Timothy Levy, R (on the application of) v The Commissioner for HMRC

Permission for judicial review may be refused where an adequate statutory appeal provides an effective route for resolving the substance of the dispute. That applied to challenges concerning loan-interest tax relief, where an appeal to the FTT was available.

Different considerations arise where the statutory appeal does not address the disputed issue. A taxpayer could therefore argue that judicial review remained available to challenge the lawfulness, reasonableness or fairness of HMRC’s non-application of an expenses deduction under Income Tax (Trading and Other Income) Act 2005, s.612(2). Permission was granted on that narrow issue only.

The claimant sought judicial review of notices issued by HMRC under s.28B(4)(a) of the Taxes Management Act 1970. The notices removed loan-interest tax relief and included partnership income used to pay loans.

HMRC subsequently issued appealable notices under s.28A concerning the loan-interest relief. The claimant was pursuing an FTT appeal. That statutory appeal did not address the alleged failure to allow an expenses deduction under s.612(2) of the Income Tax (Trading and Other Income) Act 2005.

The issue was whether permission should be granted for judicial review, in whole or in part, and particularly whether the s.612(2) issue was arguable and excluded by the statutory scheme.

1. Loan-interest relief. Permission was refused for all grounds relating to removal of loan-interest tax relief. The FTT appeal was an adequate alternative remedy for the substantive issues, including the argument concerning the purchase of a partnership share and the application of s.398(2)(a) of the Income Tax Act 2007. The proposed challenge was also academic in relation to the point that s.28A was the only permissible route, because HMRC had already issued appealable s.28A notices.
2. The judicial review court did not need to resolve the merits of arguments that would be ventilated in the FTT. Permission was not required merely to determine costs. Costs could be addressed using the mechanism identified in the M v Croydon line of authority.
3. Partnership income. The challenge to the inclusion of taxable partnership income used to pay the loan was unarguable in light of the Court of Appeal’s decision in Good v HMRC. The separate question concerning an expenses deduction under s.612(2) was different. The parallel FTT appeal did not determine it.
4. s.612(2) issue. At the modest permission threshold, it was arguable that judicial review could examine the lawfulness, reasonableness and fairness of HMRC’s non-application of the deduction. The statutory scheme did not conclusively exclude such a challenge. The judge was sceptical that enhanced fact-based scrutiny of the kind discussed in BlackRock HoldCo 5 LLC v HMRC would be appropriate, but HMRC had not shown that the claimant’s challenge to its reasoned conclusion was unarguable.
5. Permission was granted only to determine: (i) whether the judicial review court could consider the s.612(2) issue; and (ii) if so, whether HMRC’s application of s.612(2), as described in its letter of 6 August 2025, was unlawful, unreasonable or unfair. The grounds were to be amended accordingly. Questions of stay, transfer and directions were left for further submissions.

First-instance judicial review permission decision. No prior appellate decision in this claim was stated.