“The object of APNs… is to change the financial benefit of tax avoidance arrangements by ending the economic benefit to taxpayers of retaining an amount equal to the disputed tax until the issue is finally determined against them (if the arrangements are ultimately held to be ineffective). APNs… thus require the persons on whom they are served… to pay disputed tax in advance of that final determination on the basis that the sums will be repayable with interest if the arrangements are held to be effective.”
“219 Circumstances in which an accelerated payment notice may be given (1) HMRC may give a notice (an “accelerated payment notice”) to a person (“P”) if conditions A to C are met. (2) Condition A is that – (a) a tax enquiry is in progress into a return or claim made by P in relation to a relevant tax, or (b) P has made a tax appeal (by notifying HMRC or otherwise) in relation to a relevant tax but that appeal has not yet been – (i) determined by the tribunal or court to which it is addressed, or (ii) abandoned or otherwise disposed of. (3) Condition B is that the return or claim or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular arrangements (“the chosen arrangements”). (4) Condition C is that one or more of the following requirements are met – … (b) the chosen arrangements are DOTAS arrangements; … (5) “DOTAS arrangements” means – (a) notifiable arrangements to which HMRC has allocated a reference number under section 311 of FA 2004, … 220 Content of notice given while a tax enquiry is in progress (1) This section applies where an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while a tax enquiry is in progress). (2) The notice must – (a) specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given, (b) specify the payment (if any) required to be made under section 223 and the requirements of that section, (c) explain the effect of sections 222 and 226, and of the amendments made by sections 224 and 225… (3) The payment required to be made under section 223 is an amount equal to the amount which a designated HMRC officer determines, to the best of that officer’s information and belief, as the understated tax. (4) “The understated tax” means the additional amount that would be due and payable in respect of tax if – … (b) in the case of a notice given by virtue of section 219(4)(b) (cases where the DOTAS requirements are met), such adjustments were made as are required to counteract what the designated HMRC officer determines, to the best of that officer’s information and belief, as the denied advantage; … (5) “The denied advantage” – … (b) in the case of a notice given by virtue of section 219(4)(b), means so much of the asserted advantage as is not a tax advantage which results from the chosen arrangements or otherwise, … 221 Content of notice given pending an appeal (1) This section applies where an accelerated payment notice is given by virtue of section 219(2)(b) (notice given pending an appeal). (2) The notice must – (a) specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given, (b) specify the disputed tax, (c) explain the effect of section 222 and of the amendments made by section 224 and 225 so far as relating to the relevant tax in relation to which the accelerated payment notice is given, … (3) “The disputed tax” means so much of the amount of the charge to tax arising in consequence of – (a) a tax enquiry is in progress into a return or claim made by P in relation to a relevant tax, or (b) P has made a tax appeal (by notifying HMRC or otherwise) in relation to a relevant tax but that appeal has not yet been – (i) determined by the tribunal or court to which it is addressed, or (ii) abandoned or otherwise disposed of. (b) the chosen arrangements are DOTAS arrangements; (a) notifiable arrangements to which HMRC has allocated a reference number under section 311 of FA 2004, (a) specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given, (b) specify the payment (if any) required to be made under section 223 and the requirements of that section, (c) explain the effect of sections 222 and 226, and of the amendments made by sections 224 and 225… (b) in the case of a notice given by virtue of section 219(4)(b) (cases where the DOTAS requirements are met), such adjustments were made as are required to counteract what the designated HMRC officer determines, to the best of that officer’s information and belief, as the denied advantage; (b) in the case of a notice given by virtue of section 219(4)(b), means so much of the asserted advantage as is not a tax advantage which results from the chosen arrangements or otherwise, (a) specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given, (b) specify the disputed tax, (c) explain the effect of section 222 and of the amendments made by section 224 and 225 so far as relating to the relevant tax in relation to which the accelerated payment notice is given, (a) the amendment or assessment of tax appealed against, or (b) where the appeal is against a conclusion stated by a closure notice, that conclusion, as a designated HMRC officer determines, to the best of the officer’s information and belief, as the amount required to ensure the counteraction of what that officer so determines as the denied advantage. (4) “The denied advantage” has the same meaning as in section 220(5). …”
“The courts are entitled to approach these unusual powers on the basis that (unless the legislation clearly provides the contrary) Parliament would not confer power to serve an APN… unless there were reasonable grounds for concluding that the tax would ultimately be found to be payable. That would result in APNs… only being capable of being used in a proportionate manner when the interests of the state and of the taxpayers involved are fairly balanced. The contrary proposition would involve allowing the state arbitrarily to deprive individuals of their property, even only in anticipation of an obligation that has not yet become complete in law.”
“222 Representations about a notice (1) This section applies where an accelerated payment notice has been given under section 219 (and not withdrawn). (2) P has 90 days beginning with the day that notice is given to send written representations to HMRC – (a) objecting to the notice on the grounds that Condition A, B or C in section 219 was not met, or (b) objecting to the amount specified in the notice under section 220(2)(b) or section 221(2)(b). (3) HMRC must consider any representations made in accordance with subsection (2). (4) Having considered the representations, HMRC must – (a) if representations were made under subsection (2)(a), determine whether – (i) to confirm the accelerated payment notice (with or without amendment), or (ii) to withdraw the accelerated payment notice, and (b) if representations were made under subsection (2)(b) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount ought to have been specified under section 220(2)(b) or section 221(2)(b), and then – (i) confirm the amount specified in the notice, or (ii) amend the notice to specify a different amount, and notify P accordingly.” (a) objecting to the notice on the grounds that Condition A, B or C in section 219 was not met, or (b) objecting to the amount specified in the notice under section 220(2)(b) or section 221(2)(b). (a) if representations were made under subsection (2)(a), determine whether – (i) to confirm the accelerated payment notice (with or without amendment), or (ii) to withdraw the accelerated payment notice, and (b) if representations were made under subsection (2)(b) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount ought to have been specified under section 220(2)(b) or section 221(2)(b), and then – (i) confirm the amount specified in the notice, or (ii) amend the notice to specify a different amount, and notify P accordingly.”
“Where an accelerated payment notice has been given, HMRC may, at any time, by notice given to P – (a) withdraw the notice, …”
“make representations to us objecting to the notice and/or the amount of the accelerated payment if you believe that one or both of the following applies: • One or more of the conditions shown earlier in this notice for issuing this notice have not been met • The amount shown on the notice is not correct – if this is the case you will need to tell us what you think the correct amount is and why If you want to make representations, you need to write to us to let us know what they are. You need to make sure that we receive your letter no later than22 December 2014 . We will then consider your representations and let you know our decision. If you make representations in relation to the conditions for issuing the notice we will either confirm this notice, (with or without amendment), or withdraw it. If you make representations about the amount specified in this notice, we will decide whether a different amount should have been specified and then either confirm the amount specified in this notice, or amend the notice to specify a different amount.”
“For the reasons given, we consider the APNs have been issued without HMRC having power lawfully to do so. If, on reflection, HMRC agrees with our analysis and is willing to withdraw the notices using the power to so ins.227 Finance Act 2014 , or otherwise, we should be grateful if you would let us know as soon as possible. Pending that, we intend to proceed to issue the application given that time is running against our clients.”
“(i) on a proper interpretation of the legislation, HMRC are not allowed to issue the notices in cases of genuine dispute; (ii) the designated officer issuing the notices is required to determine the amount which is correctly payable “to the best of that officer’s information and belief” and in the circumstances the officer cannot have reached such a determination in these cases; (iii) in Mrs Archer’s case, she has not asserted any “tax advantage” nor met any of the other conditions, and accordingly the statutory conditions for HMRC to be able to issue an accelerated payment notice to her are not met; (iv) as shown by the issue of accelerated payment notices to both Mrs Archer and Mr Archer, the true purpose of HMRC’s actions is not to enforce payment of a sum properly due to HMRC, but to impose a threat which will be regarded as so intimidating that it forces payment to HMRC of a sum which is not or, at least, may not be, properly due to them.”
“There is no tax due from Mrs Archer to HMRC. The suggestion that she owes capital gains tax is fanciful: she does not. And, in any event, Mrs Archer did not use DOTAS arrangements and has not claimed or asserted a tax advantage. Accordingly (but without limitation) the requirements ofFinance Act 2014 s.219(1) , (3) and (4)(b) are not met and there is no question of HMRC being properly able to issue an APN to her: the APN has been issued without HMRC having the power to issue it. Moreover, there is no amount which can be determined as payable pursuant to an APN, because there is no “asserted advantage” which can be determined not to be a tax advantage resulting from the chosen arrangements, and indeed in Mrs Archer’s case there are no “chosen arrangements”.”
“Our representations are made on the same basis as the application for the judicial review…, namely that we consider the APNs to have been issued without HMRC having power lawfully to do so, and we append a copy of the sealed Claim Form, statement of facts and detailed statement of grounds for ease of reference.”
“Where both spouses play a part in avoidance arrangements, as in the case of your clients, best practice requires that all the circumstances of those arrangements including the involvement of both spouses should be considered before approval is given for the issuing of notices to both. In this case, my clients regret that best practice was not followed. Having now considered all the circumstances of your clients’ arrangements, HMRC have decided to withdraw the notice issued to Mrs Archer. Please note that the notice is withdrawn without prejudice to HMRC’s position that Mrs Archer is liable to tax in respect of her involvement in the Certificates of Deposit Scheme (DOTAS reference 74201516).”
“The next question to consider is whether there is good reason to make a different order. [HMRC] argues that the issue of proceedings for judicial review was premature because representations in response to the APN were not forthcoming until almost three weeks after the issue of the claim. As the effect of these was to require [HMRC] to either confirm or withdraw the APN the submission of representations was therefore a clear alternative step for the Claimant and one which had not been taken at the time the claim was issued. The Claimant disagrees but no clear explanation for this has been given other than submissions which suggest the Claimants had limited confidence in the process of representations as an alternative remedy. However, it is significant that these submissions do appear to accept that only after consideration of representations and a decision by [HMRC] to confirm or withdraw the APN could judicial review be “the only form of legal redress”, i.e. a remedy of last resort. On balance I am not persuaded that the issue of a claim at the material time was justified. The Claimants points to a desire to act promptly but this virtue by itself should not override all other considerations and whether a claim for judicial review was at this stage truly a last resort, as it should be, is of course a matter of judgment and one to be reached taking into account all of the circumstances. On any objective analysis it would seem that there was at the point of issue a very significant potential for the situation to be resolved without the additional upheaval and cost of proceedings; an alternative course to litigation had still to be played out as events in the following three weeks swiftly demonstrated. By this time the dispute had been running many years and the relationship between what were clearly two very well-resourced parties was a well-established one. Progress between them was clearly ongoing and at an advanced stage as both parties must have realised. In this context the lawyers involved were under a heavy obligation to resort to litigation only if it was really unavoidable. To my mind the force of the guidance and obligations identified in R (Cowl) v Plymouth City Council[2001] EWCA Civ 1935 are very much underlined by the extraordinary amount of costs that were subsequently generated overall in this case; even without any advanced preparations for trial the combined Claimants’ costs alone are said to amount to approximately£601,557.20 . I have considered the parties’ submissions very carefully and taking all the circumstances into account I am not persuaded that the issue of the claim was at the material time justified. In consequence, and balancing the various factors fairly in the scale, I consider the most appropriate outcome here is that there should be no order for costs.”
“1. The importance of this appeal is that it illustrates that, even in disputes between public authorities and the members of the public for whom they are responsible, insufficient attention is paid to the paramount importance of avoiding litigation whenever this is possible. Particularly in the case of these disputes both sides must by now be acutely conscious of the contribution alternative dispute resolution can make to resolving disputes in a manner which both meets the needs of the parties and the public and saves time, expense and stress.”
“It appears that one reason why the wheels of the litigation may have continued to roll is that both parties were under the impression that unless they agreed otherwise the claimants were entitled to proceed with their application for judicial review unless the complaints procedure on offer technically constituted an “alternative remedy” which would fulfil all the functions of judicial review. This is too narrow an approach to adopt when considering whether an application to judicial review should be stayed. The parties do not today, under the Civil Procedure Rules, have a right to have a resolution of their respective contentions by judicial review in the absence of an alternative procedure which would cover exactly the same ground as judicial review. The courts should not permit, except for good reason, proceedings for judicial review to proceed if a significant part of the issues between the parties could be resolved outside the litigation process. The disadvantages of doing so are limited. If subsequently it becomes apparent that there is a legal issue to be resolved, that can thereafter be examined by the courts which may be considerably assisted by the findings made by the complaints panel.”
“This case will have served some purpose if it makes it clear that the lawyers acting on both sides of a dispute of this sort are under a heavy obligation to resort to litigation only if it is really unavoidable. If they cannot resolve the whole of the dispute by the use of the complaints procedure they should resolve the dispute so far as is practicable without involving litigation. At least in this way some of the expense and delay will be avoided.”
“In oral submissions he argued that the conclusion that the Claim was premature because of section 222 was incorrect and failed to take account of the fact that the section 222 procedure had many inherent limitations: the review was entirely optional and not a mandatory part of the assessment system; the subject matter of representations was statutorily limited; there was no duty on HMRC to accede to arguments, even if compelling; HMRC was neither impartial nor independent in its own cause and was inherently likely to uphold its own prior assessment and conclusions; there was no time limit governing any new decision by HMRC; and the procedure was not linked to any immediate right of statutory appeal. Mr McDonnell argued that in consequence it was entirely appropriate for [Mrs Archer] to have issued the Claim Form as a protective measure. There could be no certainty that if she had awaited the outcome of the section 222 procedure that HMRC (or even a court of its own motion) might not say that there had been fatal delay and that it was inappropriate to exercise discretion in favour of allowing the claim to proceed. As a matter of practice issuing the Claim Form and then seeking a consensual stay pending a section 222 procedure was the sensible and pragmatic course and was in accordance with established practice and case law.”
“… there is no hard-edged question concerning jurisdiction, but rather the exercise of discretion on the basis of the circumstances of the particular case. In deciding whether to exercise restraint in the face of an alternative remedy, the court will consider the potential for the alternative to provide a means of redress, taking into account relative convenience, expedition, cost and effectiveness; and exercise its judgment to determine whether the alternative remedy is more suitable, so that the court proceedings should be dismissed, or at least stayed, to allow it to proceed to a conclusion.”
“(i) ordinarily the taxpayer should await the outcome of the section 222 procedure so that the final position was known before applying for permission; and (ii), HMRC could not ordinarily argue that any such application for permission to apply for judicial review was tardy or late or out of time; and (iii), in the (most unlikely) event that a court was nonetheless called upon to exercise its discretion to extend time that it should ordinarily do so.”
“My conclusion on this is therefore that section 222 must be construed broadly and it should be rare that any representation made by a taxpayer about the APN could fall outside of the ambit of that provision. But if it did then section 222 is supplemented by the broader common law and HMRC’s general acceptance in Glencore that it should deal in good faith with proper representations made to it by taxpayers. Insofar as there is any daylight between section 222 and the arguments a taxpayer wishes to advance HMRCʼs general position should plug that lacuna.”
“DPT is a tax introduced to counter the use of aggressive tax planning deployed by multinational corporate groups to divert profits which would otherwise have been subject to corporation tax in the UK away from the UK to low tax jurisdictions, thereby eroding the UK tax base. The tax becomes chargeable in relation to “taxable diverted profits” arising to a company in a relevant accounting period (section 77) under certain conditions, in an amount calculated by comparing the UK tax payable in relation to the arrangements which result in the diversion of profits with the notional tax payable in the UK if they had not been diverted. The assessment of whether the relevant conditions exist and the elaboration of the counterfactual scenario to work out the notional tax payable (i.e. the tax which would have been payable had a “relevant alternative provision” been in place between relevant parties: see section 82) can involve considerable complexity.”
“2. The FA 2015 makes detailed provision for the procedures to be followed when the respondent commissioners (“HMRC”) consider whether to make a charge to DPT and then after they issue a charging notice setting out DPT which they say is due to be paid in respect of an accounting period. A designated officer of HMRC must first issue a preliminary notice within 24 months after the end of the relevant accounting period setting out the tax which she has reason to believe is due. The taxpayer has 30 days in which to make representations and the designated officer has 30 days in which to consider those representations and decide whether to issue a charging notice for DPT and if so in what amount. The taxpayer is obliged to pay the tax set out in the charging notice within 30 days thereafter. The designated officer is then obliged to review the case and the charge to DPT in the following period of 12 months (“the review period”), and may issue an amending notice to reduce the DPT or a supplementary notice to increase the DPT assessed to be due. The taxpayer has 30 days from the end of the review period to institute an appeal to the FTT. There is no right of appeal before that point. The appeal is, like other tax appeals, a full merits appeal on the law and the facts. If the taxpayer succeeds on an appeal, it will have been out of its money during the period of the review and the appeal, but the amount of the tax will be repaid with interest.”
“(i) in Glencore there was an automatic statutory right of review which followed issuance of the notice to pay whereas under section 222 the review is optional at the behest of the taxpayer; (ii) in Glencore the review was time limited and HMRC had to respond within a fixed period of time whereas in section 222 there is no time limit for a determination by HMRC; and (iii), in Glencore there was a statutory right of appeal to the Firsttier Tribunal upon expiry of the review period whereas there is no equivalent immediate right of appeal under the FA 2014.”
“55. In my view, the principle is based on the fact that judicial review in the High Court is ordinarily a remedy of last resort, to ensure that the rule of law is respected where no other procedure is suitable to achieve that objective. However, since it is a matter of discretion for the court, where it is clear that a public authority is acting in defiance of the rule of law the High Court will be prepared to exercise its jurisdiction then and there without waiting for some other remedial process to take its course. Also, in considering what should be taken to qualify as a suitable alternative remedy, the court should have regard to the provision which Parliament has made to cater for the usual sort of case in terms of the procedures and remedies which have been established to deal with it. If Parliament has made it clear by its legislation that a particular sort of procedure or remedy is in its view appropriate to deal with a standard case, the court should be slow to conclude in its discretion that the public interest is so pressing that it ought to intervene to exercise its judicial review function along with or instead of that statutory procedure. But of course it is possible that instances of unlawfulness will arise which are not of that standard description, in which case the availability of such a statutory procedure will be less significant as a factor. 56. Treating judicial review in ordinary circumstances as a remedy of last resort fulfils a number of objectives. It ensures the courts give priority to statutory procedures as laid down by Parliament, respecting Parliamentʼs judgment about what procedures are appropriate for particular contexts. It avoids expensive duplication of the effort which may be required if two sets of procedures are followed in relation to the same underlying subject matter. It minimises the potential for judicial review to be used to disrupt the smooth operation of statutory procedures which may be adequate to meet the justice of the case. It promotes proportionate allocation of judicial resources for dispute resolution and saves the High Court from undue pressure of work so that it remains available to provide speedy relief in other judicial review cases in fulfilment of its role as protector of the rule of law, where its intervention really is required.”
“57. I now pull the threads together. Mr Yates reminded me that the issue in this case was not permission to apply for judicial review but an appeal about costs. The nub of the issue was whether the Master erred. In my judgment based upon the analysis above he did not err. He was entitled on the facts of the case to conclude that the section 222 procedure was an adequate alternative remedy which should have been exhausted before a Claim Form was issued. In concluding also that it was open to [Mrs Archer] to require HMRC to confirm or withdraw the APN following the making of statutory representations the Master did not err. He was correct in his construction of section 222 which does impose a duty on HMRC to make a determination. He correctly concluded that the issuance of judicial review was not a remedy of last resort. 58. As to Mr Yates’ argument that the Master was taking a decision limited to particular facts and expressing condemnation of the litigation conduct of Mrs Archer I am less convinced. The Masters reasoning is relatively brief… He focused upon the argument of HMRC that the claim was premature. He places this in its factual context pointing out that the section 222 representations made by [Mrs Archer] post-dated the Claim Form and he expressed the view (no doubt based upon the fact that the dispute was rapidly resolved) that the dispute between the parties was capable of being resolved via the section 222 procedure. In my view this reasoning is perfectly sound but it does assume that the section 222 procedure is an adequate alternative and if he had been wrong in this then it would follow that the pith and substance of his reasoning for awarding no costs was also flawed.”
“That approach places the onus on the taxpayer to make representations and the onus on HMRC to make the correct decision following representations, rather than requiring the original decision to be correct. But the decision following representations is secondary and derivative.”
“The court has jurisdiction to entertain an application by a citizen for judicial review in respect of a resolution before or after its adoption. But it is a jump in legal logic to say that he must apply for such relief in respect of the resolution on pain of losing his right to judicial review of the actual grant of planning permission which does affect his rights. Such a view would also be in tension with the established principle that judicial review is a remedy of last resort.”
“43. At this stage it is necessary to return to the point that the rule of court applies across the board to judicial review applications. If a decision-maker indicates that, subject to hearing further representations, he is provisionally minded to make a decision adverse to a citizen, is it to be said that time runs against the citizen from the moment of the provisional expression of view? That would plainly not be sensible and would involve waste of time and money. Let me give a more concrete example. A licensing authority expresses a provisional view that a licence should be cancelled but indicates a willingness to hear further argument. The citizen contends that the proposed decision would be unlawful. Surely, a court might as a matter of discretion take the view that it would be premature to apply for judicial review as soon as the provisional decision is announced. And it would certainly be contrary to principle to require the citizen to take such premature legal action. In my view the time limit under the rules of court would not run from the date of such preliminary decisions in respect of a challenge of the actual decision.”