HMRC defeats accelerated payments legal challenge

Investors in the Ingenious Media tax avoidance schemes have lost their legal challenge against HMRC, over the legitimacy of the tax authority's ability to issue accelerated payment notices (APN).

Some 154 claimants contended that the issuing of the APNs was unreasonable, breached natural justice, and represented an abuse under the European Convention on Human Rights to a fair trial and protection of property.

Accelerated payment notices are a new power exercisable by HMRC, which allows the authority to demand any disputed tax upfront, before a trial or any sort of challenge can be mounted by the tax payer.

Investors in the Ingenious Media film schemes won the right to have a judicial review of APNs earlier this year, but the High Court has now dismissed their claims on all accounts.

Delivering judgment, Mrs Justice Simler said: 'These claims for judicial review fail and are dismissed.

'The PPNs [partner payment notice] were lawfully issued and the principles of natural justice have been adhered to by the statutory scheme and by HMRC, in exercise of the discretion conferred by FA 2014 [finance act].

'There has been no breach of the claimants' procedural or substantive legitimate expectations. The decision to give PPNs was neither unreasonable nor irrational. It represented a lawful exercise of the statutory discretion conferred by FA 2014.

She added: 'There has been no unlawful interference with the claimants' possessions by the giving of PPNs in this case. Article 6 of the Convention does not apply but in any event, the claimants have had access to an independent and impartial tribunal on judicial review'.

George Osborne recently stated in his emergency summer budget that HMRC will take an extra £7.2bn in tax as a result of a hard line regime on tax avoidance - this decision will embolden the treasury's claims.

David Richardson, HMRC's director of counter avoidance, commented: 'This is an important result, and good news for the vast majority of taxpayers who do not try to avoid paying their fair share of tax.

'Those who use tax avoidance schemes need to know they can no longer hold on to the money while their affairs are investigated. They have to pay their tax up front like everybody else.'

He added: 'We expect to complete the issue of around 64,000 notices tax by the end of 2016, bringing forward £5.5bn in payments for the exchequer by March 2020.'

Binyamin Ali is assistant editor of Private Client Adviser