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Rowe/Vital Nut – Court of Appeal decision on APNs

Rowe/Vital Nut – Court of Appeal decision on APNs

The taxpayers’ applications for judicial review against accelerated payment Notices have been rejected.


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The Court of Appeal has rejected these joined applications for judicial review against accelerated payment notices (APNs) and partner payment notices (PPNs), served by HMRC on taxpayers taking part in various tax avoidance arrangements. The taxpayers, with two lead cases Rowe and Vital Nut, had challenged the validity of APNs on several grounds.

  • The taxpayers argued that HMRC must be satisfied that an arrangement does not work before issuing an APN or PPN. The Court agreed, concluding that a designated officer put in place must take the view that the arrangements are ineffective before issuing an APN/PPN. However, HMRC’s statutory powers to issue an APN/PPN are not restricted by the fact that an appeal may be pending.
  • It was also argued that it was an abuse of power to use APNs or PPNs as an alternative to the enquiry and appeal process. The Court accepted that it would be unlawful for HMRC to fail to take an enquiry forward once an APN or PPN had been paid, but there was no evidence this was happening.
  • The taxpayers had argued that the legislation did not allow for APNs to be served on people who had completed transactions associated with their tax avoidance arrangements before the legislation was passed, as this amounted to retrospective taxation. The Court dismissed this argument, stating that it would be contrary to the statutory purposes of the legislation were it not allowed to operate in relation to existing tax avoidance cases.
  • The Court considered the possibility that an APN could lead to taxpayers having to sell their homes or become bankrupt. While making no specific judgment on this, the judge stated “I would like to leave open the question whether the application by HMRC of its usual hardship rules is necessarily sufficient”. It remains to be seen if HMRC will take any action in response to the Court’s concerns, particularly given the difficult balance that needs to be struck between being lawfully proportionate and giving people the opportunity to opt out of paying an APN/PPN by claiming hardship
  • The taxpayers argued that HMRC needed to explain the basis of the asserted tax liability and provide them with a proper opportunity to rebut the claims before the APNs/PPNs were served. The Court rejected this argument on the basis that the taxpayers were entitled to make representations to HMRC upon receiving an APN/PPN on whether their arrangements were effective for tax purposes. They also found that the representations can cover matters that are not expressly provided for and HMRC have to take these into account.
  • The Court did not consider that a delay in issuing an APN/PPN was in itself unfair, bearing in mind both the impact of ongoing litigation and HMRC’s limited resources.
  • The taxpayers argued that their rights under Article 1 of the First Protocol to the European Convention on Human Rights and Fundamental Freedoms (the right to peaceful enjoyment of one’s possessions) were breached. The Court rejected this argument as the Article specifically allows the State to “control the use of property … to secure the payment of taxes”.

The full decision can be found here. It remains to be seen whether the Court of Appeal’s decision will be appealed to the Supreme Court.

For further information please contact:

Chris Davidson

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