Cartref Care Home Ltd & Ors, R. (On the Application Of) v The Commissioners for HMRC

Retrospective tax legislation is not incompatible with Article 1 of Protocol 1 merely because it changes the tax consequences of earlier arrangements. The decisive question is whether it strikes a fair balance between the public interest and the taxpayer’s rights. Tax measures receive a wide margin of appreciation, but the court must still examine lawfulness, legitimate aim, rational connection, less intrusive alternatives and the severity of the consequences. A declaration of incompatibility requires reliable evidence of the burden imposed. Parliamentary commentary and hypothetical examples may carry little or no evidential weight where their factual basis cannot be tested. Tax disputes, including accelerated-payment and follower-notice procedures, do not ordinarily concern civil rights for Article 6 purposes; in any event, representations and judicial review may provide sufficient procedural protection.

The claimants challenged HMRC correspondence concerning the 2019 Loan Charge and partnership follower notices. They alleged breaches of Article 1 of Protocol 1 and Article 6 of the Convention, and sought declarations and orders quashing the decisions.

The court treated the November 2018 Loan Charge letters as reviewable decisions because they conveyed a settled determination and warning, although formal assessments would follow. The partnership follower notices concerned a separate statutory regime and were not linked to the Loan Charge for judicial-review purposes. Permission was granted only to Cartref in relation to its Loan Charge challenge. The remaining claims failed at the permission stage, but the court considered the substantive arguments as if permission had been granted.

1. Reviewability and standing. The November 2018 letters were decisions sufficient to engage judicial review. Their language communicated that the Loan Charge would apply unless the recipients settled. The partnership follower notices were separate decisions, prompted by the distinct authority in Degorce v Revenue and Customs [2017] EWCA Civ 1427, and the claims concerning them were premature while representations remained outstanding.
2. The individual directors were not victims for purposes of section 7 of the Human Rights Act 1998. The companies were separate legal persons and any possible liability of the directors was contingent and secondary.
3. Possession. Under Kopecký v Slovakia (2005) 41 EHRR 43, a claim requires a sufficient basis in national law, more than mere arguability. The court considered the distinction between a fund and a contested claim in St Matthews (West) Ltd v R & C Comrs [2015] STC 2272 and Rowe v HMRC [2018] STC 462. DES had no possession because, by 2013, its arrangements were materially within the area of HMRC concern. Cartref’s 2010 position was different, and permission was granted to it. Partnership follower notices did not in principle interfere with possessions, consistent with R (oao Haworth) v HMRC [2018] EWHC 1271 (Admin).
4. Article 1 of Protocol 1. The Loan Charge pursued the legitimate aim of securing tax and countering contrived remuneration arrangements. Its retrospectivity required careful consideration, but retrospectivity was not prohibited per se. The statutory scheme was rationally connected to its aim, and the evidence did not establish hardship or consequences sufficient to overcome the State’s wide margin of appreciation. The APPG report was not admissible factual evidence and the House of Commons motion supplied opinion rather than the verified facts needed for the balancing exercise.
5. Article 6. Tax disputes, including accelerated-payment and follower-notice procedures, do not ordinarily involve civil rights and obligations. In any event, representations and judicial review supplied sufficient protection. The substantive challenges therefore failed and the claim was dismissed.