Doha, R (on the application of) v Inland Revenue

The Inland Revenue’s equitable liability policy permits relief from legally due tax only where the taxpayer has exhausted all other possible remedies and insisting on recovery would be unconscionable. A remedy is not exhausted merely because the taxpayer allowed the opportunity to pursue it to lapse. Judicial review remains a residual remedy. Where the relevant arguments have already been considered and rejected by the General Commissioners, and statutory remedies remain available or have not been used, refusal of equitable liability will not ordinarily be unconscionable. Evidence unavailable when the decision was made cannot invalidate that decision.

Dr Doha sought judicial review of the Inland Revenue’s refusal to exercise its equitable liability policy in relation to substantial tax assessments arising from his medical practice. The General Commissioners had rejected his explanations concerning money passing through his bank accounts and had found fraud, wilful default or neglect. He had not challenged two earlier decisions and had a case-stated appeal pending in relation to another. Moses J refused permission on 27 November 2001. On the renewed application, the central issues were whether the policy required exhaustion of remedies that had previously been available, and whether the Revenue’s refusal was unlawful or unconscionable in light of the evidence relied upon.

Application refused. Lord Justice Keene gave the judgment, with Mr Justice Sumner agreeing.

1. The equitable liability policy is confined to cases where the taxpayer has exhausted all other possible remedies and where insisting on recovery of the legally due tax would be unconscionable. Both conditions must be considered.
2. Exhaustion concerns remedies that were available and should have been pursued. A taxpayer cannot satisfy the condition by failing to use an available remedy and later arguing that the opportunity has expired. The statutory right to appeal on a point of law by case stated under Taxes Management Act 1970, section 56, was an available alternative remedy. Two of the relevant decisions had not been challenged, while a further case-stated appeal remained pending.
3. Judicial review is ordinarily residual. It is available when other remedies are no longer available, but it does not replace remedies which the applicant chose not to pursue.
4. The arguments concerning the bank evidence and the alleged ownership of approximately £500,000 had already been advanced before and rejected by the General Commissioners. In those circumstances, it was difficult to regard the Revenue’s insistence on collecting the assessed sums as unconscionable.
5. A witness statement produced after the challenged decision, and unavailable to the Revenue when it acted, could not vitiate that decision. The court declined to amend the judicial review challenge to address any later refusal to consider the statement.

There was no realistic prospect of a successful appeal, and the renewed application was refused.

• Court of Appeal (Civil Division): renewed application for permission to appeal refused; [2002] EWCA Civ 563.
• High Court of Justice, Administrative Court: Moses J refused permission to seek judicial review on 27 November 2001.