The Bampton Property Group Ltd & Ors v King (HM Revenue & Customs officer) & Ors

This was a judicial review of HM Revenue & Customs' refusal to allow late group (consortium) relief claims under Schedule 18, Finance Act 1998 (as amended). The claimants were subsidiaries within the Daejan group who sought admission of late claims for losses surrendered by other companies in the group for the years ended 31 March 2005 and 31 March 2006. The court considered four grounds: (1) insufficiency of reasons given for the refusal, (2) legitimate expectation based on HMRC correspondence and SP 5/01, (3) flawed decision‑making methodology including irrelevant considerations alleged to have infected the decision, and (4) irrationality.

• The court held that there is no general implied duty to give detailed reasons for an administrative refusal to admit a late claim under paragraph 74(2) Schedule 18 and that the defendant’s reliance on contemporaneous internal advice (Mr Jefferies' email) supplied adequate basis for the decision.
• There was no legitimate expectation that HMRC had bound itself to admit any future late claims: the letter relied upon was limited and expressly conditional, and SP 5/01 did not promise automatic acceptance of late claims.
• HMRC had not misapplied SP 5/01. The court accepted HMRC’s purposive reading that errors by advisers or other members of a group may properly be taken into account when assessing reasonableness under SP 5/01.
• The decision was not irrational; there was no evidence of deliberate withholding of information or bad faith by HMRC officers, and the officer’s assessment fell within a range of reasonable responses.

Background and parties: The claimants were seven wholly owned subsidiaries of Daejan Holdings plc. They sought admission of late consortium (group) relief claims in relation to losses realised by third parties (Arch (2004) Ltd and two Crowe companies) acquired within the group. HMRC (through an officer, Mr King) refused to admit late claims under paragraph 74(2) Schedule 18, Finance Act 1998. The claimants applied for judicial review.

Nature of the application: The claimants sought relief quashing HMRC’s decision refusing admission of late group relief claims for the accounting periods ended 31 March 2005 and 31 March 2006. They advanced four grounds: (1) inadequate reasons, (2) legitimate expectation, (3) unlawful decision‑making methodology (including reliance on irrelevant considerations such as a general view that the arrangement was tax avoidance), and (4) irrationality.

Procedural posture: The matter was heard in the Administrative Court before Mr Justice Blair. HMRC had conducted enquiries, issued closure notices and, after internal technical consideration (including a technical submission and internal advice from Mr Jefferies), refused the late claims by letter dated 28 April 2010. The claimants commenced judicial review proceedings and the parties adduced witness evidence; HMRC was permitted to file further witness statements to meet assertions of bad faith.

Key factual matrix: The Daejan group, advised by accountants, claimed consortium relief in 2005 and 2006. Errors in apportionment and computation (linked to differing accounting year ends and the identity of the absorbing entity within the group) meant Daejan Holdings plc had claimed more relief than it could absorb, leaving potential claims by other group members to be made late. HMRC opened enquiries, requested consents and ultimately issued closure notices which, combined with statutory rules, meant the subsidiary claimants’ time limits ran out. KPMG later submitted corrected computations and formal late claims; HMRC considered those under SP 5/01 and refused.

Issues framed by the court:

• Whether the decision letter contained legally sufficient reasons.
• Whether the claimants had a legitimate expectation, derived from HMRC correspondence and SP 5/01, that late claims would be admitted or at least considered on the merits.
• Whether HMRC misapplied or irrationally applied SP 5/01 or took irrelevant considerations into account (notably the characterisation of the arrangements as tax avoidance).
• Whether the decision to refuse late claims was irrational or infected by bad faith.

Court’s reasoning and findings: The court reviewed the statutory time limits in paragraph 74 Schedule 18 and the discretionary power in paragraph 74(2) (as amended). It set out SP 5/01 criteria governing admission of late claims and examined the contemporaneous materials and witness evidence showing the decision‑making process at HMRC. The court accepted HMRC’s evidence that the relevant apportionment errors were discovered in mid‑2008 (for the 2006 claim) and in October 2008 (for the 2005 claim) and rejected the suggestion that HMRC had knowingly delayed notifying the group to produce a tactical advantage. On the reasons point the court held there was no implied duty to give a detailed statement of reasons in such a discretionary context and that the internal advice relied upon (supplied to the claimants before proceedings) provided the effective reasons. On legitimate expectation the court found no clear, unambiguous promise that late claims would be admitted: the relevant correspondence was conditional and limited. On methodology the court found HMRC’s reading of SP 5/01 to be permissible and that taking account of the fact that losses had been acquired as part of a tax planning arrangement was not an irrelevant consideration (and paragraph 12 of SP 5/01 expressly contemplates avoidance as relevant). Finally, the court rejected the allegation of irrationality and bad faith, admitting limited further evidence to address those accusations but finding no basis to set the decision aside.

Result: The application for judicial review was dismissed; HMRC’s refusal to admit the late claims was held to be lawful.

The claim is dismissed. The court held that HMRC lawfully exercised its discretion under paragraph 74(2) Schedule 18 Finance Act 1998 by refusing to admit the late consortium relief claims. The decision letter, read with contemporaneous internal advice, provided an adequate basis for the refusal; there was no clear legitimate expectation that late claims would be admitted; HMRC did not misapply SP 5/01 or take irrelevant considerations that vitiated its decision; nor was the refusal irrational or tainted by bad faith.