Vital Nut Co Ltd ("Vital Nut") & Anor, R (On the Application Of) v Revenue And Custom (Rev1)

An accelerated payment notice under the Finance Act 2014 requires more than a mechanical calculation of the claimed tax advantage. The designated officer must determine, to the best of the officer’s information and belief, that the claimed advantage is not accepted as lawfully available, so that the advantage is disputed.

That determination may be based on the Revenue’s published position and intended legal arguments. It is a question concerning the valid exercise of the statutory power, rather than its existence. The statutory requirements governing the notice must be complied with, but the consequence of non-compliance depends on parliamentary intention. Delays in resolving the underlying tax dispute did not make the notices unlawful, unfair or an abuse of power on the facts.

The claimants sought judicial review of accelerated payment notices requiring payment of sums corresponding to corporation tax relief claimed for employer-financed retirement benefits schemes. The notices were issued under Chapter 3 of Part 4 of the Finance Act 2014, on the basis that the arrangements were DOTAS arrangements and that the statutory conditions were met.

The claimants argued that the Revenue had not determined that the claimed relief was unavailable, that the notices infringed their property rights under Article 1 of Protocol No 1, and that the notices were unfair and unreasonable. The court considered the statutory construction issue, the effect of protective PAYE and national insurance assessments, and the relationship with the earlier decisions in R (Rowe) v HMRC and R (Walapu) v HMRC.

1. Ground 1 dismissed. The statutory conditions for issuing an accelerated payment notice under sections 219 and 220 of the Finance Act 2014 were satisfied. The notice requirement required the designated officer to determine, to the best of the officer’s information and belief, that the claimed tax advantage was not accepted as lawfully available. It was not enough simply to calculate the asserted advantage.
2. The determination was case-sensitive. It could arise from lack of information, the need for further investigation, or a dispute about statutory interpretation. The Revenue had made clear its view that the pre-2011 EFRBS arrangements did not produce the claimed corporation tax relief. The designated officer was entitled to act on that published position and the Revenue’s intention to argue the point.
3. A failure to make a determination, or to apply the correct test, concerned the validity of exercising the power under section 219, not the existence of the statutory power itself. The effect of any failure on the validity of a notice would depend on the statutory scheme, including the representations procedure under section 222. The court did not decide the alternative argument under R v Soneji.
4. The protective PAYE and national insurance assessments did not show that the Revenue accepted the corporation tax relief or had failed to form a view. They reflected the possibility of an alternative or limitation-based argument and were not inconsistent with the Revenue’s primary position.
5. Grounds 2 and 3 also failed. The court did not regard the earlier decisions in R (Rowe) v HMRC and R (Walapu) v HMRC as plainly wrong or distinguishable on the asserted basis. The Article 1 of Protocol No 1 issues were left for the Court of Appeal. The delay was significant but did not make the notices unfair, abusive or an abuse of power. The claims were dismissed.

First-instance judicial review claim. The judgment records that permission to appeal had been granted in R (Rowe) v HMRC [2015] EWHC 2293 and R (Walapu) v HMRC [2016] EWHC 658 (Admin), but no appeal from the present decision is stated.