Sword Services Ltd Ors, R (on the application of) v HM Revenue & Customs

At the permission stage, a notice of enquiry under section 12 AC of the Taxes Management Act 1970 need not adopt formal wording. A letter clearly informing the recipient that HMRC intends to enquire into the relevant partnership tax return may suffice, even if it also refers to the recipient’s company tax return. The issue remains arguable where notice was not sent to the partner who made and delivered the return. Whether Schedule 32 to the Finance Act 2014 applies to limited liability partnerships was also arguable.

The claimants sought permission to bring judicial review proceedings concerning Partner Payment Notices issued by HMRC under Schedule 32 to the Finance Act 2014. They challenged the validity of the underlying partnership-return enquiries and argued that a limited liability partnership was outside the meaning of partnership in Schedule 32. They also advanced general public law and Human Rights Act arguments, affected by the pending appeal in R (on the application of Rowe, Worrall and Others) v HMRC [2015] EWHC 2293 (Admin). The court had to decide which grounds were arguable and whether agreed interim relief should continue.

1. Permission and stay. Consideration of the general public law and Human Rights Act grounds was adjourned until the Court of Appeal determined the appeal in R (on the application of Rowe, Worrall and Others) v HMRC [2015] EWHC 2293 (Admin).
2. Category 1 notice cases. The courtesy letters clearly informed recipients that HMRC intended to enquire into the partnership tax returns. The additional reference to company tax returns did not alter that meaning. The challenge was not arguable. The court also relied on Flaxmode Ltd v The Commissioners for Her Majesty’s Revenue and Customs [2008] STC (SCD) 666, which held that section 12 AC did not require particular formality.
3. Category 2 notice cases. Where notice was not sent to the partner who made and delivered the return, the argument that no valid enquiry was opened was arguable. HMRC’s proposed purposive construction could not be resolved at the permission stage. The court also declined to decide whether section 114 of the Taxes Management Act 1970 cured the alleged misidentification, expressing scepticism that it extended beyond minor errors.
4. LLP point. It was arguable that “partnership” in Schedule 32 included limited liability partnerships for tax purposes, having regard to section 1273 of the Corporation Tax Act 2009.
5. Interim relief. Existing relief was maintained because arguable grounds remained and related appellate proceedings were pending. Permission was granted for the category 2 technical arguments and the LLP point. The Rowe-type grounds were adjourned.

This was a renewed permission application following refusal on paper by a Deputy High Court Judge on 3 November 2015. The judgment does not record a substantive appeal from that refusal.