Following its inquiry into a tax avoidance scheme entered into by the first claimant’s husband, the revenue issued an accelerated payment notice (“APN”) against the first claimant under section 219 of the Finance Act 2014 on the basis that she was liable to some £6m in capital gains tax in consequence of her participation in the scheme. The first claimant and her husband commenced judicial review proceedings against the revenue, pursuant to CPR r 54.5(1), contending that it should withdraw the APN. Nearly three weeks later the first claimant made representations to the revenue objecting to the APN, pursuant to section 222 of the 2014 Act, on the grounds that the statutory conditions for making an APN were not met. The revenue then withdrew the APN. On the first claimant’s application for an order that the revenue pay her costs of the judicial review proceedings, the master made no order for costs, holding that the claim for judicial review had been premature. On the first claimant’s appeal, the judge held that the right to make representations to the revenue about an APN under section 222 of the Finance Act 2014 would generally be an appropriate alternative remedy which a taxpayer should exhaust before bringing judicial review proceedings.
On the first claimant’s further appeal—
Held, appeal dismissed. (1) Parliament must have intended taxpayers to take advantage of the machinery in section 222 in all cases where it was available, before having resort to judicial review proceedings. The principle that judicial review was a last resort was of long standing, and had been reiterated in judicial pronouncements at the highest level. The representations machinery in section 222 fulfilled an obvious purpose, by providing a relatively cheap and simple way for a taxpayer to challenge an APN, without incurring the cost of court proceedings or adding to the already very heavy burdens on the resources and expertise of the Administrative Court. It was all but self evident that section 222, read in its context, was intended by Parliament to provide the primary recourse for a taxpayer dissatisfied with an APN, which should normally be exhausted before judicial review proceedings were set in motion. The authorities showed that, although the three-month time limit for judicial review in CPR r 54.5(1) was indeed strict, it was not applied unthinkingly, and in a suitable context the courts were willing to adopt a flexible and pragmatic approach. Where Parliament had provided a potential alternative remedy, such as that in section 222, the court would if necessary ensure that the taxpayer was not prejudiced by taking advantage of it. The sensible course would normally be for the taxpayer, when making his representations, to seek HMRC’s agreement that time for judicial review purposes should not begin to run until the section 222 procedure had been completed. Both sides were under a duty to act responsibly and to take all reasonable steps to ensure that judicial review proceedings were not prematurely pursued while other forms of dispute resolution were in progress. Judicial review proceedings should not be begun on a precautionary basis, and then stayed, but rather they were to be held in reserve as a true remedy of last resort, to be deployed (if at all) only when the section 222 procedure had left the taxpayer still dissatisfied, and even then the focus of the challenge should be on the APN as it stood at the end of the process rather than as it was originally issued (unless of course it had simply been upheld without variation) (paras 89, 92, 93, 96).
(2) Section 222 should be given a broad and non-technical construction, with the aim of enabling all objections to the application of the three conditions set out in section 219, or to the amount of the accelerated payment, to be covered if at all possible by the representations. The claimant’s claim did not have to be brought jointly with her husband’s, nor did the nature of the relief sought somehow make the section 222 review machinery inappropriate. The alleged joint nature of the claimant and her husband’s judicial review proceedings was largely spurious, and in any event insufficient to justify the refusal in the claimant’s case to make representations under section 222 before embarking upon judicial review. Whatever the position might have been in relation to the claimant, she should have engaged with the section 222 procedure as a first resort, and her failure to do so clearly entitled the master to exercise his discretion in relation to her costs as he did (paras 95, 99–102, 104, 105, 106).
Conrad McDonnell (instructed by KPMG llp) for the claimant.
David Yates QC (instructed by the Solicitor, Revenue and Customs) for the revenue.