where the substantive case will be heard by the Tribunals (recall that one condition of the APN being granted is that an enquiry and appeal are ongoing), one might query why there needs to be ongoing two parallel proceedings. Yes, there will need to be separate proceedings where taxpayers have sought interim relief (injunction applications can for the most part generally only be granted by the High Court), but the point is that each case for interim relief could go on to be a full judicial review. At the same time, the substantive dispute will be heard before the tribunals. With two parallel proceedings ongoing, I again ask the question why should the expertly constituted First tier Tax Tribunal not have the capacity to resolve both disputes?

[1] See the JR stats at this page, download the zip file (Civil Justice and Judicial Review data) and look for the “Tax Avoidance” JRs in the JR spreadsheet. All have been since 2014-the same time that the legislation for APNs/PPNs and Follower Notices was introduced. It is hypothesized that all those cases are concerned with APNs/PPNs rather than Follower Notices for the reason that Follower Notices themselves do not require taxpayers to pay the tax, but rather the later issuance of an APN/PPN. Of course, some could be JRs of Follower Notices pre-empting the later issuance of an APN/PPN, but there has yet to be an administrative court judgment concerning Follower Notices, but there are myriad concerning APNs/PPNs).
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About taxatlincolnox

Tax PhD candidate, College Lecturer and Tutor at Oxford University; Researcher at King's College London and Social Sciences Tutor with the Brilliant Club. With this blog, I seek merely to contribute to the debate. All thoughts are mine, of course.
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