Glencore Energy UK Ltd, R (On the Application Of) v The Commissioners for HMRC

Judicial review is ordinarily a remedy of last resort. Where Parliament has provided a full statutory tax appeal, the court will normally require a taxpayer to use that procedure, even if the assessment process is said to involve an error of law. Judicial review remains available only in an exceptional case involving a serious abuse of power or a compelling need to vindicate the rule of law.

The statutory review and subsequent merits appeal under Part 3 of the Finance Act 2015 were a suitable alternative remedy. The review may address liability as well as quantum. A charging notice need state the factual basis on which the officer considers the statutory condition applies; the common law did not require fuller reasons in this statutory context.

HMRC issued Glencore Energy UK Ltd with a charging notice for diverted profits tax under Part 3 of the Finance Act 2015. The assessment concerned payments by the company to its Swiss parent under a risk and services agreement.

The company paid the assessed tax but sought judicial review instead of awaiting the mandatory HMRC review and its subsequent right of appeal to the First-tier Tribunal. It alleged that the designated officer had applied the wrong statutory test, failed to consider representations, failed to give adequate reasons, and acted irrationally in two aspects of the calculation.

Green J refused permission for judicial review on 26 June 2017. This court granted permission and determined the claim substantively. The central issue was whether the statutory review and appeal process was a suitable alternative remedy and, if not, whether the charging notice was unlawful.

1. The judicial review claim was dismissed. The statutory review under section 101 and the full merits appeal to the First-tier Tribunal under section 102 of the Finance Act 2015 were a suitable alternative remedy. Judicial review is ordinarily a remedy of last resort. In the tax context, Parliament's appeal procedure should normally be used unless there is an exceptional serious abuse of power or a compelling need for immediate intervention to uphold the rule of law. The obligation to pay tax before review and appeal did not make this an exceptional case.

2. The section 101 review reinforced that conclusion. It was intended to enable HMRC and the taxpayer to resolve complex issues using fuller information, and could result in no diverted profits tax being due. Section 101(3)(b) did not confine the review to quantum. The subsequent appeal was in any event unrestricted.

3. The designated officer applied the correct test for a charging notice. Although the notice also used the preliminary-notice phrase “reason to believe”, it expressly stated that the conditions in section 80(1) were considered to be met. That satisfied section 95(5)(b).

4. Section 95(5)(b) required the officer to state the factual basis on which she considered section 80 applied. It did not require full reasons for rejecting each representation. The statutory scheme, including the merits appeal, left no lacuna requiring a wider common-law duty to give reasons. In any event, under section 31(2A) of the Senior Courts Act 1981, fuller reasons would not have made the outcome substantially different.

5. Representations within section 94(3) were mandatory considerations. Other representations and information could rationally be considered under the general best-estimate duty in section 96(2). Neither challenged deduction was irrational on the material before the court.

• Court of Appeal (Civil Division): The court dismissed the judicial review claim, upholding Green J's conclusion that the statutory review and appeal process was a suitable alternative remedy: [2017] EWCA Civ 1716.
• High Court, Administrative Court: Green J refused permission to apply for judicial review on 26 June 2017, principally because a statutory review and First-tier Tribunal appeal were available.