Adviser Business Solutions Limited & Ors, R (on the application of) v The Commissioners for HMRC [2025] EWHC 1641 (Admin)

[2025] EWHC 1641 (Admin)Case No AC-2016-LON-004817
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 30/06/2025
Before
MRS JUSTICE FOSTER
Between
THE KINGClaimantTHE COMMISSIONERS FOR HIS MAJESTY'S REVENUE & CUSTOMSDefendant
Hearing Hearing dates: 11 July 2024
Approved JudgmentThis judgment was handed down remotely at 10.30am on 30 June 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................MRS JUSTICE FOSTER

Introduction

[1]These are the written reasons for the refusal of permission in this matter which challenges the issuing of Accelerated Payment Notices (“APNs”) under Part 4 of the Finance Act 2014 and schedule 2 of the National Insurance Contributions Act 2015 by the Claimants, who are private limited companies.[2]The claims involve the tax years 2011/12 and 2014/15 and tax arrangements, in effect avoidance schemes designed to produce a tax advantage, disclosed to the Revenue under the disclosure requirements contained in the Disclosure of Tax Avoidance Schemes (“DOTAS”) regime under Part 7 of the Finance Act 2004.[3]An APN requires payment of the tax in issue up front, whilst a challenge to the obligation to pay is on foot, rather than the position hitherto where money was only payable at the end of what might be a very long process of challenge, appeal and further appeal. No right of appeal lies against an APN itself; challenge is by judicial review only.[4]In broad terms, the detail of which is not relevant to this application, the arrangement was designed to work as follows:a. an individual would agree to pay a sum of money to an employee in return for a legally binding obligation that the employee would simultaneously subscribe for a new class of shares in the relevant company.b. the company would pay the individual the money.c. the individual would subscribe for shares, with each having a nominal value of £1, but would only be required to subscribe £0.01 per share immediately.d. the company could call for the remaining uncalled amount (i.e. £0.99 per share) within a given notice period.[5]The individuals and companies were advised that the tax treatment would have the effect thata. the payment made to the individual was subject to a corresponding commitment for the employee to subscribe for the shares, and therefore that sum was not earnings/emoluments for the purposes of income tax and NICs.b. the shares were treated as emoluments subject to income tax and NICs, but only to the extent of their paid-up value, i.e. £0.01 per share.c. the company was entitled to a corporation tax deduction for the amount paid to the employee.[6]HMRC did not accept that the scheme operated in law such that tax was avoided in respect of the tax said to be due, so, on 27 May 2016 protective determinations were issued by HMRC under regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 and corresponding NIC decisions (under section 8 Social Security Contributions (Transfer of Functions, etc.) Act 1999). The Claimants appealed these and HMRC agreed to postpone collection of all of the tax. Statutory Enquiries were opened into the corporate tax returns.[7]The basis of the Claimant’s first point is a complaint that the APN notifications did not include any analysis by HMRC’s designated officer in relation to the identification of the disputed tax or the arrangements. That was a legal requirement they argue, and consequently the APNs in issue are ultra vires and of no effect.[8]Their second point asserts a legitimate expectation that in spite of the APNs and their legal effect, there was a legitimate expectation created that tax would be postponed and would not be payable under the APN regime.[9]Further detail on the mechanism of the relevant schemes and the statutory underpinning may be found in the caselaw to which reference is made below.[10]One of the Claimants is Adviser Business Solutions Limited (“ABS”). It took part in an arrangement known as the E-Securities Arrangement. Evidence from the CEO of ABS illustrates the general history of the interaction of the taxpayers’ advisors and HMRC relevant to this application.[11]The evidence shows the E-Securities Arrangement was notified to HMRC under DOTAS in around July 2011. There was an exchange of correspondences at an early stage between HMRC and ABS in which views on the scheme were expressed.[12]On 20 March 2013, HMRC wrote to ABS following requests for information about the E-Securities Arrangement. The letter stated that HMRC had considered the documentation it had received. They said:
“it is HMRC’s view that the scheme does not work”
[13]HMRC also referred ABS to a ‘Spotlight’ article it had published. That article was titled “Employment Benefit Schemes using fettered payments” and referred expressly to, amongst others, the E-Securities Arrangements DOTAS reference number. The article summarised the scheme and said “in HMRC’s view these schemes don’t work”. It stated that “HMRC will challenge users of the scheme – through the courts, where appropriate – to make sure that the companies and employees pay the correct amount of tax and [NI] contributions”[14]On 12 February 2014, HMRC told the Claimants that they intended to litigate the effectiveness of the Arrangements and confirmed on 13 November 2014 to ABS they were still challenging the E-Securities Arrangement.[15]The statutory provisions that give effect to the APN regime came into force on 17 July 2014. National Insurance Contributions were covered with effect from 12 April 2015.[16]Thereafter on 6 May 2015, HMRC wrote to ABS explaining that they intended to issue income tax determinations and NIC decisions in relation to the E-Securities Arrangement. HMRC warned about APNs which, if issued, would mean that ABS would have to “pay the tax and NIC even though the scheme remains under dispute”.[17]On 23 June 2015, ABS were told in writing by HMRC that income tax determinations and NIC decisions had been issued in relation to the E-Securities Arrangement. The letter stated ABS had the right to appeal and explained “[i]f you appeal you can ask for payment of all or part of the tax in dispute to be postponed until the matter is resolved”.[18]On 7 July 2015, ABS’ tax adviser did so, the grounds of appeal were that “the payment to the individuals is not earnings and is therefore not subject to PAYE and NIC. Therefore the Notice of Decision is invalid.”.[19]They requested that the tax sums were “postponed pending final settlement of the appeal”.[20]On 17 July 2015, HMRC acknowledging the appeal, wrote to ABS and agreed to postpone the collection of the tax.[21]On 27 May 2016, HMRC wrote to ABS’ advisers confirming their intention to issue APNs to users of the E-Securities Arrangement and on 31 May 2016, HMRC said that users of the Evolve Arrangement would also be receiving APNs in due course.[22]APNs were issued to ABS on 20 June 2016.[23]There is also a relatively complicated history to this case, but, it is not strictly relevant to this application. Suffice it to say that on 1 December 2016, interim relief was granted to the effect that HMRC were unable to enforce the APNs in respect of the Claimants who had claimed hardship; and that interim relief is still in place in respect of about 76 of the Claimants. Thereafter the claim was stayed pending two sets of proceedings: R (Rowe and others) v HMRC and R(Dickinson and Others) v HMRC which were determined by the Court of Appeal (reported as Rowe v HMRC [2017] EWCA Civ 2105; Dickinson v HMRC [2018] EWCA Civ 2798) The case of Vital Nut v HMRC was heard with Rowe. The stay ended on 22 January 2019 and an Acknowledgment of Service and Statement of Grounds of Defence were served on behalf of the Defendants.[24]Initially a number of challenges were advanced but following the decisions in Dickinson v HMRC 2018 EWCA Civ 298, Rowe as above, and Vital Nut v HMRC [2016] 1797, these have been narrowed to two arguments. This claim wassubsequently stayed pending the decision of the Court of Appeal in Sheiling Properties Ltd v HMRC [2021] EWCA Civ 1425.

The Current Challenges

[25]The Claimants argue first that APNs issued to them are ultra vires and of no effect. They say that the Designated Officer under statute had not fulfilled the requirements of the statute in that he could not say that he was positively satisfied on the evidence that he then had that the tax scheme was not effective.[26]Their second point is that it is said to be conspicuously unfair for the APNs to be issued as the taxpayers had a legitimate expectation that they would become liable to make payments to the Commissioners only in response to decisions taken under regulation 80 of the relevant Income Tax Regulations.[27]The legitimate expectation is set out in the following terms in the Claimant’s pleadings, namely that they would only be liable to pay sums to HMRC where (using the Claimants’ Grounds numbering):
“ …12.2.1 HMRC issued a determination under Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 SI/2003/2682 …; 12.2.2 That at the point [sic], they would have a right to appeal; 12.2.3 This would in addition give rise to a right of review (s.49 TMA); … 12.2.4 That pending determination of the appeal, the payment liability would be postponed, either under s.55(3) TMA … or under HMRC’s general collection and management powers contained in s.5(1) of the Commissioners for Revenue & Customs Act 2005…”
[28]Put shortly, the Defendants say that the first point is not arguable because it is plain from the context the Designated Officer had addressed his mind to the facts and matters required by statute.[29]As to the legitimate expectation, the Defendants say there was none because provisions of statute in force at the time the Claimants made a request for tax to be postponed, made clear that tax ceased to be postponed from the date when notice of the APNs was given. The prior postponement (under section 55Taxes Management Act 1970 (“TMA”) ceased to have effect.

Framework

[30]The statutory framework within which the APN may be issued is relevantly as follows.[31]Chapter 3 of Part 4 FA 2014 empowers HMRC to issue APNs to taxpayers requiring immediate payment of particular categories of tax in specific circumstances, in particular where the specified tax is the subject of an appeal or an enquiry. For the purposes of issuing an APN under s219(2)(b) (i.e. where a tax appeal has been made), section 221 prescribes the content of the notice and identifies the “disputed tax” that can be stated in the notice, as determined by the ‘designated officer’ thus:
“Section 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 (if any), … (3) “The disputed tax” means so much of the amount of the charge to tax arising in consequence of— (a) the amendment or assessment to 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. …”
[32]The “designated HMRC officer” is defined in section 229 as “an officer of Revenue and Customs who has been designated by the Commissioners for the purposes of this Part”.[33]Tax advantage is defined in section 201:
“Section 201 – “Tax advantage” and “tax arrangements” (1) This section applies for the purposes of this Part. (2) “Tax advantage” includes— (a) relief or increased relief from tax, (b) repayment or increased repayment of tax, (c) avoidance or reduction of a charge to tax or an assessment to tax, (d) avoidance of a possible assessment to tax, (e) deferral of a payment of tax or advancement of a repayment of tax, and (f) avoidance of an obligation to deduct or account for tax. …”
[34]By s.224 of the FA 2014, Parliament introduced a “Restriction on powers to postpone tax payments pending initial appeal” in cases where APNs have been given. It did so by an amendment to TMA s.55, introducing new subsections (8B) to (8D) as follows: Section 55 TMA s.55 TMA (as in force at the time of the postponement request) Recovery of tax not postponed … (3) If the appellant has grounds for believing that the amendment or assessment overcharges the appellant to tax, or as a result of the conclusion stated in the closure notice the tax charged on the appellant is excessive, the appellant may—(a) first apply by notice in writing to HMRC within 30 days of the specified date for a determination by them of the amount of tax the payment of which should be postponed pending the determination of the appeal;(b) where such a determination is not agreed, refer the application for postponement to the tribunal within 30 days from the date of the document notifying HMRC’s decision on the amount to be postponed. An application under paragraph (a) must state the amount believed to be overcharged to tax and the grounds for that belief … (6) The amount of tax the payment of which shall be postponed pending the determination of the appeal shall be the amount (if any) in which it appears … that there are reasonable grounds for believing that the appellant is overcharged to tax; … (8B) Subsections (8C) and (8D) apply where a person has been given an accelerated payment notice or partner payment notice under Chapter 3 of Part 4 of the Finance Act 2014 and that notice has not been withdrawn. (8C) Nothing in this section enables the postponement of the payment of (as the case may be)— (a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates, (b) the disputed tax specified in the notice under section 221(2)(b) of that Act … (8D) Accordingly, if the payment of an amount of tax within subsection (8C)(b) is postponed by virtue of this section immediately before the accelerated payment notice is given, it ceases to be so postponed with effect from the time that notice is given, and the tax is due and payable— (a) if no representations were made under section 222 of that Act in respect of the notice, on or before the last day of the period of 90 days beginning with the day the notice or partner payment notice is given, and (b) if representations were so made, on or before whichever is later of— (i) the last day of the 90 day period mentioned in paragraph (a), and (ii) the last day of the period of 30 days beginning with the day on which HMRC's determination in respect of those representations is notified under section 222 of that Act … Emphasis added. Consideration Ultra vires – Designated Officer

Consideration

[35]The Claimants argue that caselaw has made clear that there is an obligation upon HMRC when issuing APNs for the Designated Officer (and that officer alone) to provide analysis of why the tax liability is said to arise. There is a requirement for the relevant facts, law and arguments to be considered which the Revenue say supports the case for a tax liability. Mr Elliott for the taxpayers argued that they looked for some analysis at the time the APNs were issued but the covering letter did not contain analysis which he submitted, it had to in order to be lawful. Furthermore, HMRC could not prove they had reached a concluded view at the time of the APNs so it could not be said that any failure might be covered by section 31of the Senior Courts Act 1981where “ …(3C)When considering whether to grant leave to make an application for judicial review, the High Court— (a)may of its own motion consider whether the outcome for the applicant would have been substantially different if the conduct complained of had not occurred, and (b)must consider that question if the defendant asks it to do so. (3D) If, on considering that question, it appears to the High Court to be highly likely that the outcome for the applicant would not have been substantially different, the court must refuse to grant leave.”[36]HMRC he argued, did not even say that the Designated Officer did form a view. He relied on the case of Vital Nut and the dicta of Charles J. the Judge said: “ … 35. on both a linguistic and purposive approach that the Notice Requirement for the issue of a valid APN cannot be satisfied unless, to the best of his information and belief, the designated officer is of the view that he is not satisfied that as a matter of law and fact the claimed tax advantage is lawfully available and so should be allowed and so, in that sense, the designated officer has determined that the claimed tax advantage is disputed. I shall refer to this as the determination. 36. As set out later, the Claimants’ argument was based on the assertion that no determination had been made rather than an assertion that a determination which was based on the wrong test had been made.[37]The Claimants highlighted that in Rowe, the Court of Appeal had held (see paragraphs [61]-[67]) that the statute required the Designated Officer to be positively satisfied the scheme was not effective. That meant he had to diligently weigh up all the information available and have no reason to doubt it.[38]The Claimants argued before me that there was therefore no realistic possibility that HMRC had even turned their minds to this obligation because at the relevant time they did not understand there to be any obligation upon them to do so. It was only in the Court of Appeal in the case of Rowe and Vital Nut when they continued to assert no duty arose in these circumstances that Arden LJ had put them right. She recorded that they had argued no such duty existed - and had not asserted that in 2016 (the APNs were issued then), that the Designated Officer had addressed his mind to the issues.[39]Before me the Revenue argued, and I agree, that the present circumstances are materially different from those cases, and here it is just not possible to say that the Designated Officer had not concluded as the statute required him to do.[40]In Vital Nut there had been an enquiry (under s.219(2)(a) Finance Act 2014) and the APNs were issued in the course of that enquiry. In this case however the APN was issued after HMRC had formed a concluded view, communicated that view, and after an appeal against the Decision had been issued by the Claimants. HMRC therefore had issued determinations to the Claimants under Regulation 80 of the Income Tax (Pay as You Earn) Regulations 2003 and Decisions under section 8 Social Security Contributions (Transfer of Functions) Act 1999, which the Claimants had appealed against. The chronology of communications shows that the positions had been taken, the decisions had been made. It is not accurate in my judgement to state as was submitted, that it was not clear what stage the analysis of HMRC had reached. It is also not the case that an appeal situation is the same as an enquiry. The facts here are different – the passages from Arden LJ in Rowe do not derogate from the proposition that the decision-making was very different in the cases cited from that in the present case. In the present case the decisions were clearly made and communicated to the taxpayers.[41]Arden LJ in Rowe concluded in paragraph [61] that the power to issue APNs was conferred by Parliament where there were reasonable grounds for concluding that the tax would ultimately be found to be payable. This required a “positive determination” (see [62]).[42]In my judgement there has plainly been such a determination- the contrary is not arguable.[43]Further and in any event, as the Defendants argue in their Summary Grounds of Defence, even if this procedure were wrong, (and I believe that proposition to be unarguable) the result would not have been any different if the correct procedure had been followed. Accordingly section 31(2D) Senior Courts Act 1981 would apply. As the Revenue stated, by the time the relevant APNs were issued, HMRC (corporately) had already determined that tax was due. The Claimants had appealed against the relevant determinations and decisions and litigation was already on foot and HMRC had not altered its stance in light of the Claimants’ grounds of appeal.[44]It makes no difference as was sought to be said whether the default in question is said to be the act or the omission of the relevant officer. Permission would fall to be refused.

Legitimate Expectation

[45]The taxpayers argue that they have a legitimate expectation based upon an exchange with HMRC in which their decisions which had been appealed by the Claimant (a PAYE determination and a NIC decision) were accompanied by a request for the tax to be postponed.[46]Postponement of tax was possible pursuant to section 55 TMA (see above) and HMRC responded confirming that they would postpone the tax. The Claimants assert this was a clear and unequivocal promise given by a public body and they may rely upon it. It was breached they say because HMRC decided money was due under APNs.[47]The difficulty for the Claimants is that the APN legislation was at that time in force, which they must be taken to know. Section 55 had been amended as set out above such thatif the payment of an amount of tax was postponed by the section immediately before an APN was given, it ceased to be postponed from that time and the tax become due. In other words Parliament had determined that APNs trumped postponement of tax.[48]As the Defendants say, taxpayers must be taken to know what the law provided: they cannot claim a promise that is inconsistent with the primary legislation. That is what they seek to do here; the proposition is unarguable.[49]In the case of Dickinson the equivalent promise was given before the law was changed. In these circumstances HMRC agreed that they had by their promise given rise to a legitimate expectation – although the Court declined to hold that there was consequent illegality: Parliament’s later intention trumped it. Indeed as McCombe LJ noted in that case: “in the present cases, HMRC agreed to the postponement of payment (pending appeal) of assessed tax, which would otherwise have been due, pursuant to the postponement regime, under TMA s.55, as in force prior to the introduction of the APN provisions and the enactment of the revised postponement regime and in particular the introduction of section 55(8D)”[see above] [Emphasis added]

[Emphasis added]

[50]The claimants in that case had argued before the judge at first instance (Charles J) that it was an unlawful abuse of power for HMRC to resile from the express promises made not to enforce payments pending resolution of the disputes as to the tax in question – at a time before the new APN legislation was in force. Charles J however rejected their claims of an abuse of power.[51]He said as follows (with emphasis added):
“[184] Applying the principles on abuse of power set out in paragraphs 34 to 41 hereof, I have concluded that the strengths of the Revenue’s alternative arguments outweigh the strengths of the Claimants’ arguments and the core of that conclusion is that: (i) the macro-political policy issues flowing from the terms and underlying purpose of the APN legislation undermine the force of the clear and unambiguous promises given by the postponement agreements because the legislation provides a change in the underlying statutory test and approach to the issue when disputed tax should be paid, (ii) those macro-political policy issues provide a weighty factor in favour of the conclusion that the giving of APNs is unlikely to be an abuse of power if the arguability of the tax dispute and other conditions for giving them are satisfied, as they are here, although they do not warrant a “one approach fits all” approach or one that has regard only to those policy issues reflected in legislative change, and (iii) the strengths of the Claimants’ case identify a number of valid criticisms of the approach and decision making of the Revenue but assessed with the rival strengths of the Revenue’s case relating to the particular circumstances of the Claimants and the approach taken by it to them, the Claimants’ assertions of conspicuous unfairness to themare effectively based on the change that Parliament has enacted and do not found an abuse of power.”
[52]Even in that case, he held that there had been no unlawfulness. This conclusion was challenged on appeal but the court declined to interfere. The judge had found a failure of good administration and also in that case (on very different facts from the present) conspicuous unfairness, but nonetheless declined to give effect to the promise as to postponement: the reasoning of Charles J was upheld.[53]This is, as Swift J concluded also fatal to the Claimant’s case.[54]As was submitted by Mr Pritchard for HMRC, Dickinson shows that Parliament has enacted a scheme that “changed the goal posts”. It has created a regime that empowers HMRC to override postponement agreements, and the reasonable reader of HMRC’s letter regarding postponement in this case would have known that. In the present case there can have been no legitimate expectation (unlike Dickinson) other than that the law would be enforced.[55]This application is refused for these reasons.