Sensor Solutions Limited, R (on the application of) v The Commissioners for HMRC

For the Disguised Remuneration Repayment Scheme, “reasonable disclosure” is exhaustively defined by section 20 of the Finance Act 2020. The relevant information must appear in the statutory tax returns. HMRC and the courts cannot enlarge that definition on grounds of procedural fairness.

The taxpayer must identify a specific qualifying loan or quasi-loan, including the relevant amount and date. HMRC is not required to join speculative or incomplete information across other documents. Unpublished guidance is unlawful only if it materially departs from published criteria and is applied without a fair opportunity to make representations. Relief must also be refused where it is highly likely that the outcome would have been substantially the same.

Sensor Solutions Ltd sought judicial review of HMRC’s decision dated 13 January 2023 refusing repayment under the Disguised Remuneration Repayment Scheme. The claim concerned tax years 2012 to 2014, although the claimant ultimately limited it to the 2012 year.

The claimant argued that HMRC should have considered DOTAS AAG forms and related enquiry material when deciding whether its tax returns contained reasonable disclosure of loans or quasi-loans. It also alleged unfair reliance on unpublished internal guidance and breach of HMRC’s duty of candour. Permission to amend the claim was sought shortly before the hearing.

The central issues were whether the statutory definition permitted consideration of material outside the tax returns, whether reasonable disclosure was established on the available material, and whether any procedural error could affect the outcome.

1. Disposition. Permission to amend was refused because the proposed grounds had no real prospect of success. Judicial review was refused and the claim was dismissed.
2. Sections 20(5) and 20(8) of the Finance Act 2020 establish an exhaustive scheme. “Reasonable disclosure” must be found in one or more statutory tax returns. Fairness regulates the procedure by which a public body makes its decision; it does not authorise the court or HMRC to alter the substantive statutory definition. HMRC was therefore not required, or permitted, to rely on DOTAS AAG forms or enquiry documents outside the statutory tax returns.
3. Even assuming the AAG material could be considered, it did not establish reasonable disclosure. The statutory requirements include identification of the specific qualifying loan or quasi-loan, the amount and date, the recipient, the connected arrangements, and information sufficient to show that a reasonable case could be made that tax was payable. The documents described an EFRBS and related transactions, but required speculative inferences and did not clearly identify the relevant quasi-loans.
4. The unpublished guidance did not materially depart from the published criteria. At most, it indicated that substance rather than precise labelling mattered and that obvious inferences could be drawn. The guidance relied on concerned section 17 rather than section 20, and there was no sufficient evidence that it had been applied as a different policy. In any event, the claimant knew the statutory criteria and had made full submissions on them.
5. Under section 31(2A) of the Senior Courts Act 1981, relief had to be refused because it was not merely highly likely but inevitable that the same decision would have been reached. The alleged failure to consider additional documents could not have altered the statutory result.
6. There was no material breach of HMRC’s duty of candour. Even if a later failure to explain searches had occurred, it could not have tainted the earlier administrative decision.

Administrative Court: Permission to amend refused; judicial review refused and claim dismissed.