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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Aston & Ors, R (on the application of) v HM Revenue & Customs [2015] EWHC 3118 (Admin) (12 October 2015)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2015/3118.html
Cite as: [2015] EWHC 3118 (Admin)
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QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Strand London WC2A 2LL |
||
B e f o r e :
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| THE QUEEN ON THE APPLICATION OF ASTON and Others | Claimants | |
| v | ||
| HM REVENUE & CUSTOMS | Defendant |
____________________
DTI Global Trading as
A Merrill Communications Company
165 Fleet Street London EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
Miss Gemma White and Miss Aparna Nathan appeared on behalf of the Defendant
____________________
Crown Copyright ©
- MR JUSTICE KENNETH PARKER: At the end of the day - I am addressing both parties now - I am not satisfied that there is a clear demarcation between Rowe and the present case.
- Miss Simor makes points, both of alleged differentiation and also, quite squarely, in relation, for example, to retrospectivity and the application of Article 1 Protocol 1 that seek to distinguish the present case from that of Rowe. I am not satisfied at the end of the day that these are very substantial distinctions between the present case and Rowe. On the other hand, I acknowledge in relation to legitimate expectation that there is potentially a separate issue of law on the interpretation of Section 55. It also seems to me over the course of these two days [Miss Simor] has raised real points in relation to the correctness of the judgment of Mrs Justice Simler in Rowe in relation, for example, to retrospectivity and to the application of A1P1. The practical problem that I face is that the Court of Appeal is going to be looking at the application for permission to appeal and is therefore going to be considering, among other matters, the various points that [Miss Simor] has raised in criticism of Mrs Justice Simler's judgment.
- It seems to me that for the efficient and effective conduct of this claim there are really two ways forward. Either I can grant permission in relation to the various grounds that [Miss Simor] has put forward on the basis that there are points of substance and that ordinarily they would merit review at a full hearing and then stay the claim. I would be very concerned indeed about this claim proceeding without the judge having the advantage of seeing what had happened in the Court of Appeal, either permission having been granted and the appeal proceeding or indeed reasons given by the Court of Appeal why they do not believe there is a reasonable or realistic prospect of success on the appeal in relation to the points of criticism that [Miss Simor] has raised before me. The alternative course is simply to conclude that there are not sufficient points of distinction and to refuse permission and leave you to proceed in the Court of Appeal.
- On balance, I think that sufficient has been made out before me - particularly in relation to legitimate expectation - that I should grant permission and I should not seek at this stage to disallow permission in respect of any of the grounds. But I shall nonetheless stay this particular claim because it does not appear to me that it would be efficient or fair to let this claim simply proceed without having the benefit of the result in the Court of Appeal. I am only hoping the Court of Appeal will consider this matter reasonably quickly and that all parties know where they stand.
- MR JUSTICE KENNETH PARKER: Consequent upon my granting permission in this claim, the claimants have applied for interim relief. The form that that relief would take broadly would be that HMRC would, pending determination of this claim, be precluded from enforcing the amounts specified in the APN. Miss Simor QC, on behalf of the claimants, also urges this court that any form of interim relief, if it were so granted, should also provide that the penalty regime that is imposed by the relevant legislation should in effect be suspended, namely that until the claim is determined penalties should not run under the legislation and that they should begin to run only when the legal position is determined at the outcome of the claim.
- The principles governing interim relief are well known. It is unnecessary for me in this judgment to rehearse them. Mrs Justice Simler in Rowe (to which I have made reference) gave a reasoned and substantial judgment in respect of the application for interim relief. In my opinion, she set out the principles clearly and comprehensively.
- The central issue is where the balance of convenience should lie in this case, permission having been granted. This is a public law case. I have to bear in mind that Parliament has now imposed a specific regime in this area of fiscal legislation. It is clear from everything that I have seen that Parliament took the view that tax avoidance arrangements were enabling tax payers, for a substantial length of time, to defer tax that they believed or contended was not due and that this was operating contrary to the public interest in the collection of tax. Accordingly, the advance payment notice provisions are there in order, first, to discourage what might be called "artificial tax arrangements" and to remove the advantages to tax payers of the delay that, almost inevitably, will occur in this area of public administration before the State can levy the tax that is properly due, denying en route the advantage that has wrongly been claimed.
- For that purpose I have to consider the merits of the proposed claim more critically than I would have to do in a different context. I have already described the general grounds of claim. I do not intend to go into the grounds in great depth.
- I would say the following. I have heard the argument on legitimate expectation. On the statutory material that has been presented before me, it appears to me that the claimant[s] would have something of an uphill task in persuading the court in the substantive judicial review that Section 55 was not addressed to the scenario that has arisen in this case, namely that an assessment has been made and that there has been an appeal albeit that is through the processes available for review by HMRC. It appears to me that the provisions dealing specifically with the time in which the tax payer can ask for postponement of the payment of the tax would be difficult to reconcile (to put the matter at its lowest) with the interpretation advanced by the claimant. Furthermore, as I indicated during the course of argument, there would be a substantial question raised as to the coherence of these provisions if, in the case of an appeal notified to the tribunal, the APN would override any agreement with HMRC or would override an order by the tribunal itself but that the same override was not intended to apply where HMRC had agreed postponement of the tax at a somewhat earlier stage during the appellate procedure.
- Looking at the merits of the second ground on ultra vires, it appears to me again that the claimant has something of an uphill task. HMRC in this case, on the material that I have seen, have satisfied the statutory criteria for the imposition of APN. However it is urged that nonetheless HMRC acted beyond its powers because it is argued that the precise circumstances of the imposition of the APN were different from those contemplated by Parliament and were not the kind of circumstances in which Parliament intended the APN regime to operate.
- However it seems to me that this potentially confuses the validity of an APN with circumstances that the legislature may have had primarily in mind when it designed the particular legislative scheme. I referred to Spath Holme in the course of argument and it seems to me that there is a strong argument that although the circumstances might be somewhat different, nonetheless the criteria have been satisfied and that is all that is necessary.
- The other element of vires in my judgment also faces considerable hurdles. It is said that on the evidence that I have in this case HMRC did not satisfy one of the criteria, that is namely specifying through the designated officer the precise grounds with sufficient particularity as to why the APN was being imposed and why HMRC believed that there was an underlying tax liability.
- However Miss White took me through other documents. I am satisfied on those documents, for the purposes of the application for interim relief, that HMRC did make clear why it considered the tax was due. Put shortly, HMRC was faced with a scheme in which those who earned income in this jurisdiction from employment decided to channel part of that income through an off-shore company and to receive a very substantial part of that remuneration in the terms of loans from that particular off-shore company against a background in which realistically it does not look as if anyone involved contemplated that those loans would be repayable. HMRC, understandably, took the position in the tax dispute that, for example, the anti-avoidance provisions that seek to capture arrangements involving transfer of assets abroad where the transferor continues to enjoy the fruits of the assets transferred would be a prime peg upon which tax liability could be pinned.
- Other provisions were referred to but, on the material that I have seen, there does not seem to me a great deal of doubt that HMRC did make plain to these tax payers the basis upon which it considered that the loans were in fact income to those who earned the money in the first place and who were in effect self-funding the loans. It is also clear on that material that those involved in the scheme benefited substantially over a considerable number of years in the receipt of those loans without any substantial payment of tax otherwise than through the specific provisions related to low-interest loans.
- Turning to retrospective application of the power that is ground 3, I have considered the judgment of Mrs Justice Simler and the points raised by Miss Simor QC criticising the judgment. For the purposes of this application I form a view of my own as to the likely prospects of that claim succeeding. I find the judgment of Mrs Justice Simler impressive. The Court of Appeal may take a different view. On this application I have to take my own view and it appears to me her analysis is sound.
- The same can be said about ground 4. Mrs Justice Simler considered the application of Article 1 Protocol 1. Without reciting the detail, it appears to me that that analysis is very powerful indeed. Again, the Court of Appeal may take a different view.
- Turning to civil rights and retrospective criminal charge, it appears quite difficult for me to see how the claimant[s] will eventually make good [their] arguments that this regime of APN constitutes some form of criminal charge and will overcome the general difficulties in this area, having regard to the authority of Ferrazzini that provides that the penalty provisions of the ECHR do not apply in this area of public administration. As for a breach of natural justice, Mrs Justice Simler again dealt with that in some detail and concluded that the regime as a whole appeared, in the light of the kind of public concern that I have already adumbrated, to be a fair, reasonable and proportionate one. There also may be specific facts in respect of particular cases which strengthen the argument that the procedures in a particular case have not accorded with the principles of natural justice. I have to take a broad view on that. Again, Mrs Justice Simler's judgment appears to me to be an impressive one, a first-rate piece of analysis. Again, at this stage it would seem to me that it is something of an uphill task for the claimants to make good that ground on the ultimate hearing of this claim.
- Summarising all of that, using the best judgment that I can, having considered the respective arguments over the last couple of days, my view is that the ultimate prospects of success in this claim are relatively low. I therefore do not take the view that it would be conducive to the public interest for me to grant any form of interim relief. I am willing to acknowledge that the obligation to pay the amount specified in the APN may in individual circumstances potentially cause some degree of hardship, perhaps even substantial hardship, in specific cases. I do bear in mind however, as I made clear in Huitson, that these claimants have had the advantage over a long period of years of the enjoyment of income that, on one strong view, should have been subject to tax many years ago in this jurisdiction. If they have spent the money on current consumption or on the acquisition of assets that have fallen in value, one has sympathy. But in my view, on the balance of public interest, it is not a determinative factor and therefore I would not be prepared to shift my position of refusal having regard to that factor.
- I do in that context however bear in mind that HMRC of course will consider specific applications for the deferment of the payment of APN depending upon the specific facts and matters advanced to them why they should defer the collection of the APN.
- I wish also to make it absolutely clear that even if I had been prepared to grant interim relief, I would have done so only on terms that the penalty regime should continue to be operative. That was the position reached by Mrs Justice Simler in Rowe, and also Mrs Justice Laing in a further case gave reasons why that was the appropriate course. I would see no reason why the penalty provisions should not continue to operate. If the judicial review were successful then of course no penalty would be collectible. But if it were not it would not seem to me to be right to have deferred the triggering of the penalty provisions pending the determination of the claim. However that is somewhat academic because I do not believe it is in the interests of justice, having regard to the matters I have mentioned, that I should grant any interim relief in this case.
- I do not think there is anything else I need deal with today.
- MISS WHITE: I am instructed to apply for costs of resisting the interim relief application. In my submission it is clearly an application. HMRC rightly came to resist. My Lord has rejected it. In those circumstances I would ask for an order for its costs in the - - - - -
- MR JUSTICE KENNETH PARKER: Have you any kind of summary assessment in the matter?
- MISS WHITE: Yes. We had a schedule. It is difficult because the schedule applies to both permission and the interim relief. It was served on Thursday.
- MISS SIMOR: The position on interim relief is that until Mrs Justice Simler's judgment the Revenue were in agreement to grant some form of interim relief, that is to postpone the APNs as they did. In no sense can it be said that seeking interim relief was unreasonable. These people are faced with a significant payment with significant consequences. In the light of both the fact that the Revenue itself agreed to postpone it back in November 2013 - and that is quite irrespective of this litigation and the Revenue has still not assessed for tax - we submit there was nothing unreasonable about such an application and the costs of dealing with it in any event are nugatory.
- MR JUSTICE KENNETH PARKER: I could reserve the costs in relation to relief until we know where the whole claim goes.
- MISS SIMOR: Yes. That would seem to be a sensible half-way house.
- MR JUSTICE KENNETH PARKER: Happy with that, right. I will reserve the costs on the interim relief for final determination.
- Thank you for your most helpful and lucid submissions.
(Miss Simor QC and Miss White addressed the court on the matter of interim relief)