Walapu v HM Revenue & Customs

An accelerated payment notice may require payment before a taxpayer’s liability has been formally assessed. Fairness does not generally require a prior hearing where the statutory scheme provides a substantial period for representations after the notice, judicial review, and a route to compel an assessment and obtain statutory appeal rights.

The regime does not unlawfully frustrate legitimate expectations or operate retrospectively merely because the taxpayer entered the scheme, submitted the return, or received an automatic repayment before the legislation changed. A tax dispute is outside the civil limb of Article 6 ECHR; in any event, effective routes to judicial supervision and appeal remain. Requiring payment on account is a proportionate control of property use under A1P1.

For DOTAS purposes, arrangements are not substantially the same where a legal change, such as converting a partnership into a syndicate, may materially alter their tax effectiveness.

The claimant participated in a notified tax avoidance scheme and claimed loss relief. HMRC opened an enquiry but had not made a formal assessment when it issued an accelerated payment notice under Chapter 3 of the Finance Act 2014.

The claimant challenged the notice on grounds including procedural unfairness, legitimate expectation, retrospectivity, Article 6 ECHR, A1P1, and alleged lack of statutory power because the scheme was said to be substantially the same as an earlier scheme. The court considered the reasoning in Rowe v HM Revenue & Customs [2015] EWHC 2293 (Admin) and the Court of Appeal decision in R (De Silva) v HM Revenue & Customs [2016] EWCA Civ 40. The central questions were whether the notice could lawfully precede assessment and whether the later syndicate arrangements fell within the DOTAS regime.

The claim for judicial review was dismissed.

1. Procedural fairness. The statutory right under section 222 of the Finance Act 2014 permits representations within 90 days about the statutory conditions and the amount specified. HMRC must consider them and may confirm, amend or withdraw the notice. The notice and calculations provide the information needed to make effective representations. The statutory period balances fairness against delaying tactics. Further common law duties were unnecessary.
2. The underlying merits of the tax avoidance scheme need not be finally determined before an accelerated payment notice is issued. Public-law objections affecting the statutory conditions, rationality or computation may be raised, while the substantive tax dispute remains for assessment and appeal. Judicial review is available, and section 28A(4) of the Taxes Management Act 1970 enables the taxpayer to compel a closure notice or assessment, thereby engaging ordinary appeal rights.
3. No legitimate expectation arose from HMRC’s delay or the automatic repayment. There was no clear and unambiguous representation that the law would remain unchanged or that payment would only be sought after assessment. Even if an expectation existed, the large affected class, consultation, and legitimate policy of removing the liquidity advantage of tax avoidance made the change fair and lawful. The new payment rules were, at most, retrospective in a very limited sense.
4. Tax disputes fall outside the civil limb of Article 6 ECHR. Alternatively, the claimant retained effective access to judicial review, statutory assessment and appeal procedures, and had agreed to be bound by representative sample litigation.
5. The disputed money was not a protected possession because HMRC’s claim was at least seriously arguable. Alternatively, requiring temporary payment was a control of use of property pursuing a legitimate objective. The measure was rationally connected to that objective, supported by safeguards and representations, and struck a fair balance, including repayment with interest if the taxpayer ultimately succeeded.
6. The syndicate schemes were DOTAS arrangements. Section 308(5) of the Finance Act 2004 was a relieving provision and did not apply where the section 308(3) duty did not arise because the arrangement implemented an already-notified proposal. Alternatively, the syndicate schemes were not substantially the same as the partnership schemes. Their legal structure had been changed in a way intended to avoid legislation directed at partnerships and could materially alter their tax effectiveness.