The case claimed that the notices – which force users of tax avoidance schemes to pay tax up front while they are investigated – are unreasonable and breach both natural justice and human rights.
However, the court found in HMRC’s favour on all the challenges, a decision which director of counter avoidance, David Richardson, described as “good news” for legitimate taxpayers.
“Those who use tax avoidance schemes need to know they can no longer hold on to the money while their affairs are investigated,” he said. “They have to pay their tax up front like everybody else.
“HMRC wins 80% of all avoidance cases that people litigate, and many more are settling before things get to that stage.”
The case also argued that the notices take away the legitimate expectation that users of tax avoidance schemes had when they joined the avoidance scheme that they wouldn’t have to pay tax before the dispute had been resolved.
The Revenue expects to complete the issue of around 64,000 notices by the end of 2016 bringing forward £5.5bn in payments, after it started issuing them at the end of last year.
The notices have received widespread criticism from the tax industry, with commentators labelling them “draconian” and “morally questionable”
Andrew Watters, Director, Thomas Eggar, said: “When HMRC issue an Accelerated Payment Notice (APN), unlike other tax assessments, one cannot appeal to the Tax Tribunal. One can only make “Representations” to HMRC.
“The recent hearing was a Judicial Review where the High Court was asked to consider various points which amounted to an argument that the issue of APNs was unreasonable and an abuse of human rights. If the courts had found against HMRC, then the whole purpose of the legislation would have been overturned.
“In fact, the judgement supported the right of HMRC to issue APNs.
“This does not mean taxpayers cannot make ‘representations’. However, in the past many such representations were based on broad claims as to whether HMRC had the right to issue APNs.
“Following the High Court judgement, such representations are unlikely to be given much weight by HMRC. A more fruitful approach would be a review to see whether there had been some breach in procedure, or some argument as to the quantum of tax due. But following the judgement, HMRC will now proceed on the basis that APNs ‘work’ and they will be issuing a lot more.”
James Quarmby, partner and head of private wealth at Stephenson Harwood, said: “I’m a little surprised that the court rejected all of the taxpayers’ arguments as there is a fundamental issue of justice at stake – is it right that taxpayers can be forced to pay tax liabilities that have yet to be proved? I think perhaps the High Court was wary of making a bold judgment against such a flag-ship policy of the government, especially in the light of the current public mood about tax avoidance.
“We will have to see if the Court of Appeal can step up to the plate. I still believe in English justice and that when, finally, this reaches the Court of Appeal we will see the pendulum swing back to the taxpayer (if only a little). This is certainly not the end of the debate – and the fight – over this illiberal legislation.”
