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The Court of Appeal gives short shrift to taxpayers' application for judicial review regarding retrospective SDLT changes

Posted on 8 October 2015

The Court of Appeal gives short shrift to taxpayers' application for judicial review regarding retrospective SDLT changes

The recent Court of Appeal decision in APVCO 19 Limited (and others) v HMT and Commrs HMRC 2015 EWCA Civ 648 has dismissed the taxpayers' attempts to apply for judicial review of the actions of the Treasury and HMRC when they introduced retrospective legislation in Finance Act 2013 blocking a particularly aggressive form of Stamp Duty Land Tax (SDLT) planning.  In response to the repeated "abuses" of the SDLT regime (particularly with regard to "schemes" involving the claiming of so-called sub-sale relief) the Chancellor George Osborne specifically stated in the Budget in March 2013, that "he would not hesitate to move swiftly without notice and retrospectively if inappropriate ways around the new SDLT rules were found", a position which was confirmed in the 2013 Budget note.  The taxpayers' SDLT planning arrangement was notified (under the Disclosure of Tax Avoidance Scheme Rules) on 22 April 2013 (after the Budget) and so in June the Government announced (having taken legal advice from HMRC) that it would make retrospective amendments to the legislation to put it beyond doubt that a particular type of sub-sale scheme did not work.

This case involved an appeal from the High Court, where the taxpayers had unsuccessfully sought leave to apply for judicial review of the actions taken by the executive.  Specifically, it was argued that the retrospective legislation was in breach of the taxpayers' rights under the European Convention on Human Rights (ECHR) under Article 1, relating to the protection of property and Article 6, the right to a fair trial.  The taxpayers in particular relied heavily on the Government's "Tackling Tax Avoidance" Protocol from 2011, which stated that unscheduled announcements would only be appropriate in wholly exceptional circumstances.   Lord Justice Vos delivered the main judgement for the Court of Appeal.  He considered first that the ECHR was not in point at all, on the basis that no property of the taxpayers had been interfered with.  Second, Lord Justice Vos held that, even if the ECHR was in point, the legislative changes had been lawful, being neither unforeseeable (given the very public pronouncements) nor arbitrary, and were proportionate.

It is perhaps unsurprising that the Court of Appeal had little sympathy with the taxpayers' arguments in this case that their human rights had been breached by this retrospective legislation.  The Government at the time could not have been much clearer about what it would do if it came across aggressive SDLT avoidance. Taxpayers should be aware that retrospective legislation will be permitted by the courts where appropriate, particularly where the Government has issued a clear "keep of the grass" warning.

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