High Court dismisses Judicial Review challenge to APN legislation

In R (Graham & Others) v HMRC, the High Court rejected the claimants' judicial review challenge to the legality of Accelerated Payment Notices ("APNs") and Partnership Payment Notices ("PPNs") issued to them pursuant to the provisions of the Finance Act 2014 ("FA 2014"). Following R (Rowe & Ors) v HMRC [2015] EWHC 2293 (Admin) and Walapu v HMRC [2016] EWHC 658 (Admin), this is the latest in a line of High Court decisions to reject judicial review challenges to the APN legislation.


The challenges in Rowe, Walapu and Graham all concern the scope and effect of Chapter 3 of FA 2014 which entitles HMRC to require a taxpayer suspected of tax avoidance to pay on account the amount HMRC considers represents the understated tax, thereby depriving the taxpayer of the liquidity advantages formerly enjoyed by participants in tax avoidance schemes. 

In Rowe and Walapu it was variously argued that the APN legislation was unlawful because it violated legitimate expectations, defeated natural justice, infringed Art. 6 of the ECHR, denied citizens access to the courts and infringed the right to property under Art. 1 Protocol 1 ECHR. In light of the rejection of those contentions by Simler J in Rowe and Green J in Walapu, the claimants in Graham recognised that only one of their grounds could be properly pursued. As such, the only issue that fell for determination in the present case was whether any of the partnerships in which the claimants participated (“the Liberty Fund Partnerships”) was notifiable under the Disclosure of Tax Avoidance Schemes (“DOTAS”) regime.  If they were not then Condition C for the issue of an APN / PPN would not be satisfied.

The judgment

The High Court rejected the claimants’ contention that none of the Liberty Fund Partnerships was notifiable. That contention was based on technical arguments concerning the transitional provisions of the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006. The claimants argued that all Liberty Fund Partnerships whether already in existence at the commencement of the 2006 Regulations or created after the commencement of the 2006 Regulations constituted a single set of arrangements which were excluded from the duty to notify as a result of the transitional provisions.

The High Court held that there was no justification for sweeping all the individual partnerships under a single "umbrella" arrangement as the claimants contended (para 36). The relevant "arrangements" which had to be notified were the specific arrangements for each particular Liberty Fund Partnership, each of which had its own particular components (identity of partners, subscription amounts, dividend amounts etc.). Under the 2006 Regulations, any arrangements were notifiable where they were implemented on or after 1 August 2006, even if the proposal was made before that date but on or after 18 March 2004 (para 41).

Accordingly, the High Court determined that each of the Liberty Fund Partnerships under consideration were "notifiable arrangements" so that Condition C for the issue of an APN was satisfied.

Akash Nawbatt and Sebastian Purnell appeared on behalf of the successful Respondent, instructed by the General Counsel and Solicitor to HMRC.

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