Court of Appeal upholds decision of the High Court striking out ‘abusive’ private law claims brought by individuals who participated in failed tax avoidance schemes
A number of taxpayers brought Part 7 proceedings in the High Court, seeking to avoid having to pay tax due in respect of their participation in failed tax avoidance schemes. They alleged a procedural flaw in the mechanism by which HMRC sought to enquire into their carry-back loss relief claims. They maintained those claims, notwithstanding the decision of the Supreme Court in De Silva to the effect that the alleged procedural flaw did not exist. A number of the claimants also argued that the decision of the Supreme Court in De Silva did not apply to claims made in respect of losses, where the losses were realised post-2007, after the enactment of the Income Tax Act 2007.
The Court of Appeal has upheld the decision of the High Court striking out the claims on the ground of abuse and on the ground that they lacked any merit.
In relation to the arguments on the merits, the Court of Appeal has confirmed that in respect of trade-loss relief (which can be contrasted with share loss relief, which was the subject of the decision of the Supreme Court in Derry), there is no possible basis for distinguishing the post-2007 claims from the pre-2007 claims, all of which were bound to fail.
In relation to abuse of process: the Court upheld the principle that if Parliament has laid down a statutory appeal process against a decision of HMRC, a person aggrieved by the decision wishing to challenge it must use the statutory process (Autologic). It also applied the principle established in O’Reilly v Mackman, a challenge to a Partner Notices issued under s.28B(4) of the Taxes Management Act 1970 is a purely public law matter. Where no statutory appeal procedure exists, the proper forum for challenging such a notice is by Judicial Review.
Marika Lemos appeared for HMRC in the High Court and in the Court of Appeal.Back to News
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