QUEEN'S BENCH DIVISION ADMINISTRATIVE COURT
 EWHC 2293 (Admin)
MRS JUSTICE SIMLER
QUEEN'S BENCH DIVISION ADMINISTRATIVE COURT
 EWHC 1797 (Admin)
MR JUSTICE CHARLES
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE McCOMBE
LADY JUSTICE THIRLWALL
R (on the Application of Rowe and Others)
Her Majesty's Revenue and Customs
R (on the Application of Vital Nut Co Limited and Others)
Her Majesty's Revenue and Customs
James Eadie QC, Sam Grodzinski QC, Gemma White QC and David Yates (instructed by the General Counsel and Solicitor to HMRC) for the Respondents
Hearing dates : 18-20 July 2017
Crown Copyright ©
LADY JUSTICE ARDEN :
i) unreasonable, disproportionate and otherwise unfair, and based on an erroneous assessment of the statutory purpose (Ground 1: the unreasonableness ground).
ii) beyond the powers conferred on HMRC by the FA 2014 in so far as HMRC sought to apply the provisions of the FA 2014 retrospectively to steps taken before that Act came into force (Ground 2: the retrospectivity ground).
iii) not in accordance with the principles of natural justice (Ground 3: the natural justice ground).
iv) (Rowe appeal only) in breach of the FA 2014 in that there was no "understated partner tax" as required by FA 2014, s 228 and schedule 32, paragraph 4 because no tax was due and payable in the majority of cases where partners had made "carry back" claims (Ground 4: 'no tax due and payable' ).
v) in breach of Article 1 of the First Protocol ("A1P1") to the European Convention on Human Rights ("the Convention") and Articles 6 and 7 of the Convention (Ground 5: the Convention ground).
vi) (Vital Nut appeal only) in breach of FA 2014 in that the decision to issue APNs was ultra vires because it was not in accordance with FA 2014, s 219 to 223 (Ground 6: the 'designated officer' ground).
i) HMRC is enquiring into the taxpayer's return or claim (an enquiry case) or the taxpayer has brought an appeal that has not been determined (FA 2014, s 219(2)) (Condition A).
ii) The taxpayer made the return, claim or appeal on the basis that a particular tax advantage arises from the arrangements implemented (FA 2014, s 219(3)) (Condition B).
iii) One of three further conditions is met, of which the most relevant is that the arrangements are DOTAS arrangements, for which HMRC has issued a scheme reference number (SRN), or are substantially the same as arrangements already notified (this is called collectively Condition C).
29 Writing in the relevant definitions (and in italics what they represent in these cases), the relevant requirement relating to the validity of an APN (the Notice Requirement) is that it must specify as the sum to be paid an amount equal to:
"what the designated HMRC officer determines, to the best of that officer's information and belief, to be so much of the asserted advantage (the claimed relief from corporation tax) as is not a relief from tax (corporation tax) which results from the chosen arrangements (the EFRBS)."
35 In my view, the factors listed in the last paragraph support the view 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.
4…(2) The payment required to be made under paragraph 6 is an amount equal to the amount which a designated HMRC officer determines, to the best of the officer's information and belief, as the understated partner tax.
(3) "The understated partner tax" means the additional amount that would become due and payable by the relevant partner in respect of tax if—
(b) in the case of a notice given by virtue of paragraph 3(5)(b) (cases where the DOTAS arrangements are met), such adjustments were made as are required to counteract so much of what the designated HMRC officer so determines as the denied advantage as is reflected in a return or claim of the relevant partner;
12AC Notice of enquiry
(1) An officer of the Board may enquire into a partnership return if he gives notice of his intention to do so ("notice of enquiry")–
(a) to the partner who made and delivered the return, or his successor,
(b) within the time allowed…
(6) The giving of notice of enquiry under subsection (1) above at any time shall be deemed to include the giving of notice of enquiry–
(a) under section 9A(1) of this Act to each partner who at that time has made a return under section 8 or 8A of this Act or at any subsequent time makes such a return…
i) Stage 1: HMRC publishes upon its website a list of DOTAS schemes on which advanced payments might be charged. HMRC excludes from that list schemes which are accepted to be effective, and obsolete schemes with no users. The first list was published on 15th July 2014 and has been updated subsequently on 30th October 2014 and on 30th January 2015.
ii) Stage 2: The officer responsible for overseeing the investigation of a particular scheme completes the internal "survey". The survey requires answers to questions designed to enable HMRC to rank the scheme according to its suitability for the earlier issue of APNs…
iii) Stage 3: Schemes are then ranked into a preliminary order and placed into categories according to the range within which their score falls. Thereafter, schemes are prioritised within categories by reference to the answers to particular survey questions.
iv) Stage 4: Each identified scheme is then subject to a more detailed review the purpose of which is to identify any reasons why notices should not be issued to users including whether the particular circumstance of any user are such that, exceptionally, no APN should be issued. In the present case no circumstances were identified in relation to the Claimant. Copies of the Detailed Review Template ("DRT") used for this exercise were before the Court.
v) Stage 5: Following the completion of the detailed review each scheme is considered by the Workflow Governance Group. The minutes of the meetings of this Group relevant to the schemes in issue were also before the Court. The Group exercises, from the perspective of a wide range of expert disciplines, supervision of the information collection process ensuring good governance.
vi) Stage 6: The Designated Officer thereafter determines the amount of the understated tax to the best of his/her information and belief. The officer reviews a "Designated Officer Authorisation form" and computations provided by the official responsible for issuing the APN. If satisfied the official countersigns the Designated Officer Authorisation form. The relevant forms relating to the Claimant were once again before the Court. These set out the understated tax. The document has attached to it a "Calculation Summary". This provides the details of the computation. The Claimant was provided with tax calculations relating to all relevant tax years when he was issued with the APN.
4. HMRC'S POWERS TO OPEN ENQUIRIES
(1) It was no part of the statutory purpose of the FA 2014 that APNs/PPNs should be served on persons, such as the appellants in the Rowe appeals, who had completed their tax-avoidance transaction before the legislation was passed. It would in addition be an abuse of power to use APNs/PPNs as an alternative to getting on with enquiries and appeals.
(2) The designated officer must be satisfied that the scheme is not effective for tax purposes before issuing or confirming the issue of an APN/PPN. The test put forward by Charles J in Vital Nut (see paragraph 11 above) wrongly reversed the onus of proof and placed the onus of proof on the taxpayer.
(3) HMRC's Policy failed to take account of all relevant factors in that it failed to take account of the need for HMRC to be satisfied on the information then available that the scheme was ineffective.
(4) The provisions of the FA 2014 about APNs/PPNs were not retrospective in their effect and accordingly PPNs should not have been served in the Rowe case.
(5) The issue of the APNs/PPNs in the Rowe case was unfair for diverse reasons, particularly because of the delay on HMRC's part, the lack of the appellants' participation in the appeal proceedings (conducted by IFP), and the retrospective application of the FA 2014.
B. Judgment of Simler J
102. Here, the Claimants are correct that the approach adopted by HMRC as reflected in Julie Elsey's statement, demonstrates that in the overwhelming majority of cases where HMRC consider that the statutory conditions are satisfied, HMRC will exercise the powers conferred by FA 2014 by giving APNs or PPNs, and the question is generally one of when, not whether, they will be given. However, that does not mean that HMRC's discretion has been unlawfully fettered or turned into a rule without exception. In my judgment, it has not.
103. A fair reading of Ms Elsey's witness statement demonstrates recognition by HMRC of the statutory discretion conferred by the legislation, the adoption and application of a policy to be applied to the generality of cases, and express consideration as to whether users of the Ingenious scheme in particular, should be treated as falling into an exceptional category so as to justify not issuing notices in their cases.
104. Ms Elsey explains that HMRC excluded from the list of DOTAS schemes liable to be affected, schemes which HMRC accepted were effective and obsolete schemes with no users: 20. The remaining schemes were ranked in terms of priority for issuing notices: 21 and 22. The question whether notices should be issued when litigation and/or settlement was imminent was considered by the Accelerated Payments Steering Group at a meeting on 10 June 2014. The paper put to the Steering Group addressing the implications of issuing notices in such cases recommended, for the reasons set out, the issue of notices regardless of when the scheme would be litigated and where potential settlement was imminent. The Steering Group approved the recommendations: 23.
105. At para 24 Ms Elsey states:
"Following the prioritisation exercise I have described above each scheme identified was subject to a detailed review by the technical lead, with input from other officers, for example those responsible for the particular specialist issues raised by the challenge to a scheme. The purpose of that review was to identify any reasons why notices should not be issued to users of an identified scheme. No such reasons were identified for the Ingenious schemes. I note that the Claimant suggests that the notices ought not to have been issued because the hearing of the Ingenious tax appeals was imminent. Consistently with the decision of the Steering Group to which I have referred above, HMRC decided that this was not a reason to delay issuing notices."
106. Given the nature and purpose of PPNs (namely to accelerate the payment of tax considered to be due, by removing the cash flow advantage and requiring a payment on account of the disputed tax to be made before resolution of the underlying dispute), there is nothing wrong in my judgment, with a general rule that when the statutory criteria are met, the discretion will be exercised by issuing the notice, save in exceptional circumstances.
107. So far as the asserted materially relevant considerations contended for by the Claimants are concerned, as Mr Eadie submits there is a danger in circumstances where HMRC have an obligation to treat like cases consistently, that the suggested consideration if accepted becomes a mandatory one and undermines the legislation. If Parliament had intended to limit the APN/PPN regime to new investments in tax avoidance schemes made only after the enactment of FA 2014, it could easily have done so; but it did not. The prior existence of the Claimants' scheme was not a relevant consideration within the "statutory lexicon" (Khatun, above). The same point is true in relation to the fact that HMRC met repayment claims some years ago. There is nothing in the legislative scheme to justify a conclusion that FA 2014 was intended to work differently depending on whether carry back, rather than sideways, loss relief tax avoidance schemes are in issue. Further, as already indicated, the Claimants do not and cannot assert that the making of repayments prevented HMRC from subsequently opening enquiries into the efficacy of their tax avoidance schemes. Moreover, at the time the repayment claims were met, there was no power to issue PPNs even if there were other statutory provisions available affording HMRC power to postpone repayment. As for appeals in these cases being well advanced, this was in fact recognised and addressed by HMRC before issuing the PPNs. As Ms Elsey explains, HMRC concluded that this was not a sufficient reason to refrain from giving PPNs, and this view cannot be described as irrational.
The legislation, on its face, makes clear that it was intended to apply to existing as well as post-enactment schemes. FA 2014 expressly removes rights that previously existed under s 55 TMA in respect of all appeals (whenever made); and expressly extends the accelerated payment regime to all DOTAS schemes, irrespective of when those schemes were adopted, notified or when investments into them were made. The definition of "tax appeal" makes clear that it is not limited to appeals post enactment (see s 203 and Sch 32 para 3(2)(b)). Similarly so far as the definition of DOTAS arrangements is concerned, there is nothing in FA 2014 to restrict its application to DOTAS arrangements invested in only after enactment: see ss 219(5) and (6). The definition extends for example to "notifiable arrangements to which HMRC has allocated a reference number" save for the express carve out in sub-s 6. Parliament has accordingly legislated for taxpayers such as the Claimants, who have chosen to participate in DOTAS arrangements (likely to be tax avoidance schemes), so as to remove the cash flow advantage of holding onto the disputed sums during a dispute concerning the efficacy of the avoidance scheme. ()
(1) No part of statutory purpose to issue APNs/PPNs in appellants' cases?
i) Lifting the Lid on Tax Avoidance Schemes (HMRC, July 2012). This pointed out the centrality of the DOTAS arrangements, which would warn HMRC of loopholes in the legislation which they might need to close.
ii) Raising the stakes on tax avoidance (HMRC, August 2013). Ms Simor submits that this consultation document shows that HMRC's primary aim is to bring in the money from those who have used DOTAS arrangements and disincentivise taxpayers from using the appeal process. HMRC indicated that they would be issuing notices to around 33,000 individuals and 10,000 businesses. In cases where there has been no assessment, like that of Mr Rowe, Ms Simor submits that the taxpayer obtains no cash flow advantage because HMRC has not made an assessment. Thus, she submits, it is wrong in principle for HMRC to deprive the taxpayer of his money at this stage. All HMRC seem to be saying is that they will not issue an APN if it is unlawful to do so (or, as it was put by the respondents in oral argument, unless it was a "slam dunk" case, that is, a case in which effectiveness is decisively shown). Ms Simor stresses that many people would choose not to take their cases to the FTT at all. Before the APNs were issued, HMRC made settlement proposals to investors in the Ingenious film scheme on the express basis that any taxpayer who did not accept it would receive an APN.
iii) Budget 2014: policy costings (March 2014, HM Treasury), which estimated that the value of the APNs that will be issued was £7.1bn, adjusted for existing cases by assuming 80% success in existing cases where substantive liability to tax was disputed (the "80% win rate"). The document states that that percentage was based on HMRC's success rate in "associated avoidance cases" in 2010 to 2013. Budget 2014: policy costings also states that the inflow into the national budget of £1.2 billion for 2015/16 for accelerated payments as a result of the extension to disclosed tax avoidance schemes and the GAAR. Ms Simor notes that the 80% win rate has been applied to determine the value to the exchequer of APNs, even though the Conditions for service of those notices do not involve any "litigation test". Ms Simor submits that this is an irrational assumption because, if HMRC win 80% of the cases they litigate, that is not the same as saying that they will win 80% of all cases irrespective of whether they have actually decided to make an assessment in relation to them. APNs are capable of being issued even if there has been no decision to litigate. In those cases, there is no incentive for HMRC to complete its enquiries or for the tribunals to be funded sufficiently to reduce a significant backlog of cases. HM Treasury will have secured all the money by way of APNs/PPNs, and the longer it can retain those funds the better for its budgetary purposes.
At the same time, and this is an important part of the appellants' case, the effect on the individuals concerned may be draconian. If they have had to sell assets, those sales may trigger capital gains tax liabilities. The individuals may have to borrow monies. The provision for hardship cases, submits Ms Simor, applies only in exceptional circumstances.
iv) Briefing note about users of tax avoidance schemes being required to make advance payments of tax (HMRC, November 2014). This stated that HMRC expected to issue payment notices to 43,000 taxpayers involved in avoidance schemes who were currently under dispute with HMRC. Of these taxpayers, around 33,000 were individuals and 10,000 businesses. The average income of an individual whom might receive a notice was £262,000. HMRC added that some cases involved wealthy individuals trying to avoid over £10 million of tax through the use of tax avoidance schemes. HMRC also stated that it expected to have sent the vast majority of notices to avoidance scheme users over the course of 2014/2015 and 2015/2016. It had given a first warning by publishing a list of the tax avoidance schemes disclosed under DOTAS whose users might be required to make an accelerated payment of tax. This was a first warning for avoidance scheme users that they might need to prepare for a payment notice.
v) Tackling Marketed Tax Avoidance (HMRC, 2014) This explained that: (1) some 65,000 people and businesses had used marketed tax avoidance schemes that needed to be investigated and litigated; (2) the current system, which enabled taxpayers to hold on to disputed tax, incentivised taxpayers and scheme promoters to sit back and delay as long as possible, despite evidence that in the vast majority of cases, when a dispute is resolved, tax is due; and for instance, there are some 6,300 users of Employment Benefit Trusts, which diverted remuneration via a trust to avoid paying PAYE and NICs. HMRC stated that they proposed to change the economics of tax avoidance arrangements by using the new powers, detailed in the document, and the responses document also published, to drive cases towards resolution more quickly. The document also set out a proposal for accelerating payment. In the summary of responses, HMRC explained that APNs were not retrospective:
The measure creates a new non-retrospective obligation after Royal Assent and relates to who holds the money during the dispute, rather than whether the tax scheme is effective or not.
Based on the information provided by the technical lead and your knowledge of the scheme, are there any grounds for not issuing Accelerated payments notices at this time?
(2) Scope of Designated officer's determination
(3) HMRC wrong to exclude from their Policy any consideration of the scheme's effectiveness?
a Ministry or large authority may have had to deal already with a multitude of similar applications and then they will almost certainly have evolved a policy so precise that it could well be called a rule. There can be no objection to that, provided the authority is always willing to listen to anyone with something new to say…
(4) do the statutory provisions about APNs/PPNs apply retrospectively?
97. The claimant also argued that the change was unfairly retroactive. I will deal with this briefly. HMRC submits that it is not retroactive since the basis for the imposition of tax has not changed; all that is new is the point in time at which payment must be made. In my judgment the change in the Finance Act 2014 is retroactive only in the very limited sense that there are new payment rules being applied which alter the position that taxpayers hitherto were subject to. It is doubtful whether this is properly to be categorised in law as retroactivity since it merely changed the consequences of acts and/or omissions from those which would have been expected at the time (see by way of analogy per Floyd LJ in Solar Energy at ). But even if it is retrospective it operates at the very lowest point of severity. In the context of tax avoidance it is a change justified by a legitimate policy and it is fair and reasonable in all the circumstances (see Solar Energy at – in the High Court, endorsed as the test in the Court of Appeal at , ). Indeed, as already observed, it would defeat in a substantial way the Parliamentary purpose of introducing the legislation which covered 'legacy' disputes if it could not be applied to extant notified schemes. The principle is also said to be, at heart, one of statutory construction. On this basis there can be little doubt but that in the Finance Act 2014 Parliament intended the new regime to apply to extant legacy tax avoidance schemes.
(5) HMRC's decision to issue APNs/PPNs in breach of duty of fairness for other reasons?
My Lords, I think it unnecessary to refer by name or to quote from, any of the often-cited authorities in which the courts have explained what is essentially an intuitive judgment. They are far too well known. From them, I derive that (1) where an Act of Parliament confers an administrative power there is a presumption that it will be exercised in a manner which is fair in all the circumstances. (2) The standards of fairness are not immutable. They may change with the passage of time, both in the general and in their application to decisions of a particular type. (3) The principles of fairness are not to be applied by rote identically in every situation. What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. (4) An essential feature of the context is the statute which creates the discretion, as regards both its language and the shape of the legal and administrative system within which the decision is taken. (5) Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken, with a view to procuring its modification; or both. (6) Since the person affected usually cannot make worthwhile representations without knowing what factors may weigh against his interests fairness will very often require that he is informed of the gist of the case which he has to answer.
A. Judgment of Simler J
i) APNs/PPNs dealt with the question who should hold the tax pending resolution of the dispute. The FA 2014 contained safeguards. Taxpayers had the right to make representations to HMRC before any payment obligation arose. They could challenge HMRC's decision to issue APNs/PPNs and the amount of tax due on the narrower basis of rationality, but natural justice did not require taxpayers to be able to make representations about the efficacy of the scheme itself. That was a matter for the statutory appeal process.
ii) APNs/PPNs did not deprive the taxpayers of their statutory right to challenge the underlying tax liabilities by way of appeal to the FTT and they had done so. A taxpayer may suffer hardship but that was not a matter relevant to the fairness of the provisions of the FA 2014, only to the mechanics of payment. "[T]hat hardship was always a risk that might materialise in the case of a taxpayer entering a tax avoidance scheme without making provision for payment of the tax if the scheme failed" ().
iii) If a taxpayer succeeded on his appeal, HMRC would be bound to refund his money with interest. If a taxpayer failed before the FTT, he was not entitled to have the cash flow benefit of holding the money.
iv) The taxpayer could always challenge the decision to issue an APN/PPN by way of judicial review.
D. My Conclusions on Ground 3
Natural justice requires that the procedure before any tribunal which is acting judicially shall be fair in all the circumstances, and I would be sorry to see this fundamental general principle degenerate into a series of hard-and-fast rules. For a long time the courts have, without objection from Parliament, supplemented procedure laid down in legislation where they have found that to be necessary for this purpose. But before this unusual kind of power is exercised it must be clear that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the apparent purpose of the legislation."
My Lords, that the conception of natural justice should at all stages guide those who discharge judicial functions is not merely an acceptable but is an essential part of the philosophy of the law. We often speak of the rules of natural justice. But there is nothing rigid or mechanical about them. What they comprehend has been analysed and described in many authorities. But any analysis must bring into relief rather their spirit and their inspiration than any precision of definition or precision as to application. We do not search for prescriptions which will lay down exactly what must, in various divergent situations, be done. The principles and procedures are to be applied which, in any particular situation or set of circumstances, are right and just and fair. Natural justice, it has been said, is only "fair play in action." Nor do we wait for directions from Parliament. The common law has abundant riches: there may we find what Byles J. called "the justice of the common law
164 Judges have no more important function than that of protecting individuals and organisations from abuse or misuse by the executive of its considerable and extensive powers—even, as is almost always the case, when such abuse or misuse does not involve bad faith. The substantial adverse financial consequences for Bank Mellat of the giving of the Direction in this case provide a good example of the importance of this function. On the other hand, the judiciary's power to review decisions of the executive must be exercised bearing in mind that responsibility for the decision lies with the executive, not the judiciary, and judges do not have the relevant expertise or experience of those responsible for the decision. In the present case, the importance and relevance of expertise and experience in international relations, national security and financial Regulation, is self-evident….
179 In my view, the rule is that, before a statutory power is exercised, any person who foreseeably would be significantly detrimentally affected by the exercise should be given the opportunity to make representations in advance, unless (i) the statutory provisions concerned expressly or impliedly provide otherwise or (ii) the circumstances in which the power is to be exercised would render it impossible, impractical or pointless to afford such an opportunity. I would add that any argument advanced in support of impossibility, impracticality or pointlessness should be very closely examined, as a court will be slow to hold that there is no obligation to give the opportunity, when such an obligation is not dispensed with in the relevant statute.
7. GROUND 4: NO 'TAX DUE AND PAYABLE'
B. Judgment of the Judge
76. In his submission, FA 2014 recognises the difference between returns and claims and makes a basic structural distinction between the two types of enquiry available under the TMA: enquiries into claims and enquiries into returns. Partnerships can only make returns; they cannot make claims that are not included in returns. Whereas partners can make claims that are not included in returns. He submits that Sch 32 para 3(3) recognises this. The particular arrangements giving rise to the asserted advantage are those contained in the partnership return and transmitted to the relevant partner's self-assessment tax return. The legislation anticipates that a tax advantage for the relevant partner may arise from the partnership loss but that is only for current year claims. A carry back claim cannot be included in the relevant partner's self-assessment tax return and the chosen arrangements in the partnership return cannot therefore feed through into the individual partner's return in such a case. The tax advantage accordingly, only results from the partnership arrangements in the case of current year claims. In the case of carry back or stand-alone claims, it results from the separate claim made by the individual partner. He submits that there are good policy reasons for this distinction: it respects the integrity of the tax system and the structural principles on which it is based.
…after the filing date for the tax return, Claimants who received a repayment and those who received a set-off were in the same economic position. Both received a tax advantage whether the share of losses was used in a carry back claim or in a current year claim. It is difficult to see any reason or policy justification why the legislation should exclude from its scope the right to issue a PPN where one rather than the other is used.
C. Subsequent decision of this court in De Silva
49. Second, the Appellants' approach fails to recognise that, no matter how a claim for relief has initially been 'made', the claim for relief is nonetheless required to be included in the return of the individual taxpayer for the year in which the losses were actually made by the partnership (ie here the later year—Year 02). That obligation is imposed by ss 8(1B) and 9 of the TMA and s 380 of ICTA. That is because the claim, if valid, will affect the tax chargeable and payable in the later year: see para 2(3) of Sch 1B. Losses, which may be carried back from a later year to an earlier year, cannot be given effect to in law in that earlier year; in other words they may not be relieved against the tax liability of that earlier year, despite the fact that the quantum of the claim will be calculated by reference to the earlier year. Thus, the correct procedure for making a Sch 1B claim is either to make it in the return for the loss-making year in question (the Year 2 return), or to make an earlier (or indeed later) Sch 1A standalone claim, which is then, subsequently, nonetheless required to be included in the return for the later year.
a) The claim had to be included in the return: see per Lord Hodge at  and  where he held:
A claim is not included in a return for certain statutory purposes simply because it appears on the face of the tax return form. They have to establish the amounts for which a person is chargeable to tax for the relevant year of assessment and the amount payable by him by way of income tax for that year.
b) The claim had to alter the tax charged on the assessment for the year.
(1) This paragraph applies where a person makes a claim requiring relief for a loss incurred or treated as incurred, or a payment made, in one year of assessment ("the later year") to be given in an earlier year of assessment ("the earlier year").
(2) Section 42(2) of this Act shall not apply in relation to the claim.
(3) The claim shall relate to the later year…
(6) Effect shall be given to the claim in relation to the later year, whether by repayment or set off, or by an increase in the aggregate amount given by section 59B(1)(b) of this Act, or otherwise…
E. My conclusions on Ground 4
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
Against this background, the most natural approach, in the Court's opinion, is to examine Gasus's complaints under the head of "securing the payment of taxes", which comes under the rule in the second paragraph of Article 1 (P1-1). That paragraph explicitly reserves the right of Contracting States to pass such laws as they may deem necessary to secure the payment of taxes. The importance which the drafters of the Convention attached to this aspect of the second paragraph of Article 1 (P1-1) may be gauged from the fact that at a stage when the proposed text did not contain such explicit reference to taxes, it was already understood to reserve the States' power to pass whatever fiscal laws they considered desirable, provided always that measures in this field did not amount to arbitrary confiscation (see Sir David Maxwell-Fyfe, Rapporteur of the Committee on Legal and Administrative Questions, Second Session of the Consultative Assembly, Sixteenth Sitting (25 August 1950), Collected Edition of the Travaux préparatoires, vol. VI, p. 140, commenting on the text of the proposed Article 10A, ibid., p. 68).
29. In the tax field, developments which might have occurred in democratic societies do not, however, affect the fundamental nature of the obligation on individuals or companies to pay tax. In comparison with the position when the Convention was adopted, those developments have not entailed a further intervention by the State into the "civil" sphere of the individual's life. The Court considers that tax matters still form part of the hard core of public-authority prerogatives, with the public nature of the relationship between the taxpayer and the community remaining predominant. Bearing in mind that the Convention and its Protocols must be interpreted as a whole, the Court also observes that Article 1 of Protocol
No. 1, which concerns the protection of property, reserves the right of States to enact such laws as they deem necessary for the purpose of securing the payment of taxes (see, mutatis mutandis, Gasus Dosier- und Fördertechnik GmbH v. the Netherlands, judgment of 23 February 1995, Series A
no. 306-B, pp. 48-49, § 60). Although the Court does not attach decisive importance to that factor, it does take it into account. It considers that tax disputes fall outside the scope of civil rights and obligations, despite the pecuniary effects which they necessarily produce for the taxpayer.
LORD JUSTICE McCOMBE
Protection of property
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. "."
"116. It is common ground that the general principles to be applied in determining whether A1P1 is engaged are set out in Kopecký v Slovakia (2005) 41 EHRR 43 (see  to ). The Strasbourg Court held that a possession can be an existing asset or a claim in respect of which an applicant can argue that he has a legitimate expectation that the claim will be realised. However the Court concluded that its case-law did not contemplate the existence of a "genuine dispute" or an "arguable claim" as a criterion for determining whether there is a "legitimate expectation" protected by A1P1 but rather, "where the proprietary interest is in the nature of a claim it may be regarded as an "asset" only where it has a sufficient basis in national law, for example where there is settled case-law of the domestic courts confirming it": ."
"The following relevant principles have been established by the practice of the Convention institutions under Art.1 of Protocol No.1:
(a) Deprivation of ownership or of another right in rem is in principle an instantaneous act and does not produce a continuing situation of "deprivation of a right".
(b) Article 1 of Protocol No.1 does not guarantee the right to acquire property.
(c) An applicant can allege a violation of Art.1 of Protocol No.1 only in so far as the impugned decisions related to his "possessions" within the meaning of this provision. "Possessions" can be either "existing possessions" or assets, including claims, in respect of which the applicant can argue that he or she has at least a "legitimate expectation" of obtaining effective enjoyment of a property right. By way of contrast, the hope of recognition of a property right which it has been impossible to exercise effectively cannot be considered a "possession" within the meaning of Art.1 of Protocol No.1, nor can a conditional claim which lapses as a result of the non-fulfilment of the condition.
(d) Article 1 of Protocol No.1 cannot be interpreted as imposing any general obligation on the Contracting States to restore property which was transferred to them before they ratified the Convention. Nor does Art.1 of Protocol No.1 impose any restrictions on the Contracting States' freedom to determine the scope of property restitution and to choose the conditions under which they agree to restore property rights of former owners."
The court continued with its findings as to whether the applicant had "existing possessions" and/or an "asset" for A1P1 purposes and began its consideration of those questions at  and  as follows:
"(b) Whether there were "existing possessions"
41. The applicant based his restitution claim on the provisions of the Extra-Judicial Rehabilitations Act 1991. It is not suggested that title to the property he sought to recover vested in him without the intervention of the courts. The proprietary interest invoked by the applicant is therefore in the nature of a claim and cannot accordingly be characterised as an "existing possession" within the meaning of the Court's case law. This was not disputed before the Court.
(c) Whether the applicant had an "asset"
42. It therefore remains to determine whether that claim constituted an "asset", that is whether it was sufficiently established to attract the guarantees of Art.1 of Protocol No.1. In this context it may also be of relevance whether a "legitimate expectation" of obtaining effective enjoyment of the coins arose for the applicant in the context of the proceedings complained of."
"52. In the light of the foregoing it can be concluded that the Court's case law does not contemplate the existence of a "genuine dispute" or an "arguable claim" as a criterion for determining whether there is a "legitimate expectation" protected by Art.1 of Protocol No.1. The Court is therefore unable to follow the reasoning of the Chamber's majority on this point. On the contrary, the Court takes the view that where the proprietary interest is in the nature of a claim it may be regarded as an "asset" only where it has a sufficient basis in national law, for example where there is settled case law of the domestic courts confirming it."
"58. … In particular, the Court notes that the applicant's restitution claim was a conditional one from the outset and that the question whether or not he complied with the statutory requirements was to be determined in the ensuing judicial proceedings. The courts ultimately found that that was not the case. The Court is therefore not satisfied that, when filing his restitution claim, it can be said to have been sufficiently established to qualify as an "asset" attracting the protection of Art.1 of Protocol No.1."
"43. The money required to be paid by the Notices cannot be regarded as the Appellants' A1P1 possessions, given the existence of at least an arguable claim that the money was owed as tax and so does not belong to the Appellants at all. This conclusion is strongly supported by both domestic and Strasbourg case law."
In contrast, Ms Simor QC, for the appellants submitted that this amounts to an argument that a simple demand by the State to an individual that he/she should pay money, without more, would mean that (pro tanto) the individual's cash in possession was no longer either his/her property or his possession for the purposes of A1P1. In principle, I consider that this submission of Ms Simor is correct. A mere demand by the State that a citizen should pay money should not remove from that citizen's cash its status as a "possession" for the purposes of A1P1.
"69. On that fresh approach to the point on legitimate expectation, the nature of the "claim" asserted has to be examined. The "claim" to tax relief under the DTA is one which has neither been accepted by HMRC nor has it been made out in any tribunal or court. All that has been established is the existence of a genuine dispute about whether the scheme based on the claim for tax relief under the DTA worked."
"122. … First, in the Bulves case the court was able to identify the applicant company's right to claim a deduction of input VAT as legitimate expectation of obtaining the effective enjoyment of a property right which amounted to a possession. In the present case the court cannot identify such a right. Whether or not the claimant has complied with all the conditions for claiming input tax is the substantive issue between the claimant and the commissioners. Until that issue is resolved it is difficult to see how the claimant can have a legitimate interest which could amount to a property right."
Again, the asserted right to quiet enjoyment of possessions seems to have been founded upon a perceived legitimate interest in the claim to deduction of input VAT. It was not based upon a claimed right of the state to take from a person some of his money to meet an anticipated tax liability, which seems to me to be of a different quality altogether. If the claimant wanted to appeal, he had to put the money up first. In the present cases, however, the claim to payment can be made whether or not there is a liability and independently of whether the taxpayer wishes to invoke a right of appeal.
"120. The question in these circumstances is whether the money representing the reduced tax liability (or loss relief claim) held by the claimants pending the determination of the dispute is an existing asset or possession for A1P1 purposes. So far as the money itself is concerned, that is affected by the argument as to whether it is payable to HMRC. As Vos LJ held in APVCO 19 Ltd and others v HM Treasury & Anor  EWCA Civ 648 at :
"Of course, the money is a possession in one sense, but it is a possession impressed with an arguable claim by HMRC, which prevents it being properly regarded as a possession for A1P1 purposes."
Both sides claim to be entitled to the money but nobody yet knows to whom it properly belongs, and the mere fact that it is held for the time being by the taxpayer does not make a difference."
"125. Furthermore, the decision in APVCO 19 Ltd and others v HM Treasury & Anor is binding, clear authority that legislation can remove without any interference with possessions, a taxpayer's argument that had existed previously (that HMRC was not entitled to the money) with the result that tax is payable and the money in the taxpayer's hands must fund it. In those circumstances it is difficult to see why a different result should follow from the lesser step of legislation requiring the disputed sum to be paid on account of the tax (but without finally determining liability) pending resolution of the dispute."
"80. The routes by which Floyd LJ and Vos LJ conclude that the appellants have failed to establish an A1P1 claim are, I think, subtly different. Vos LJ focuses on whether the money can be said to be a possession. In essence, he considers that the fact that, at the relevant time (namely at the time of the legislative changes), it was impressed with an arguable claim by HMRC prevents this. Floyd LJ focuses on whether, assuming the money is properly classed as a possession, the appellants have been deprived of it, and concludes that they have not established this. If they are right in their argument about the efficacy of their scheme, they have indeed been deprived of it by the legislative changes; if not, they were going to lose it anyway by operation of the existing statute. Arguably being right is not sufficient to establish the required deprivation."
Thus, Black LJ agreed with both judgments.
"119. The Strasbourg court has itself interpreted conformity to the rule of law as requiring, amongst other things, that the relevant domestic law must be adequately accessible and sufficiently precise to be foreseeable in its effects (Lithgow v United Kingdom (1986) 8 EHRR 329, para 110), and that it should not operate in an arbitrary manner: Hentrich v France (1994) 18 EHRR 440, para 42. The criteria of accessibility and foreseeability are not absolute; nor is the prohibition of arbitrariness incompatible with the existence of discretion. The court has often said that the effect of these requirements in a given situation depends upon the particular circumstances: see e g Sunday Times v United Kingdom (1979) 2 EHRR 245, para 49.
120. In the criminal sphere, the Convention allows only a limited scope for retroactive legislation: the principles encapsulated in the maxim nullum crimen sine lege, nulla poena sine lege are reflected in article 7. The position is different in the civil sphere. Changes in the law, even if resulting from prospective legislation or judicial decisions, will frequently and properly affect legal relationships which were established before the changes occurred. Changes in family law, for example, are not applicable only to families which subsequently come into existence, but affect existing families, even although the changes may not have been foreseeable at the time when individuals married or had children. Similarly, a person who buys a house, or a company that employs staff, cannot expect the law governing the rights and responsibilities of homeowners or employers to remain unchanged throughout the period of ownership or employment. The same point could be made in respect of other types of right and obligation of a civil character. As Lon L Fuller observed in The Morality of Law (revised ed 1969), p 60: "If every time a man relied on existing law in arranging his affairs, he were made secure against any change in legal rules, the whole body of our law would be ossified forever."
"The proportionality of the interference
"126. In order for an interference with possessions to be compatible with A1P1, it must not only be lawful and in the general interest, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised. This involves an assessment of whether a fair balance has been struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights: the individual should not be required to bear an individual and excessive burden: James v United Kingdom, 8 EHRR 123, para 50. In making that assessment at the international level, the Strasbourg court has allowed national authorities a wide margin of appreciation: see e g JA Pye (Oxford) Ltd v United Kingdom (2007) 46 EHRR 1083, para 75)."
"150. … The court considers that tax matters still form part of the hard core of public authority prerogatives, with the public nature of the relationship between the taxpayer and the tax authority remaining predominant. Bearing in mind that the convention and its protocols must be interpreted as a whole, the court also observes that art 1 of Protocol 1, which concerns the protection of property, reserves the right of states to enact such laws as they deem necessary for the purpose of securing the payment of taxes (see, mutatis mutandis, Gasus Dosier-und Fordertechnik GmbH v Netherlands (1995) 20 EHRR 403 at 434, paragraph 60). Although the court does not attach decisive importance to that factor, it does take it into account. It considers that tax disputes fall outside the scope of civil rights and obligations, despite the pecuniary effects which they necessarily produce for the taxpayer."
"152. That rationale applies equally to a PPN. FA 2014 Schedule 32 para 6(3) provides that the accelerated partner payment is to be treated as a payment on account of the understated partner tax; and to the extent that the understated partner tax is paid before the accelerated partner payment, the latter is treated as having been paid to the same extent at the same time. The amounts due are as a matter of substance, payments on account of tax."
She noted further that there was a statutory right of appeal against any penalty imposed under the 2014 Act and that this satisfied any Article 6 obligation in that regard.
(1) "3.50. As noted already, this measure affects taxpayers who have used avoidance schemes in the past, but it is not a retrospective change to the substance of the issue. The measure creates a new and prospective obligation after Royal Assent and relates to who holds the money during the dispute, rather than whether the tax scheme is effective or not."
(2) "4.7. The Government rejects the contention that this is retrospective legislation. Whilst it imposes a new obligation on certain taxpayers that they did not expect when they entered into these schemes, the Government is not changing the legislation that determines whether the scheme used is effective. These proposals change the circumstances where tax is held by the Exchequer during a dispute and puts all taxpayers in dispute on an avoidance scheme on an equal footing."
(3) "Col. 492. Clause 216 sets out what happens when a notice is given during an open inquiry. The accelerated payment is a new form of payment. It will be treated as a payment on account of the final liability, which means that interest will stop running on the amount paid from the date that the taxpayer pays it over. This is emphatically not any form of determination of the final tax liability, which will still be subject to all existing appeal rights."
"1. No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time where it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed."
"57. Further and in any event, since penalties are payable for non-payment of amounts set out in PPNs, Article 6 necessarily applies in this regard too, it being well established since Bendenoun v. France (1994) 18 EHRR 54 that proceedings relating to tax disputes are "criminal" if tax fines, surcharges, etc., with a deterrent and punitive purpose are imposed or even if there is a risk that they may be imposed Article 6 applies: Jussila v. Finland: Application No. 73053/01  STC 29, judgment 23 Nov 2006. The Judge was wrong to find that the possibility of appealing against these penalties was sufficient: §153."
"153. Save so far as penalties are concerned it is not even arguable that criminal charges are involved. So far as penalties are concerned however, there is a statutory right of appeal to the FTT against any penalty under FA 2014 and Schedule 32 para 7 read with s.226 Finance Act 2012 and paras 9-18 of Schedule 56 FA 2009. This satisfies any Article 6 obligations in that regard."
Ground 6: The Designated Officer Ground
"30. This is clearly a requirement for each APN and so is case specific. Here the sum is relatively easy to calculate because it is equal to the relief claimed by reason of the payment of what are said by the taxpayer to be "qualifying benefits".
31. At its highest the Revenue argue that the Notice Requirement requires only a calculation of the asserted advantage and that, subject to the qualification referred to in the next paragraph, an APN can be validly given without consideration of whether, on the information it has, the Revenue and / or the designated officer consider that the claim for the tax advantage (the relief) is available.
32. The qualification is that if the Revenue or the designated officer is of the view, on the information they have, that the claim to the tax advantage (the relief) is available under the taxation legislation an APN cannot properly be given.
33. So, at its highest and subject to that qualification, the Revenue argues that a valid APN can be given without any view being taken, on the information available to the Revenue, whether a claim for relief under a DOTAS arrangement is lawful and available to the taxpayer."
"78. That leaves the question whether the designated officer has failed to determine to the best of his information and belief that he does not accept that the Claimants are entitled to the relief from corporation tax that they claim."
He answered the question at paragraphs 79 and 80:
"79. On the assumption that the designated officer has not himself analysed the point of statutory construction I am nonetheless of the view that under the system put in place by the Revenue he should be, and in any event is entitled to be, informed by and act in accordance with:
i) the published view of the Revenue that the Claimants' underlying argument of statutory construction is not correct, or at least is not accepted as being correct, and
ii) the present intention of the Revenue to argue the point.
80. So, although I accept that the designated officer is a particular and defined individual who has a particular statutory role, on the facts of these cases there is nothing in the point that he has not carried out a personal analysis of the relevant point of statutory construction. This is because he can act on the view and intention of the Revenue referred to in the last paragraph and so on the basis that, on the information that the Revenue and he have, the Claimants' claims for relief from corporation tax are disputed in at least the sense referred to in paragraph 35 above."
Conclusions on Grounds 5 and 6
LADY JUSTICE THIRLWALL