Qubic Tax Limited, R (on the application of) v The Commissioners for HMRC

Permission to seek judicial review should be granted where a challenge to accelerated payment notices is properly arguable. This includes an arguable issue whether the asserted tax advantage resulted from the arrangements, as required by Condition B, and whether the arrangements were notifiable arrangements satisfying Condition C. Earlier notification of similar arrangements is not necessarily decisive of their later status. An irrationality challenge may remain suitable for judicial review where the decision-maker’s conclusion depends on disputed facts, the statutory basis for the tax charge is uncertain, and an alternative appeal would not address exposure to penalties arising from the notices.

Qubic Tax Limited sought permission to challenge accelerated payment notices issued by HMRC under Chapter 3 of Part IV of the Finance Act 2014, concerning PAYE and national insurance contributions arising from employee benefit trust arrangements. Three grounds remained: failure to satisfy Condition B, failure to satisfy Condition C, and irrationality in treating a £900,000 contribution as chargeable in the relevant tax year. HMRC argued that the grounds were unarguable or suitable for determination in an appeal to the First-tier Tribunal.

The issue was whether each ground crossed the permission threshold.

1. Permission granted. Permission to apply for judicial review was granted on Grounds 6, 7 and 10. The court expressed no concluded view on the merits.
2. Condition B. Under section 219(3) of the Finance Act 2014, it was arguable that, although the corporation tax deduction resulted from the arrangements, the asserted non-liability to income tax and national insurance contributions did not result from them. It was arguable that the non-liability was instead the reason for, or cause of, entering into the arrangements. The timing of the £900,000 contribution raised a closely connected arguable issue.
3. Condition C. It was arguable that the arrangements were notifiable only where the statutory concepts of promoter and client were satisfied. The claimant’s use of arrangements in-house might mean that it was not acting as a promoter when implementing them. It was also arguable that notification might be required on each occasion when a standardised tax product was implemented. Earlier notification in 2008 did not definitively establish that the later arrangements were notifiable under section 306(1) of the Finance Act 2004, applying the approach in R (Carlton) v HMRC [2018] EWHC 130 (Admin).
4. Irrationality. It was arguable that, applying HMRC’s stated rule or policy and the facts then known, the designated officer could not rationally conclude that the contribution was chargeable to PAYE and national insurance in the year ending 5 April 2009. The issue might require cross-examination and was therefore unsuitable for final determination on the judicial review papers.
5. An appeal to the First-tier Tribunal was arguably not an adequate alternative remedy for the irrationality challenge, because it would not resolve the potential liability for penalties for non-payment of the accelerated payment notices.
6. The court would hear further submissions on the order and directions, including possible limited disclosure and cross-examination.