Out-Law News | 01 Nov 2019 | 4:29 pm | 2 min. read
"This decision confirms the reluctance of the courts to allow tax claims to be brought anywhere but the tax tribunals, or by judicial review in the Administrative Court where appropriate, where in both cases tight time limits apply," said Steven Porter, a tax disputes expert at Pinsent Masons, the law firm behind Out-law.com.
Several hundred individuals who had participated in film schemes and other tax schemes claimed that there had been procedural errors in enquiries by HM Revenue & Customs (HMRC) into their claims for carry-back loss relief. Although other proceedings had decided that the relevant schemes failed to generate the intended losses, they claimed that HMRC's procedural errors meant that they were entitled to the tax relief claimed. The claims were brought in ordinary civil proceedings in the High Court and some claimants also sought to bring judicial review proceedings.
Partner, Head of Tax Disputes and Investigations
This decision confirms the reluctance of the courts to allow tax claims to be brought anywhere but the tax tribunals, or by judicial review in the Administrative Court where appropriate.
"It is well established that if Parliament has laid down a statutory appeal process against a decision of HMRC, a person aggrieved by the decision and wishing to challenge it must use the statutory process. It is an abuse of the court's process to seek to do so through proceedings in the High Court or the County Court," Lord Justice David Richards said, giving the judgment of the Court of Appeal.
Referring to a House of Lords decision in 2006 concerning Autologic Holdings he said that where HMRC had opened an enquiry, taxpayers were required to pursue appeals to the First-tier Tribunal (FTT) unless special circumstances existed. He said there were no special circumstances in this case and the fact that taxpayers were out of time to pursue FTT appeals did not justify a challenge by civil proceedings.
"Parliament has laid down an exclusive appeal process and time limits for invoking it. If those time limits have expired, and are not or cannot be extended, the clear legislative intention is that it is too late to make any challenge," the judge said.
He said that judicial review was the appropriate way for those who had participated in tax schemes through partnerships to challenge notices amending their tax returns, as the individual partners had no right to appeal against those notices. Time limits were a strong factor in favour of judicial review being the correct procedure, rather than ordinary civil claims, he said.
"Both appeals to the FTT and applications for permission to pursue judicial review are subject to short time limits. It makes no sense at all that an individual taxpayer or a partnership has a period of 30 days in which to appeal to the FTT against a closure notice, but an individual partner should have six years in which to make what is, in effect, the same challenge to a notice given under section 28B(4)," Lord Justice David Richards said.
The Court also said that the claims the taxpayers were seeking to bring in the High Court lacked any merit. It said that the question of whether HMRC should have opened enquiries under Schedule 1A of the Taxes Management Act 1970 (TMA), instead of section 9A TMA had been decided in HMRC's favour in the De Silva Supreme Court decision. It dismissed the taxpayers' arguments that the position was different after 2007 because of the rewritten provisions of the Income Tax Act 2007.
The Court of Appeal said that even if it was wrong in concluding that the High Court proceedings should be struck out as an abuse of the process of the court, they should in any event be struck out as unsustainable in law. On the same basis the Court of Appeal said it had effectively heard the judicial review application itself and dismissed it.
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