England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2
		2nd March 2004

1. MR JUSTICE MOSES: This is an application for permission to move for judicial review, permission having been refused in writing by Charles J. The claimant is a taxpayer, Mr Weston, and he has been assessed to capital gains tax on the basis of transactions that he entered into, in pursuance of which, he, as a shareholder with other shareholders, created an interest in possession in a settlement, the settlement acquired share capital, and the settlement subscribed cash in return for loan notes issued by the company's share capital which was acquired by the settlement. The shares and loan notes were sold and the Revenue sought to charge the gain from the sale of those shares in respect of the year 1997 to 1998 pursuant to section 115 of the Taxation of Chargeable Gains Act 1992.
2. The claimant contended that there had been no gain in respect of the sale of the loan notes because they were qualifying corporate bonds known in the trade as "QCBs". There was an enquiry, the Revenue did assess his gains to tax, and the appellant appealed against the amendment of his self-assessment. Special commissioners decided that the loan notes were not QCBs, and the taxpayer has lodged an appeal to the High Court.
3. It happens that the accountants acting for him have been acting for another individual, a taxpayer, and his accountant has revealed that that individual entered into what is asserted to be an identical transaction in respect of the same tax year, but an enquiry led to closure and a decision not to amend the self-assessment. Similarly, in relation to another taxpayer, another accountant has revealed, I am told with the consent of his client, that his client too had entered into a similar transaction for the same tax year, and following enquiries, there was no amendment to his self-assessment. Mr Sherry points out that the enquiry office, which was SCO Edinburgh, was the same enquiry office as that which had sought to charge him to tax. No explanation has been given for this different treatment, and he therefore contends that arguably, the Revenue has acted unfairly in the decision to charge his client tax where other potential taxpayers in identical situations have not been charged tax.
4. In support of that argument, he relies upon the well-known decision of the House of Lords in what has become known under a number of sobriquets, but more respectably the "Fleet Street Irregulars", R v Inland Revenue Commissioners, ex parte National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617. In the course of that case, which concerned a complaint that the Fleet Street Irregulars sought to charge the press barons for visits on Sundays which they never made and who were paid under such fanciful names as Mickey Mouse of Sunset Boulevard, the contention was advanced that the Revenue was not entitled to decline to pursue all of those print workers on the basis, as the Revenue contended, that it would be quite impossible to pursue them all.
5. Lord Scarman, in a passage which is now famous, at page 651 between F and G, said:

"I am persuaded that the modern case law recognises a legal duty owed by the revenue to the general body of the taxpayers to treat taxpayers fairly; to use their discretionary powers so that, subject to the requirements of good management, discrimination between one group of taxpayers and another does not arise; to ensure that there are no favourites and no sacrificial victims. The duty has to be considered as one of several arising within the complex comprised in the care and management of a tax, every part of which it is their duty, if they can, to collect."

6. To similar effect, he spoke of the recognised duty of fairness at pages 652 and 653.
7. Those principles have been followed in many cases since, and more recently relied upon and referred to in the decision of the Court of Appeal in Wilkinson (R on the application of) v The Comissioners of the Inland Revenue [2003] EWCA Civ 814, (see paragraphs 55 and 60).
8. It is on the basis of those principles that Mr Sherry contends that absent any good reason in the interests of sound management advanced for discriminating between his client and those other taxpayers, absent any basis for distinguishing between them, it is unfair to seek to charge his client to tax by requiring an amendment to his self-assessment leaving him to pursue his case through the normal Revenue appeal ladder.
9. I disagree and do not think it arguable so to contend. There is no basis for saying that his client has been treated unfairly. The Revenue are under a duty, pursuant to sections 1 and 13(1) of the Inland Revenue Regulation Act 1890, to collect and cause to be collected every part of Inland Revenue. That is their obligation. That, indeed, is the only legitimate expectation that Mr Sherry's client had. If these bonds were not QCBs, he was liable to capital gains tax, and Parliament has so directed, and directed that the Revenue should collect that tax.
10. There is no arguable unfairness in their pursuing that duty merely because, for some reason, they have failed to pursue their obligation in relation to the other taxpayers. Nor could it possibly be contended that there was unfairness to the other taxpayers since they have had the good fortune, if Mr Sherry's client's information is correct, to have escaped the tax. But the mere fact that two taxpayers arguably in the same situation have not in fact been charged tax does not raise a case of unfairness without more. If there was some evidence, which it would be incumbent upon Mr Sherry's client to produce, to show that there had been some unfairness; a basis for distinguishing between the taxpayers; some favour shown to the Inspector which caused the Revenue to charge his client to tax but not the others; if there was some specific basis to show that the decision made was based upon some caprice or discriminatory reason; why, then the case would be different. But it is not, in my judgment, open to a taxpayer, simply because one taxpayer has been charged and another has not, simply to raise the contention and then expect the Revenue to respond requiring them to disclose the private affairs of other taxpayers.
11. In this case, driven by the seriousness of the allegation, Mr Ewart on behalf of the Revenue has, no doubt on instructions, given an explanation in his grounds for contesting the claim. But it is not evidence, and it is not sworn to as being the truth, and, in my judgment, it misses the essential legal point: namely that the Revenue is under no obligation to provide an explanation merely on the basis that one taxpayer has been charged to tax and another taxpayer has not; that is so even if that taxpayer asserts that the facts are the same and even if the same office has been dealing with it. As was canvassed in argument, there could be any number of reasons as to why that is so, but it is not open to the taxpayer to speculate or for a court to speculate, still less to allow the launch of full substantive judicial review proceedings merely on that basis.
12. As I have said, the obligation of the Revenue to treat taxpayers fairly does not mean that they all have to be charged a tax, if it appears that the facts bring them within a particular statutory charge, when there may be all sorts of reasons why it is not practical in the interests of good management to do so.
13. For those reasons, and in particular, more shortly, for the reasons given by Charles J in his written refusal of permission, I do not regard this case as arguable. The taxpayer has not shown nearly enough to raise a case of unfairness merely on the facts that he has advanced, and in those circumstances, I refuse permission.
14. MR EWART: I am obliged, my Lord.
15. MR JUSTICE MOSES: Thank you both.