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Accelerated Payment Notices – High Court rejection of human rights argument and judicial review for taxpayers

Posted on 8 October 2015

Accelerated Payment Notices – High Court rejection of human rights argument and judicial review for taxpayers

Where taxpayers and HMRC dispute the tax due in respect of a particular transaction, HMRC may issue notices known as Accelerated Payment Notices (APNs) and Partner Accelerated Payment Notices (PPNs). These force the taxpayer to pay over the disputed tax before the dispute is heard by the Tax Tribunal.

Nigel Rowe and others v HMRC (31 July 2015) concerned a group of 154 taxpayers who had been involved in various so-called "film schemes". These schemes sought, often unsuccessfully, to benefit from tax relief which was historically available for investment in the UK film industry. The taxpayers received PPNs demanding the payment of disputed tax before their various disputes were heard in the Tax Tribunal.  They brought a claim for judicial review of HMRC's decision to issue the PPNs. They claimed that the notices, and the rules allowing the notices to be issued, were unfair, unlawful, irrational, in breach of the taxpayers' human rights and given in breach of the taxpayers' legitimate expectation that they would not need to pay any disputed tax unless and until their claim for tax relief had failed in the Tax Tribunal.

The High Court found that the PPN notices had been correctly issued by HMRC. They found that the obligation to pay disputed tax was not unfair, as this was a temporary imposition that would be reversed if the taxpayer were to win at trial, and that the taxpayers had no 'legitimate expectation' that they could hold back the disputed tax until the legal process was finished.

HMRC has lauded this decision as a significant victory in their fight against tax avoidance and estimate that around £14 billion of tax is currently being disputed in respect of marketed tax avoidance schemes like the film schemes. This success is likely to embolden HMRC to issue further APNs and PPNs where taxpayers have been involved in tax avoidance schemes. Where taxpayers may previously have had a cash-flow benefit when entering into schemes, at least until the dispute was heard, this is no longer the case.

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