Accelerated Payment Notices (‘APNs‘) have been frequently visited as a topic on this blog (see here, here, here, and here). To recap, APNs require taxpayers to pay disputed tax upfront before proceeding with an appeal (provided that certain conditions are satisfied). APNs may be issued, pursuant to section 219 of Finance Act 2014 where the following conditions are satisfied:
- Either an enquiry or appeal are in progress;
- A tax advantage accrues from the particular arrangements; and
- A follower notice has been issued; the arrangements are DOTAS notifiable (FA 2004, s. 311); or a GAAR counteraction notice has been issued (FA 2013, Sch. 43, para 12).
Several cases where the claimants sought to challenge the issuance of the APNs have already failed before the Administrative Court (see here, here and here for instance), with the Court of Appeal due to begin hearing one of those cases (Rowe v HMRC) on the 18th of July.
In the most recent case Dickinson, an element which differentiated it from the other APN challenges was that HMRC had previously agreed (by virtue of a postponement agreement) not to seek the tax purported to be due until after the outcome of the appeal. This agreement took place before the APN legislation was introduced. The problem however for the claimants in Dickinson was that section 214 of Finance Act 2014 specifically envisages a situation where a postponement agreement is already in place and allows nevertheless HMRC to issue an APN. The court’s task accordingly was to resolve whether “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?”
In a strange concession, the Revenue accepted that it gave “no consideration” to the original postponement agreement when deciding to exercise the power to issue APNs in this case – a concession which the judge found “surprising”.
The claimants’ argument in the case was that HMRC had abused its power by issuing the APN, taking into account all the circumstances of the case (such as the fact that it was not a complicated DOTAS arrangement, initial positive reception by the Revenue about the schemes effectiveness, and long delays in the processes and investigations of the Revenue). The Revenue’s response effectively revolved around “macro-political” issues of policy, in other words that the claimants were ultimately seeking to challenge a political choice made by Parliament when it expressly provided the body with the power to issue APNs in such circumstances.
When assessing whether there has been an abuse of power, the court set out the factors that should be taken into account:
- categories of case or situations are not hermetically sealed but are of assistance as a matter of analysis of the competing factors and so in reaching the result,
- all the competing factors have to be assessed and weighed in the round to assess and identify the proportionate balance between the rival contentions,
- the competing factors engage private and public interests,
- the clarity of the promise and the circumstances in which it is made are relevant. They can be weighty, and require the public authority to provide compelling reasons to depart from it,
- “macro-political” issues of policy are relevant. They can be weighty and present a steep climb for a person to whom the relevant promise has been made,
- once the promise is proved the onus shifts to the authority to justify the departure from the legitimate expectation it creates (and see Paponette v A-G of Trinidad and Tobago  UKPC 32 at paragraph 37,
- if a claimant wishes to reinforce his position by relying on detriment he must prove it. The existence of detriment is not a necessary ingredient, but is often present when a claimant succeeds (and see R (Bancoult) v Foreign Secretary (No 2)  1 AC 453 at paragraphs 73 and 179),
- where a public authority is considering whether to act inconsistently with a promise that has given rise to a legitimate expectation good administration and elementary fairness demands that it takes its promise into account (see Lord Mustill in Doody and Paponette at paragraph 46),
- in assessing the scales of fairness and so whether the breach of a promise is so unfair as to amount to an abuse of power the court asks itself whether the breach of the promise is conspicuously unfair to the persons to whom it was made, and
- that focus on the relevant individuals is an important aspect of the necessary balance between private expectations and policy objectives.
The court rejected in part HMRC’s argument. The fact that there is a macro political issue at stake does not trump all other considerations. Thus, that there might be express provision for the Revenue to issue APNs when the statutory conditions are satisfied does not mean that there are no further restrictions upon the use of the power (such as for instance public law or the need to align with the underlying purpose of the legislation, or indeed the fact itself that there had been a postponement agreement). However, the court accepted that Parliament had expressly and deliberately “changed the goal posts” with respect to where the disputed tax should lie pending an appeal. On that basis, ultimately, the court found that the Revenue was using the power to issue an APN for the purposes provided by Parliament and thus the power was not abused.
The case highlights that although Parliament has endowed HMRC with a power to issue APNs provided that certain conditions set out in legislation have been satisfied, there are also other implied considerations which must be taken into account when exercising the power. This too was found in the case of Vital Nut, wherein Charles J in the High Court found that a necessary implied condition was that the relevant HMRC officer regarded the underlying tax scheme as ineffective.
Something slightly confusing about the case is however that the court seemed to suggest that HMRC had failed to take into account a relevant consideration when exercising the discretionary power, namely the postponement agreement. This of course is a ground for judicial review and should amount to a success for the claimant (provided that, had the consideration been taken into account, the same decision would not have inevitably been arrived at). But it does not appear that this point was argued in the case. Nor does it seem that this point was argued in the recent Vrang case, concerning a taxpayer who suffered at the hands of the 2011 Swiss/UK Tax Cooperation Agreement. A possible argument there could have been made that a relevant consideration when deciding to exercise discretion to repay monies was whether there was any tax initially due. In the case itself it seems that the taxpayer in fact owed little if any tax. It is canonical nevertheless that a public authority must not fail to take into account relevant considerations (and should not take into account irrelevant considerations) when exercising a discretionary power.