HM Revenue & Customs v Ali

A freezing order may support the collection of a tax debt which has been assessed and is presently in existence, even though payment is deferred by statute. The debt need not be immediately enforceable if the claimant has a sufficient present interest and the underlying right is justiciable in England. The court’s statutory power to grant injunctive relief where just and convenient is not confined by rigid categories. The ordinary requirements for freezing relief remain applicable, including a real risk of dissipation, proportionality and full and frank disclosure. Dishonesty may support an inference of dissipation but is neither essential nor sufficient by itself. Delay is relevant to discretion but is not automatically fatal.

HMRC applied to continue a freezing order made without notice against Mr Ali. The underlying claim concerned income tax and capital gains tax, including liability imposed on an employee under regulation 72 of the PAYE regulations after the employer had failed to deduct tax.

Mr Ali argued that the order was invalid because HMRC had no existing cause of action before the statutory 30-day payment period had expired. HMRC relied on section 37 of the Senior Courts Act 1981 and contended that the assessed tax debt was already in existence, although payable in the future. The court also had to determine whether the evidence established a real risk of dissipation and what relief was proportionate.

1. Jurisdiction and sufficient interest. The court had jurisdiction in the strict sense under section 37 of the Senior Courts Act 1981. The freezing jurisdiction is ancillary to enforcement of a substantive right, which usually, but not invariably, takes the form of a cause of action. A statutory tax debt which is not contingent, has been assessed, and is payable shortly in the future may provide the necessary present interest.
2. Tax assessments. The assessment procedure under section 29 of the Taxes Management Act 1970 created a sui generis case. HMRC were properly regarded as creditors, and the statutory scheme gave them a sufficient immediate and present interest to support freezing relief before the tax became payable. The court approved the reasoning in Director of Asset Recovery Agency v McCormick that the concept of a sufficient cause of action under The Siskina could be satisfied in a tax case.
3. Freezing-order discretion. The assessment was conclusive unless and until successfully appealed. The decisive factual issue was whether there was a real risk of dissipation. Dishonesty was relevant but neither an essential element nor sufficient without other evidence. The evidence of dishonesty, non-disclosure and dealings with company funds justified a finding of real risk.
4. Proportionality and delay. Delay should be considered carefully because it may suggest that the risk is not genuine, but there is no hard and fast rule that delay is fatal. The order had to be proportionate. The court therefore continued it over United Kingdom real property and the substantial Barclays savings account, while permitting specified litigation expenditure and excluding ordinary business outgoings.
5. Foreign assets. The court raised, without finally deciding, whether the revenue rule prevented HMRC enforcing a tax judgment against property or bank accounts abroad. The foreign-asset aspect was continued only temporarily to allow HMRC to address that issue.