APVCO 19 Ltd & Ors, R (on the application of) v HM Treasury & Anor

An arguable claim that a tax-avoidance scheme removes liability, or money retained to meet a disputed tax demand, is not necessarily a possession protected by A1P1. Where the scheme’s effectiveness has not been established, legislation clarifying the tax liability does not establish a deprivation.

Retrospective tax legislation is not inherently unlawful. Clear warnings, a principled response to serial abuse and the public interest may satisfy the requirements of foreseeability, the rule of law and proportionality even where other loopholes remain open. An extra-statutory government protocol may evidence governmental intent but cannot bind Parliament. Tax disputes fall outside article 6’s autonomous concept of civil rights and obligations.

The appellants had entered into SDLT avoidance schemes involving options and agreements for the future grant of options. Amendments to section 45 of the Finance Act 2003, made retrospectively by section 194 of the Finance Act 2013, were intended to prevent the schemes from avoiding SDLT.

Mrs Justice Andrews refused permission to cross-examine the respondents’ witnesses and refused permission to bring judicial review proceedings against HM Treasury and HMRC. Gloster LJ later granted permission to appeal. The appeals concerned whether cross-examination was required and whether the retrospective legislation infringed A1P1 or article 6 of the ECHR.

1. Disposition. The Court of Appeal unanimously dismissed both appeals and dismissed the application for judicial review. The refusal of permission to cross-examine was a proper case-management decision.
2. Cross-examination. Cross-examination in judicial review is exceptional, and is even more exceptional in the Court of Appeal. It was unnecessary where the written evidence was sufficient, the central issues were legal, and the proposed questioning concerned additional context or other schemes rather than facts necessary to determine the claim fairly.
3. A1P1. The appellants’ argument that their option arrangements avoided SDLT was not a possession. Under Kopecky v Slovakia (2005) 41 EHRR 43 and R (on the application of Huitson) v Revenue and Customs Commissioners [2011] STC 1860, a protected claim must be sufficiently established to generate a legitimate expectation; an arguable claim or genuine dispute is insufficient. Vos LJ considered that money retained by the appellants was subject to an unresolved arguable claim by HMRC. Floyd LJ alternatively held that deprivation had not been established because the appellants had not shown that the scheme would have avoided SDLT. Lady Justice Black agreed that the two analyses were compatible. A1P1 was therefore not engaged.
4. Lawfulness and proportionality. If A1P1 had been engaged, the legislation was lawful and proportionate. Lawfulness and fair balance were distinct, though overlapping, inquiries. The legislation had a domestic legal basis and was accessible, foreseeable and non-arbitrary. The Government’s warnings about SDLT avoidance and retrospective action supplied a principled basis for targeting these schemes, notwithstanding other unclosed loopholes. The Protocol on tackling tax avoidance was an extra-statutory statement of governmental intent and could not fetter Parliament. The public interest in preventing repeated abusive schemes outweighed the appellants’ interests, within the wide margin allowed in fiscal matters.
5. Article 6. Following Ferrazzini v Italy [2001] STC 1314, tax disputes fall outside the autonomous concept of civil rights and obligations, despite their financial consequences. Article 6 was not engaged. Vos LJ added that, if it had been engaged, the retrospective legislation would have satisfied the higher compelling-public-interest test.

• Court of Appeal (Civil Division): Permission was granted by Gloster LJ on 2 September 2014. The court dismissed both appeals and dismissed the judicial review application: [2015] EWCA Civ 648.
• High Court of Justice, Queen’s Bench Division: Mrs Justice Andrews refused permission to cross-examine the respondents’ witnesses and refused permission to bring judicial review proceedings.