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T12 - Accelerated payment notices

Partner payment notices

 

"Schedule 32 makes provision for accelerated partner payments and modifies this Chapter in relation to partnerships." (FA 2014, s.228)

Partner payment notices

Basic conditions for issue

 

"(1)     HMRC may give a notice (an “accelerated payment notice”) to a person (“P”) if Conditions A to C are met." (FA 2014, s.219(1))

 

Condition A: Tax enquiry or appeal in progress

"(2)     Condition A is that—

(a)     a tax enquiry is in progress into a return or claim made by P in relation to a relevant tax, or

(b)     P has made a tax appeal (by notifying HMRC or otherwise) in relation to a relevant tax but that appeal has not yet been—

(i)     determined by the tribunal or court to which it is addressed, or

(ii)     abandoned or otherwise disposed of." (FA 2014, s.219(2))

 

Tax enquiry

“tax enquiry” has the meaning given by section 202(2)" (FA 2014, s.229)

"(2)     “Tax enquiry” means—

(a)     an enquiry under section 9A or 12AC of TMA 1970 (enquiries into self-assessment returns for income tax and capital gains tax), including an enquiry by virtue of notice being deemed to be given under section 9A of that Act by virtue of section 12AC(6) of that Act,

(b)     an enquiry under paragraph 5 of Schedule 1A to that Act (enquiry into claims made otherwise than by being included in a return),

(c)     an enquiry under paragraph 24 of Schedule 18 to FA 1998 (enquiry into company tax return for corporation tax etc), including an enquiry by virtue of notice being deemed to be given under that paragraph by virtue of section 12AC(6) of TMA 1970,

(d)     an enquiry under paragraph 12 of Schedule 10 to FA 2003 (enquiries into SDLT returns),

(e)     an enquiry under paragraph 8 of Schedule 33 to FA 2013 (enquiries into annual tax for enveloped dwellings returns), or

(f)     a deemed enquiry under subsection (6)." (FA 2014, s.202(2))

Deemed enquiry

"(6)     An enquiry is deemed to be in progress, in relation to a return to which subsection (5) applies, during the period which—

(a)     begins with the time the account is delivered or (as the case may be) the statement, declaration, information or document is produced, and

(b)     ends when the person is issued with a certificate of discharge under section 239 of that Act, or is discharged by virtue of section 256(1)(b) of that Act, in respect of the return (at which point the enquiry is to be treated as completed)." (FA 2014, s.202(6))

Tax appeal

"In this Part “tax appeal” means—

(a)     an appeal under section 31 of TMA 1970 (income tax: appeals against amendments of self-assessment, amendments made by closure notices under section 28A or 28B of that Act, etc), including an appeal under that section by virtue of regulations under Part 11 of ITEPA 2003 (PAYE),

(b)     an appeal under paragraph 9 of Schedule 1A to TMA 1970 (income tax: appeals against amendments made by closure notices under paragraph 7(2) of that Schedule, etc),

(c)     an appeal under section 705 of ITA 2007 (income tax: appeals against counteraction notices),

(d)     an appeal under paragraph 34(3) or 48 of Schedule 18 to FA 1998 (corporation tax: appeals against amendment of a company's return made by closure notice, assessments other than self-assessments, etc),

(e)     an appeal under section 750 of CTA 2010 (corporation tax: appeals against counteraction notices),

[(ea)     an appeal under section 114 of FA 2016 (apprenticeship levy: appeal against an assessment),]1

(f)     an appeal under section 222 of IHTA 1984 (appeals against HMRC determinations) other than an appeal made by a person against a determination in respect of a transfer of value at a time when a tax enquiry is in progress in respect of a return made by that person in respect of that transfer,

(g)     an appeal under paragraph 35 of Schedule 10 to FA 2003 (stamp duty land tax: appeals against amendment of self-assessment, discovery assessments, etc),

(h)     an appeal under paragraph 35 of Schedule 33 to FA 2013 (annual tax on enveloped dwellings: appeals against amendment of self-assessment, discovery assessments, etc), or

(i)     an appeal against any determination of—

(i)     an appeal within paragraphs (a) to (h), or

(ii)     an appeal within this paragraph." (FA 2014, s.203)

Relevant tax

"In this Part, “relevant tax” means—

(a)     income tax,

(b)     capital gains tax,

(c)     corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax,

(ca)     apprenticeship levy,

(d)     inheritance tax,

(e)     stamp duty land tax, and

(f)     annual tax on enveloped dwellings." (FA 2014, s.200)

Condition B: Return, claim or appeal made on the basis of a tax advantage

"(3)     Condition B is that the return or claim or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular arrangements (“the chosen arrangements”)." (FA 2014, s.219(3))

 

Arrangements

"“arrangements” has the meaning given by section 201(4)" (FA 2014, s.229)

"(4)     “Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable)." (FA 2014, s.201(4))

Tax advantage

"“tax advantage” has the meaning given by section 201(2)" (s.229)

"(2)     “Tax advantage” includes—

(a)     relief or increased relief from tax,

(b)     repayment or increased repayment of tax,

(c)     avoidance or reduction of a charge to tax or an assessment to tax,

(d)     avoidance of a possible assessment to tax,

(e)     deferral of a payment of tax or advancement of a repayment of tax, and

(f)     avoidance of an obligation to deduct or account for tax." (s.201(2))

Condition C: follower notice, DOTAS, GAAR etc. 

"(4)     Condition C is that one or more of the following requirements are met—

(a)     HMRC has given (or, at the same time as giving the accelerated payment notice, gives) P a follower notice under Chapter 2—

(i)     in relation to the same return or claim or, as the case may be, appeal, and

(ii)     by reason of the same tax advantage and the chosen arrangements;

(b)     the chosen arrangements are DOTAS arrangements;

(c)     a GAAR counteraction notice has been given in relation to the asserted advantage or part of it and the chosen arrangements (or is so given at the same time as the accelerated payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the matter under paragraph 10 of Schedule 43 to FA 2013 was as set out in paragraph 11(3)(b) of that Schedule (entering into tax arrangements not reasonable course of action etc).

(d)     a notice has been given under paragraph 8(2) or 9(2) of Schedule 43A to FA 2013 (notice of final decision after considering Panel's opinion about referred or counteracted arrangements) in relation to the asserted advantage or part of it and the chosen arrangements (or is so given at the same time as the accelerated payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel about the other arrangements (see subsection (8)) was as set out in paragraph 11(3)(b) of Schedule 43 to FA 2013;

(e)     a notice under paragraph 8(2) of Schedule 43B to FA 2013 (GAAR: generic referral of tax arrangements) has been given in relation to the asserted advantage or part of it and the chosen arrangements (or is so given at the same time as the accelerated payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the generic referral in respect of those arrangements under paragraph 6 of Schedule 43B to FA 2013 was as set out in paragraph 6(4)(b) of that Schedule." (FA 2014, s.219(4))

DOTAS arrangements

"(5)     “DOTAS arrangements” means—

(a)     arrangements to which HMRC has allocated a reference number under section 311 of FA 2004,

(b)     arrangements implementing a proposal where HMRC has allocated a reference number under that section to the proposed  arrangements, or

(c)     arrangements in respect of which a person must provide prescribed information under section 312(2) or 312ZA(2) of that Act by reason of the arrangements being substantially the same as arrangements within paragraph (a) or (b).

(6)     But the arrangements within subsection (5) do not include arrangements in relation to which HMRC has given notice under section 312(6) or 312ZA(4) of FA 2004 (notice that persons not under duty imposed to notify client of reference number)." (FA 2014, s.219(5) - (6))

GAAR counteraction notice

"(7)     “GAAR counteraction notice” means a notice under paragraph 12 of Schedule 43 to FA 2013 (notice of final decision to counteract under the general anti-abuse rule)." (FA 2014, s.219(7))

Other arrangements

"(8)     In subsection (4)(d) “other arrangements” means—

(a)     in relation to a notice under paragraph 8(2) of Schedule 43A to FA 2013, the referred arrangements (as defined in that paragraph);

(b)     in relation to a notice under paragraph 9(2) of that Schedule, the counteracted arrangements (as defined in paragraph 2 of that Schedule)." (FA 2014, s.219(8))

Basic conditions for issue

HMRC process for issuing

 

"[28] In Walapu v HMRC [2016] EWHC 658 (Admin) at [47] another case involving a challenge to APNs issued by HMRC, Green J helpfully summarised (on the basis of the evidence filed by HMRC in that case, which I understand is not disputed in this case) the process by which HMRC determines to issue an APN as follows:
i) Stage 1: HMRC publishes upon its website a list of DOTAS schemes on which advanced payments might be charged. HMRC excludes from that list schemes which are accepted to be effective, and obsolete schemes with no users. The first list was published on 15th July 2014 and has been updated subsequently on 30th October 2014 and on 30th January 2015.
ii) Stage 2: The officer responsible for overseeing the investigation of a particular scheme completes the internal "survey". The survey requires answers to questions designed to enable HMRC to rank the scheme according to its suitability for the earlier issue of APNs…
iii) Stage 3: Schemes are then ranked into a preliminary order and placed into categories according to the range within which their score falls. Thereafter, schemes are prioritised within categories by reference to the answers to particular survey questions.
iv) Stage 4: Each identified scheme is then subject to a more detailed review the purpose of which is to identify any reasons why notices should not be issued to users including whether the particular circumstance of any user are such that, exceptionally, no APN should be issued. In the present case no circumstances were identified in relation to the Claimant. Copies of the Detailed Review Template ("DRT") used for this exercise were before the Court.
v) Stage 5: Following the completion of the detailed review each scheme is considered by the Workflow Governance Group. The minutes of the meetings of this Group relevant to the schemes in issue were also before the Court. The Group exercises, from the perspective of a wide range of expert disciplines, supervision of the information collection process ensuring good governance.
vi) Stage 6: The Designated Officer thereafter determines the amount of the understated tax to the best of his/her information and belief. The officer reviews a "Designated Officer Authorisation form" and computations provided by the official responsible for issuing the APN. If satisfied the official countersigns the Designated Officer Authorisation form. The relevant forms relating to the Claimant were once again before the Court. These set out the understated tax. The document has attached to it a "Calculation Summary". This provides the details of the computation. The Claimant was provided with tax calculations relating to all relevant tax years when he was issued with the APN." (Rowe v. HMRC [2017] EWCA Civ 2105, §28)

Content of notice: enquiry in progress

 

"(1)     This section applies where an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while a tax enquiry is in progress).

(2)     The notice must—

(a)     specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given,

(b)     specify the payment (if any) required to be made under section 223 and the requirements of that section, 

(c)     explain the effect of sections 222 and 226, and of the amendments made by sections 224 and 225 (so far as relating to the relevant tax in relation to which the accelerated payment notice is given), and

(d)     if the denied advantage consists of or includes an asserted surrenderable amount, specify that amount and any action which is required to be taken in respect of it under section 225A." (FA 2014, s.220(1) - (2))

 

Notice given for more than one reason

"(6)     If a notice is given by reason of two or all of the requirements in section 219(4) being met, any payment specified under subsection (2)(b) or amount specified under subsection (2)(d) is to be determined as if the notice were given by virtue of such one of them as is stated in the notice as being used for this purpose." (FA 2014, s.220(6))

Payment required to be made under s.223

 

"(3)     The payment required to be made under section 223 is an amount equal to the amount which a designated HMRC officer determines, to the best of that officer's information and belief, as the understated tax (and disregarding any dispute which has been referred to a tribunal under section 12ABZB(3) of TMA 1970 but not yet determined)." 

(FA 2014, s.220(3))

Designated officer

“designated HMRC officer” means an officer of Revenue and Customs who has been designated by the Commissioners for the purposes of this Part" (FA 2014, s.229)

Understated tax

 

"(4)     “The understated tax” means the additional amount that would be due and payable in respect of tax if—

(a)     in the case of a notice given by virtue of section 219(4)(a) (cases where a follower notice is given)—

(i)     it were assumed that the explanation given in the follower notice in question under section 206(b) is correct, and

(ii)     the necessary corrective action were taken under section 208 in respect of what the designated HMRC officer determines, to the best of that officer's information and belief, as the denied advantage;

(b)     in the case of a notice given by virtue of section 219(4)(b) (cases where the DOTAS requirements are met), such adjustments were made as are required to counteract what the designated HMRC officer determines, to the best of that officer's information and belief, as the denied advantage;

(c)     in the case of a notice given by virtue of section 219(4)(c), (d) or (e) (cases involving counteraction under the general anti-abuse rule), such of the adjustments set out in the GAAR counteraction notice as have effect to counteract the denied advantage were made." (FA 2014, s.220(4))

 

Asserted surrenderable amount

"(4A)     “Asserted surrenderable amount” means so much of a surrenderable loss as a designated HMRC officer determines, to the best of that officer's information and belief, to be an amount—

(a)     which would not be a surrenderable loss of P if the position were as stated in paragraphs (a), (b) or (c) of subsection (4), and

(b)     which is not the subject of a claim by P for relief from corporation tax reflected in the understated tax amount (and hence in the payment required to be made under section 223).

(4B)     “Surrenderable loss” means a loss or other amount within section 99(1) of CTA 2010 (or part of such a loss or other amount)." (FA 2014, s.220(4A) - (4B))

 

Denied advantage

(5)     “The denied advantage”—

(a)     in the case of a notice given by virtue of section 219(4)(a), has the meaning given by section 208(3),

(b)     in the case of a notice given by virtue of section 219(4)(b), means so much of the asserted advantage as is not a tax advantage which results from the chosen arrangements or otherwise, and

(c)     in the case of a notice given by virtue of section 219(4)(c), (d) or (e), means so much of the asserted advantage as would be counteracted by making the adjustments set out in the GAAR counteraction notice." (FA 2014, s.220(5))

 

GAAR counteraction notice

 

"(7)     “The GAAR counteraction notice” means the notice [under—

(a)     paragraph 12 of Schedule 43 to FA 2013,

(b)     paragraph 8 or 9 of Schedule 43A to that Act, or

(c)     paragraph 8 of Schedule 43B to that Act,

as the case may be." (FA 2014, s.220(7))

Content of notice: enquiry in progress

Contents of notice: pending appeal

 

"(1)     This section applies where an accelerated payment notice is given by virtue of section 219(2)(b) (notice given pending an appeal).

(2)     The notice must—

(a)     specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given,

(b)     specify the disputed tax (if any)

(c)     explain the effect of section 222 and of the amendments made by sections 224 and 225 so far as relating to the relevant tax in relation to which the accelerated payment notice is given, and

(d)     if the denied advantage consists of or includes an asserted surrenderable amount (within the meaning of section 220(4A)), specify that amount and any action which is required to be taken in respect of it under section 225A." (FA 2014, s.221(1) - (2))

 

Notice given for two reasons

"(5)     If a notice is given by reason of two or all of the requirements in section 219(4) being met, the denied advantage is to be determined as if the notice were given by virtue of such one of them as is stated in the notice as being used for this purpose." (FA 2014, s.221(5))

Disputed tax

"(3)     “The disputed tax” means so much of the amount of the charge to tax arising in consequence of—

(a)     the amendment or assessment to tax appealed against, or

(b)     where the appeal is against a conclusion stated by a closure notice, that conclusion,

as a designated HMRC officer determines, to the best of the officer's information and belief, as the amount required to ensure the counteraction of what that officer so determines as the denied advantage [(and disregarding any dispute which has been referred to a tribunal under section 12ABZB(3) of TMA 1970 but not yet determined)." (FA 2014, s.221(5))

 

Denied advantage

"(4)     “The denied advantage” has the same meaning as in section 220(5)." (FA 2014, s.221(5))

Assessment includes IHT determination

"(6)     In this section a reference to an assessment to tax, in relation to inheritance tax, is to a determination." (FA 2014, s.221(5))

Contents of notice: pending appeal

Disputed tax

 

Designated officer must positively be satisfied that the scheme is not effective

"[62] In my judgment, the test propounded by Charles J is more generous to HMRC than the statutory language permits. As I see it, the statutory language requires the designated officer to be positively satisfied on the information that he then has that the scheme is not effective. This is because FA 2014 s 221(3) requires the designated officer positively to determine, to the best of his information and belief, "the denied advantage". Otherwise he cannot compute the amount of the adjustments needed to counteract that advantage. The definition of "tax advantage" in FA 2014 s 220(5) applies (s 221(4)). This defines "the denied advantage" as "so much of the asserted advantage as is not a tax advantage which results from the chosen advantages or otherwise" (my underlining). None of this language suggests that it is enough that the officer is simply not satisfied that the scheme is effective and that the taxpayer has to prove the contrary.

...

[67] As I see it, Parliament has taken the view that the new powers to exact accelerated payments should only be available if the designated officer forms the view that the tax scheme does not work having diligently weighed up to the appropriate extent all the information available and not before, and the designated officer has no reason to doubt that information." (Rowe v. HMRC [2017] EWCA Civ 2105, Arden LJ)

Must reach independent view

"[220] I would add that I cannot see that the statutory requirement of a "designated officer" should mean that that officer should be a mere cipher. He/she must be there to exercise a function and to shoulder responsibility, i.e. a responsibility to be satisfied that on all the information with which he is furnished from the various sources available to him that the scheme in issue does not provide the tax advantage claimed by the taxpayer and that the sum to be determined for the purpose of a notice is, therefore, a particular amount. Otherwise, the statutory requirement of a designated officer would serve no purpose.

...

[227] In so far as there is a difference between Charles J and myself on the application of our rather different test to the facts of the Vital-Nut case, it must follow from HMRC's understanding of the exercise to be carried out by the designated officer, at the time of the issue of the notice, that one cannot be confident that the officer in these cases reached the required independent view.

[228] However, in my judgment, given the evidence considered by Charles J which led him to his own conclusion on this point, I consider that it is highly likely that the same decision would have been reached by the designated officers in these cases, even if the correct test had been applied by him/her in specifying the sum to be paid." (Rowe v. HMRC [2017] EWCA Civ 2105, McCombe LJ)

Includes r.80 PAYE

"[36] In my view, there is no difficulty in construing section 221(3) so as to conform with Parliament's evident intention. Since tax appeals against regulation 80 PAYE determinations are clearly brought within the scope of Condition A in section 219, in the way in which I have described, and since Conditions B and C were also satisfied, the entitlement of HMRC to give an APN to the Company was established. The provisions of section 221 as to the content of the notice are therefore of an ancillary nature, and they must be interpreted so as to give effect to, rather than contradict, that entitlement. Accordingly, the reference to the "assessment to tax appealed against" in the definition of "the disputed tax" in section 221(3) must be read as including a regulation 80 determination. There was no need for section 221 to spell this out explicitly, because regulation 80(5) already provides for such a determination to be treated as an assessment for the purposes of the appeal provisions in TMA 1970. On the required assumption that the Company's appeal against the regulation 80 determination is to be treated in the same way as an appeal against an assessment to tax, the language of section 221(3) can only reasonably be read as including such appeals. Another way of making the same point would be to say that, read in context, the words "assessment to tax" in section 221(3)(a) must include a section 80 determination which by virtue of regulation 80(5) is subject to Parts 4 and 5 of TMA 1970 as if it were an assessment.

[37] Furthermore, this interpretation does not in my opinion involve any inconsistency between the deeming required by regulation 80(5) and the meaning of "the disputed tax" in section 221 of the 2014 Act. The deeming in regulation 80(5) is indeed confined to the specified Parts of TMA 1970, but that deeming, read in conjunction with section 203(a) of the 2014 Act, is sufficient to ensure that an appeal against a regulation 80 determination is a "tax appeal" for the purposes of the APN regime. That in turn means that Condition A for the giving of an APN will be satisfied in cases of the present type, which in turn means that the definition of "the disputed tax" in section 221 must be construed accordingly in order to avoid an absurd result. Nor, on this approach, is there any tension or inconsistency between the definition of "the disputed tax" in section 221(3), properly understood, and the further reference to "the disputed tax" in section 55(8C)(b) of TMA 1970, as introduced by section 224 of the 2014 Act. As one would expect, the two provisions were clearly designed to work in harmony, as is made clear by the internal cross-reference to "the disputed tax specified in the notice under section 221(2)(b)"." (Sheiling Properties Limited v. HMRC [2021] EWCA Civ 1425, Henderson LJ)

Disputed tax

Representations about notice

 

"(1)     This section applies where an accelerated payment notice has been given under section 219 (and not withdrawn).

(2)     P has 90 days beginning with the day that notice is given to send written representations to HMRC—

(a)     objecting to the notice on the grounds that Condition A, B or C in section 219 was not met,

(b)     objecting to the amount specified in the notice under section 220(2)(b) or section 221(2)(b), or

(c)     objecting to the amount specified in the notice under section 220(2)(d) or section 221(2)(d)." (FA 2014 s.222(1) - (2))

 

Right to make representations re effectiveness of the scheme

"[111] The crucial question is whether the taxpayer can make representations on the question of effectiveness. In my judgment, the duty of fairness requires that he can do so since I have concluded that it is the designated officer's obligation to form a view on this (on the information available to him) before an APN/PPN can be issued. As I see it, the FA 2014 does not say that a taxpayer cannot make any further representations, and, when Parliament limits the designated officer's knowledge base to the best of his information and belief, it does not say that the information can only be provided by HMRC. In those circumstances, it seems to me that it must follow that a taxpayer can provide further representations on this point although the designated officer, of course, must reach his own view and is not bound to accept the contentions made by the taxpayer.

[112] The appellants contend that HMRC should have explained the basis of their liability. This must in principle follow from the fact that in my judgment they are entitled to make representations on the question whether their scheme was effective for tax purposes. However, I do not accept that the appellants were in doubt about the basis on which HMRC did not accept that that was so in their cases. In Rowe, the appellants know the nature of HMRC's case as their cases have reached the stage of appeal proceedings. In the case of Vital Nut also, HMRC had already given a warning through Spotlight 6 and there could be no doubt thereafter as to HMRC's opinion on the effectiveness of the scheme in question." (Rowe v. HMRC [2017] EWCA Civ 2105, Arden LJ)

HMRC duty to consider

"(3)     HMRC must consider any representations made in accordance with subsection (2)." (FA 2014 s.222(3))

HMRC action following consideration

"(4)     Having considered the representations, HMRC must—

(a)     if representations were made under subsection (2)(a), determine whether—

(i)     to confirm the accelerated payment notice (with or without amendment), or

(ii)     to withdraw the accelerated payment notice, 

(b)     if representations were made under subsection (2)(b) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount (or no amount) ought to have been specified under section 220(2)(b) or section 221(2)(b), and then—

(i)     confirm the amount specified in the notice,

(ii)     amend the notice to specify a different amount, or

(iii)     remove from the notice the provision made under section 220(2)(b) or section 221(2)(b), and

(c)     if representations were made under subsection (2)(c) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount (or no amount) ought to have been specified under section 220(2)(d) or 221(2)(d), and then—

(i)     confirm the amount specified in the notice,

(ii)     amend the notice to specify a different amount, or

(iii)     remove from the notice the provision made under section 220(2)(d) or section 221(2)(d),

and notify P accordingly." (FA 2014 s.222(4))

Representations about notice

No obligation to pay until representations are answered

 

"[79] Building on those points, I can safely infer that the legislation does not envisage a category of APNs on which representations have been made but not answered. The reason for that is obvious: HMRC can and should answer the representations in such a case and so perfect the APN in question by confirming it or withdrawing it. In this case, for reasons which are unknown, HMRC did not answer the appellant's representations. It cannot be argued that HMRC's failure to answer those representations was merely a formality or that the answer was a foregone conclusion, because that would run contrary to the case law in paragraph [78(c)] above.
[80] The FTT (at [115]) and the UT (at [93] and [99]) concluded that, in light of the representations going unanswered, no payment was due under the APNs issued to the appellant. There is no appeal by HMRC against that finding (nor could there be: the finding is unavoidable on the legislation). It follows, inevitably in my view, that the "pay now, argue later" principle, by which payment is required in advance of argument (see [78(b)] above), and which is contingent on the existence of an APN which requires payment, does not apply in this case." (Archer v. HMRC [2023] EWCA Civ 626, Whipple, Simler, Falk LJJJ)

No obligation to pay until representations are answered

Effect of accelerated payment notice

 

Enquiry in progress: obligation to pay

"(1)     This section applies where—

(a)     an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while a tax enquiry is in progress) (and not withdrawn), and

(b)     an amount is stated in the notice in accordance with section 220(2)(b).

(2)     P must make a payment (“the accelerated payment”) to HMRC of that amount.

(3)     The accelerated payment is to be treated as a payment on account of the understated tax (see section 220)." (FA 2014, s.223(1) - (3))

 

Time limit: 90 days (or 30 days following outcome of representations)

"(4)     The accelerated payment must be made before the end of the payment period.

(5)     “The payment period” means—

(a)     if P made no representations under section 222, the period of 90 days beginning with the day on which the accelerated payment notice is given, and

(b)     if P made such representations, whichever of the following periods ends later—

(i)     the 90 day period mentioned in paragraph (a);

(ii)     the period of 30 days beginning with the day on which P is notified under section 222 of HMRC's determination." (FA 2014, s.223(4) - (5))

 

Failure to issue a determination means the time limit does not begin to run

"[322] If it was irritating and time-consuming for HMRC to track down the relevant JR, they could simply have asked Mr Fox for the JR reference number.  In any event, having to expend extra effort either by asking the Solicitor’s Office, or Mr Fox, is not a valid reason for rejecting his letters on the grounds that they were not “representations about a notice” within the meaning of  s 222: they plainly were.

...

[325] Our conclusion on Issue One is therefore different from our conclusion in relation to the same issue in Exclusive’s case.  HMRC’s Response to Exclusive’s representations was a determination, albeit one which was flawed for failure to take into account certain matters.  In Mr Fox’s case, as HMRC themselves accept, they did not issue a determination at all." (Exclusive Promotions Ltd v. HMRC [2022] UKFTT 103 (TC), Judge Redston)

Failure to deal with all of the taxpayer's representations does not mean HMRC's conclusion is not a determination

"[181] ... Our own view is that (1) and (2) are requests for background information which should have been dealt with as part of HMRC’s general duty to respond, as set out in Glencore, but that (3) to (6) are challenges to the “amount” of the APN, giving the term “amount”, the “broad and non-technical construction” required by Mrs Archer.  We therefore agree with [the taxpayer] that HMRC had a duty to consider the matters raised at points (3) to (6) and that HMRC’s Response did not include HMRC’s view of those matters. 

[182] However, we do not agree with him that, in consequence, HMRC did not make a “determination”.  In our judgment, the HMRC Response is a determination, albeit one which was flawed for failure to take into account matters which should have been taken into account.  That failure falls squarely within the classic definition of Wednesbury unreasonableness

...

[191] Exclusive’s letter of representation set out a number of points which relate to the “amount”, when that term is given a “broad and non-technical” construction”.  It is clear from Beadle that the Tribunal has no jurisdiction to consider a direct challenge to the “amount” contained in an APN, and it must also follow that the Tribunal has likewise no jurisdiction to consider the more broadly based challenge to the amount which is contained within points (3) to (6) set out at §180.  We therefore decide Issue One in HMRC’s favour." (Exclusive Promotions Ltd v. HMRC [2022] UKFTT 103 (TC), Judge Redston)

Understated IHT payable in instalments

"(6)     But where the understated tax would be payable by instalments by virtue of an election made under section 227 of IHTA 1984, to the extent that the accelerated payment relates to tax payable by an instalment which falls to be paid at a time after the payment period, the accelerated payment must be made no later than that time." (FA 2014, s.223(6))

 

Payment of the tax treated as making the accelerated payment

"(7)     If P pays any part of the understated tax before the accelerated payment in respect of it, the accelerated payment is treated to that extent as having been paid at the same time." (FA 2014, s.223(7))

Recover as if tax

"(8)     Any tax enactment which relates to the recovery of a relevant tax applies to an amount to be paid on account of the relevant tax under this section in the same manner as it applies to an amount of the relevant tax." (FA 2014, s.223(8))

 

Tax enactment

"(9)     “Tax enactment” means provisions of or made under—

(a)     the Tax Acts,

(b)     any enactment relating to capital gains tax,

(c)     IHTA 1984 or any other enactment relating to inheritance tax,

(d)     Part 4 of FA 2003 or any other enactment relating to stamp duty land tax, or

(e)     Part 3 of FA 2013 or any other enactment relating to annual tax on enveloped dwellings." (FA 2014, s.223(9))

Appeal in progress: restrictions on postponement

TMA 1970 s 55(8B)–(8D)

TMA 1970 s 56(4)–(6)

IHTA 1984 s 242(4)

FA 2003 Sch 10 para 39(9)–(11)

FA 2003 Sch 10 para 40(4)

FA 2003 Sch 10 para 43(3)–(5)

FA 2013 Sch 33 para 48(8A)–(8C)

FA 2013 Sch 33 para 49(4)

FA 2013 Sch 33 para 53(3)–(5)

Surrender of losses

"(1)     This section applies where—

(a)     an accelerated payment notice is given (and not withdrawn), and

(b)     an amount is specified in the notice in accordance with section 220(2)(d) or 221(2)(d).

(2)     P may not consent to any claim for group relief in respect of the amount so specified.

(3)     Subject to subsection (2), paragraph 75 (other than sub-paragraphs (7) and (8)) of Schedule 18 to FA 1998 (reduction in amount available for surrender) has effect as if the amount so specified ceased to be an amount available for surrender at the time the notice was given to P.

(4)     For the purposes of subsection (3), paragraph 75 of that Schedule has effect as if, in sub-paragraph (2) of that paragraph for “within 30 days” there were substituted “before the end of the payment period (within the meaning of section 223(5) of the Finance Act 2014)”.

(5)     The time limits otherwise applicable to amendment of a company tax return do not prevent an amendment being made in accordance with paragraph 75(6) of Schedule 18 to FA 1998 where, pursuant to subsection (3), a claimant company receives—

(a)     notice of the withdrawal of consent under paragraph 75(3) of that Schedule, or

(b)     a copy of a notice containing directions under paragraph 75(4) of that Schedule.

(6)     Subsection (7) applies where—

(a)     a company makes such an amendment to its company tax return at a time when an enquiry is in progress into the return, and

(b)     paragraph 31(3) of that Schedule prevents the amendment from taking effect until the enquiry is completed.

(7)     Section 219 (circumstances in which an accelerated payment notice may be given) has effect, in its application to that company in a case where section 219(2)(a) applies (tax enquiry in progress), as if—

(a)     for the purposes of section 219(3), that amendment to the return had not been made,

(b)     in section 219(4), after paragraph (c) there were inserted—

“(d)     P has amended its company tax return, in accordance with paragraph 75(6) of Schedule 18 to FA 1998, in circumstances where pursuant to section 225A(3), P has received—

(i)     notice of the withdrawal of consent under paragraph 75(3) of that Schedule, or

(ii)     a copy of a notice containing directions under paragraph 75(4) of that Schedule,

but paragraph 31(3) of that Schedule prevents that amendment having effect.”,

(c)     in section 220(4), after paragraph (c) there were inserted—

“(d)     in the case of a notice given by virtue of section 219(4)(d) (cases involving withdrawal of consent for losses claimed), it were assumed that P had never made the claim to group relief to which the amendment to its company tax return relates.”, and

(d)     in section 227(10), for “or (c)” there were substituted “, (c) or (d)”.

(8)     Subsections (2) and (3) are subject to—

(a)     section 227(14) to (16) (provision about claims for group relief, and consents to claims, following amendment or withdrawal of an accelerated payment notice), and

(b)     section 227A (provision about claims for group relief, and consents to claims, once tax position finally determined)." (FA 2014, s.225A)

Late claim to surrender

"(1)     This section applies where as a result of an accelerated payment notice given to P—

(a)     P was prevented from consenting to a claim for group relief in respect of an amount under section 225A(2), or

(b)     pursuant to section 225A(3), a consent given by P to a claim for group relief in respect of an amount was ineffective.

(2)     If a final determination establishes that the amount P has available to surrender consists of or includes the amount referred to in subsection (1)(a) or (b) or a part of it (“the allowed amount”)—

(a)     section 225A(2) and (3) (which prevents consent being given to group relief claims) ceases to apply in relation to the allowed amount, and

(b)     a claim for group relief in respect of any part of the allowed amount may be made within the period of 30 days after the relevant time.

(3)     The time limits otherwise applicable to amendment of a company tax return do not apply to an amendment to the extent that it makes a claim for group relief in respect of any part of the allowed amount within the time limit allowed by subsection (2)(b).

(4)     In this section—

“final determination” means—

(a)     a conclusion stated in a closure notice under paragraph 34 of Schedule 18 to FA 1998 against which no appeal is made;

(b)     the final determination of a tax appeal within paragraph (d) or (e) of section 203;

“relevant time” means—

(a)     in a case within paragraph (a) above, the end of the period during which the appeal could have been made;

(b)     in the case within paragraph (b) above, the end of the day on which the final determination occurs." (FA 2014, s.227A)

Effect of accelerated payment notice

Withdrawal or amendment of of APN

 

"(2)     Where an accelerated payment notice has been given, HMRC may, at any time, by notice given to P—

(a)     withdraw the notice,

(b)     where the notice is given by virtue of more than one Condition C requirement being met, withdraw it to the extent it is given by virtue of one of those requirements (leaving the notice effective to the extent that it was also given by virtue of any other Condition C requirement and has not been withdrawn), 

(c)     reduce the amount specified in the accelerated payment notice under section 220(2)(b) or 221(2)(b), or

(d)     reduce the amount specified in the accelerated payment notice under section 220(2)(d) or 221(2)(d)." (FA 2014, s.227(2))

 

Condition C requirement

"(1)     In this section a “Condition C requirement” means one of the requirements set out in Condition C in section 219." (FA 2014, s.227(1))

Withdrawal of follower notice

"(3)     Where—

(a)     an accelerated payment notice is given by virtue of the Condition C requirement in section 219(4)(a), and

(b)     the follower notice to which it relates is withdrawn,

HMRC must withdraw the accelerated payment notice to the extent it was given by virtue of that requirement." (FA 2014, s.227(3))

Amendment of follower notice

"(4)     Where—

(a)     an accelerated payment notice is given by virtue of the Condition C requirement in section 219(4)(a), and

(b)     the follower notice to which it relates is amended under section 216(7)(b) (cases where there is a new relevant final judicial ruling following a late appeal),

HMRC may by notice given to P make consequential amendments (whether under subsection (2)(c) or (d) or otherwise) to the accelerated payment notice." (FA 2014, s.227(4))

DOTAS status withdrawn

"(5)     Where an accelerated payment notice is given by virtue of the Condition C requirement in section 219(4)(b), and—

(a)     under section 311(8) or 311B(8) of FA 2004, HMRC withdraw the reference number allocated to the chosen arrangements, or to proposed arrangements implemented by the chosen arrangements, or

(b)     HMRC give notice under section 312(6) or 312ZA(4) of FA 2004, with the result that persons are no longer under the duty in section 312(2) or (as the case may be) section 312ZA(2) of that Act in relation to the chosen arrangements,

HMRC must withdraw the accelerated payment notice, to the extent that it was given by virtue of the Condition C requirement." (FA 2014, s.227(5))

Modification of APN where one reason for it withdrawn

"(6)     Subsection (7) applies where—

(a)     an accelerated payment notice is withdrawn to the extent that it was given by virtue of a Condition C requirement,

(b)     that requirement is the one stated in the notice for the purposes of section 220(6) or 221(5) (calculation of amount of the accelerated payment or of the denied advantage etc), and

(c)     the notice remains effective to the extent that it was also given by virtue of any other Condition C requirement.

(7)     HMRC must, by notice given to P—

(a)     modify the accelerated payment notice so as to state the remaining, or one of the remaining, Condition C requirements for the purposes of section 220(6) or 221(5),

(b)     if the amount of the accelerated payment or (as the case may be) the amount of the disputed tax determined on the basis of the substituted Condition C requirement is less than the amount specified in the notice, amend that notice under subsection (2)(c) to substitute the lower amount, and

(c)     if the amount of the asserted surrenderable amount is less than the amount specified in the notice, amend the notice under subsection (2)(d) to substitute the lower amount." (FA 2014, s.227(6) - (7))

Consequential amendments to APN following amendment to partnership return

"(7A)     Where—

(a)     an accelerated payment notice is given, and

(b)     a partnership return (as defined in Schedule 32) to which the notice relates is amended under section 12ABZB(7)(b) of TMA 1970 (amendment following tribunal determination),

HMRC may by notice given to P make consequential amendments to the accelerated payment notice." (FA 2014, s.227(7A))

Withdrawal or amendment of of APN

Effect of withdrawal or amendment

Withdrawn notice treated as never had effect

"(12)     Where an accelerated payment notice is withdrawn, it is to be treated as never having had effect (and any accelerated payment made in accordance with, or penalties paid by virtue of, the notice are to be repaid)." (FA 2014, s.227(12))

No revival of notice of consent to group relief

(12A)     Where, as a result of an accelerated payment notice specifying an amount under section 220(2)(d) or 221(2)(d), a notice of consent by P to a claim for group relief in respect of the amount specified (or part of it) became ineffective by virtue of section 225A(3), nothing in subsection (12) operates to revive that notice." (FA 2014, s.227(12A))

30 days to make new claim for group relief

"(14)     If the accelerated payment notice is amended under subsection (2)(d) or withdrawn—

(a)     section 225A(2) and (3) (which prevents consent being given to group relief claims) cease to apply in relation to the released amount, and

(b)     a claim for group relief may be made in respect of any part of the released amount within the period of 30 days after the day on which the notice is amended or withdrawn.

(15)     The time limits otherwise applicable to amendment of a company tax return do not apply to the extent that it makes a claim for group relief within the time allowed by subsection (14).

(16)     “The released amount” means—

(a)     in a case where the accelerated payment notice is amended under subsection (2)(d), the amount represented by the reduction, and

(b)     in a case where the accelerated payment notice is withdrawn, the amount specified under section 220(2)(d) or 221(2)(d)." (FA 2014, s.227(14) - (16))

Give effect to reductions and increases

"(13)     If, as a result of a modification made under subsection (2)(c) [or an amendment made under subsection (7A)]2, more than the resulting amount of the accelerated payment has already been paid by P, the excess must be repaid.

(13A)     If, as a result of an amendment made under subsection (7A), an amount payable to HMRC under section 223(2) is increased, the amount of that increase must be paid before—

(a)     the end of the period of 30 days beginning with the day on which notice of the amendment is given, or

(b)     if later, the end the payment period (within the meaning given by section 223(5))." (FA 2014, s.227(13) - (13A))

Effect of withdrawal or amendment

Suspension of APN

 

Where follower notice on which it is based is suspended

"(8)     If a follower notice is suspended under section 216 (appeals against final rulings made out of time) for any period, an accelerated payment notice in respect of the follower notice is also suspended for that period.

(9)     Accordingly, the period during which the accelerated payment notice is suspended does not count towards the periods mentioned in the following provisions—

(a)     section 223;

(b)     section 55(8D) of TMA 1970;

(c)     paragraph 39(11) of Schedule 10 to FA 2003;

(d)     paragraph 48(8C) of Schedule 33 to FA 2013." (FA 2014, s.227(8) - (9))

Unless also given for other reasons

"(10)     But the accelerated payment notice is not suspended under subsection (8) if it was also given by virtue of section 219(4)(b) or (c) and has not, to that extent, been withdrawn.

(11)     In a case within subsection (10), subsections (6) and (7) apply as they would apply were the notice withdrawn to the extent that it was given by virtue of section 219(4)(a), except that any change made to the notice under subsection (7) has effect during the period of suspension only." (FA 2014, s.227(10) - (11))

Suspension of APN

Judicial review time limit runs from the end of the statutory procedure

 

"[23] At the heart of this ground lies HMRC's submission that the issue of the claim was premature, and that the appellant should have waited until HMRC responded to the appellant's representations. The right to make written representations, and the obligation of HMRC to consider them and to respond to them by confirming notices or withdrawing or amending them, are laid down by FA 2014. The decision taken by HMRC in response to representations is therefore susceptible to judicial review.

[24] In Archer, this court affirmed the decision of Green J at first instance and held that this statutory procedure provided an alternative remedy which should normally be pursued before the issue of judicial review proceedings: see [2019] EWCA Civ 1021[2019] 1 WLR 6355. The taxpayer in that case had issued a judicial review claim as regards an accelerated payment notice. Some three weeks later, she made representations under section 222, following which HMRC withdrew the notice. The master rejected the taxpayer's application for her costs of the proceedings and made no order as to costs. Her appeal was dismissed by Green J and by this court." (R (oao M Sport Limited) v. HMRC [2021] EWCA Civ 561, David Richards LJ)

Judicial review time limit runs from the end of the statutory procedure

Penalty for failure to pay: enquiry in progress

 

"(1)     This section applies where an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while tax enquiry is in progress) (and not withdrawn).

(2)     If any amount of the accelerated payment is unpaid at the end of the payment period, P is liable to a penalty of 5% of that amount.

(3)     If any amount of the accelerated payment is unpaid after the end of the period of 5 months beginning with the penalty day, P is liable to a penalty of 5% of that amount.

(4)     If any amount of the accelerated payment is unpaid after the end of the period of 11 months beginning with the penalty day, P is liable to a penalty of 5% of that amount." (FA 2014, s.226(1) - (4))

Penalty day

"(5)     “The penalty day” means the day immediately following the end of the payment period." (FA 2014, s.226(5))

 

IHT payable in instalments

"(6)     Where section 223(6) (accelerated payment payable by instalments when it relates to inheritance tax payable by instalments) applies to require an amount of the accelerated payment to be paid before a later time than the end of the payment period, references in subsections (2) and (5) to the end of that period are to be read, in relation to that amount, as references to that later time." (FA 2014, s.226(6))

 

Application of FA 2009, Sch 56 machinery

 

"(7)     Paragraphs 9 to 18 (other than paragraph 11(5)) of Schedule 56 to FA 2009 (provisions which apply to penalties for failures to make payments of tax on time) apply, with any necessary modifications, to a penalty under this section in relation to a failure by P to pay an amount of the accelerated payment as they apply to a penalty under that Schedule in relation to a failure by a person to pay an amount of tax." (FA 2014, s.226(7))

 

Amended accelerated payment notice

"(8)     Where an amendment to an accelerated payment notice made under section 227(7A) (amendment following tribunal determination about partnership return) increases the amount of the accelerated payment, the amount of the increase is to be ignored for the purposes of—

(a)     this section, and

(b)     any other enactment imposing a penalty or surcharge for non-payment or late payment of tax." (FA 2014, s.226(8))

Penalty for failure to pay: enquiry in progress

Penalty for failure to pay: appeal in progress

 

Ordinary late payment penalties engaged

"[61] In relation to Appeal Cases, as noted above, the effect of FA 2014, s 224 is to bring to an end the postponement of the tax which is under appeal, and this triggers the penalty provisions in FA 2009, Sch 56.

[62] Paragraph 3 of that Schedule first sets out the taxes to which it applies; these include income tax, see subpara 1 read with para 1.  The paragraph continues:

“(2)    P is liable to a penalty of 5% of the unpaid tax.

(3)     If any amount of the tax is unpaid after the end of the period of 5 months beginning with the penalty date, P is liable to a penalty of 5% of that amount.

(4)     If any amount of the tax is unpaid after the end of the period of 11 months beginning with the penalty date, P is liable to a penalty of 5% of that amount.”

[63] Schedule 56 thus sets out essentially the same phased 5% penalties in relation to Appeal Cases as apply to Enquiry Cases by virtue of FA 2014, s 226.  Additionally, paras 9 to 18 apply to Enquiry Cases as they do to Appeal Cases, see FA 2014, s 226(7)." (Exclusive Promotions Ltd v. HMRC [2022] UKFTT 103 (TC), Judge Redston)

Penalty for failure to pay: appeal in progress

Reasonable excuse

 

See also 

Reasonable excuses

Reliance on belief that APN would be quashed on judicial review: gross or obvious error required

“[202] … Even if the appellant had a reasonable belief, subjectively, objectively or both, and based upon professional advice, that he was not liable to pay the understated partner tax liability, this could not form a reasonable excuse for the failure to pay the PPN within the payment period.

[202] Applying the test in the Clean Car Company, a reasonable taxpayer in the appellant’s position would make payment of the sum under the PPN within the payment period and make whatever challenges (whether statutory or extra statutory) to the underlying liability he or she chose to do in the mean-time. This would be the case, whatever his or her reasonable belief as to the merits of his substantive challenge. If such a challenge were successful then the appellant would receive a refund or repayment but this cannot reasonably excuse [not] making a payment [of] the sum due under the PPN that Parliament has required should be made in the interim.

[209] The appellant’s reasoning, if accepted, would permit any taxpayer to circumvent the evident intention of Parliament as to who should hold the tax pending the final determination of the tax liability by allowing taxpayers to institute multiple proceedings in different fora. It would also result in the Tribunal entertaining collateral challenges to the underlying tax liability in penalty proceedings which cannot have been the Parliamentary intention. The statute requires that the taxpayer [pay the tax] in the interim while the underlying liability, if challenged, can be resolved. If the taxpayer is successful in their challenge to the liability they will receive the appropriate rebate from HMRC.” (Beadle v. HMRC [2019] UKUT 101 (TCC), Arnold J and Judge Cannan, approved by the Court of Appeal [2020] EWCA Civ 562 at §59, Simler LJ)  

“[81]…in assessing the objective reasonableness of a belief which a taxpayer had been found to hold that the APN issued to him is procedurally invalid, the FTT's assessment should take into account the following points:

(1)     In line with Perrin, it should consider all the surrounding facts and circumstances, including the foundation for the taxpayer's belief, any advice on which he has relied, and whether that advice is specific to his APN.

(2)     It should identify precisely what the taxpayer does believe; is it that the APN is obviously procedurally invalid, or merely that it is arguable (however strongly) that it is?

(3)     It should take into account the reason for the alleged procedural invalidity. We observe that in Chapman, to which the FTT referred in this case in forming its view, the FTT referred at [72] to 'an obvious or gross error' in the notice, such as where the decimal point had slipped in the statement of the amount to be paid. One can postulate other similar errors. One would hope that in practice such errors would be corrected through the process of representations. In any event, the assessment of objective reasonableness in such a situation will be much more straightforward than one where the determination of validity turns on detailed legal arguments and the outcome of a judicial review.

(4)     In view of the concerns we have set out above, it would not be desirable or appropriate for the FTT to conduct a 'mini-trial' of the arguments which a taxpayer asserts mean that his judicial review into procedural invalidity will or is likely to be successful.

(5)     It must be borne in mind that substantive invalidity cannot form the basis for a reasonable excuse. While the dividing line between substantive and procedural invalidity is clear in principle, there may be instances where the taxpayer's excuse is really the former dressed up as the latter.” (Sheiling Properties Limited v. HMRC [2020] UKUT 175 (TCC), Trower J and Judge Scott)

Error depending upon detailed competing legal arguments not gross or obvious

"[150] ... We are not satisfied that the defect in the Closure Notices was at any stage properly described as gross and obvious, to use the language in previous cases. We note in that context that HMRC argued before Jay J and the Court of Appeal that the Closure Notices did validly amend Mr Archer’s return. Whilst those arguments were ultimately rejected, there was no indication that they were without merit."(Archer v. HMRC [2022] UKUT 61 (TCC), Joanna Smith J and Judge Cannan)

“[84]...if the alleged ground of procedural invalidity requires detailed submissions by the parties on competing legal arguments, it is by definition not a gross or obvious error, and, as such, is considerably less likely to be objectively reasonable in this context.” (Sheiling Properties Limited v. HMRC [2020] UKUT 175 (TCC), Trower J and Judge Scott)

APN flawed because designated officer failed to form a view on effectiveness of scheme not a gross or obvious error

[210] We accept that Sheiling provides support for the view that a gross or obvious procedural error in an APN can provide the basis for a reasonable excuse defence.  However, we agree with Mr Hall that a genuine belief in the success of a JR based on the failure by the Designated Officer to form a view on the effectiveness of the scheme is not “gross or obvious” error, but instead one which requires “detailed legal submissions”: this is evident from the Rowe litigation as well as from the length and complexity of the relevant parts of this Decision. 

[211] It therefore follows that a person’s belief that a JR would succeed because of the failure by the Designated Officer to form a view on the effectiveness of the scheme cannot form an objectively reasonable excuse for the purposes of an appeal against an APN penalty.  That is sufficient to decide Issue Two in HMRC’s favour, but in case we are wrong in our analysis we have also considered Perrin." (Exclusive Promotions Ltd v. HMRC [2022] UKFTT 103 (TC), Judge Redston)

Belief that interim relief would be granted not shown to be a reasonable excuse

"[242] Exclusive’s case on Issue Three therefore fails because there are no findings of fact that Mr Jones believed that the effect of the interim relief order meant that the JR would succeed, or that he was no longer liable to pay by the due date, or that he would escape penalties were he to fail to pay but subsequently lost the JR. 

[243] Even if Mr Jones did believe that the interim relief order meant he did not have to pay the APN, we would have found that his belief was not objectively reasonable.  That is because:

(1)           Although we were not supplied with copies of RPC’s legal advice to Mr Jones, it is absolutely plain from the terms of the draft interim order and from the final order that its effect was merely to stay enforcement.  It did not change the date on which APNs were due for payment or prevent HMRC from issuing penalties for failure to pay by the due dates. 

(2)          RPC would have known the effect of the order, and would also have know that this outcome was consistent with Simler J’s rejection of the claimants’ application in Rowe Interim Relief that “no penalty for late payment can become due until the requisite time after the sum becomes payable has expired”.  RPC would also have seen the same terms reflected in HMRC’s Response. 

(3)          We therefore find that RPC id not advise Mr Jones that the interim order had changed the date by which the APN was legally due to be paid, or that the order prevented penalties being payable." (Exclusive Promotions Ltd v. HMRC [2022] UKFTT 103 (TC), Judge Redston)

Reasonable excuse

Must put forward evidence of subjective reason for non-compliance

 

"[143] ... In our view, in circumstances such as this, the FTT is entitled to, and indeed must, consider the reasons for non-payment. That will inevitably involve the taxpayer advancing by way of evidence what the reasons were, with HMRC being entitled to test that evidence in cross-examination. That is what happened in Sheiling Properties, where the evidence was that the reason the APNs were not paid was because of advice the taxpayer had received that there was a good prospect that the APNs were invalid. It was only when pressed in cross-examination that it became apparent that the predominant reason for nonpayment was the financial position of the taxpayer.

[144] The fact that it is necessary to establish that the reason put forward as an excuse caused the taxpayer not to pay the tax inevitably means that, in the first instance, the taxpayer must give evidence of his or her subjective beliefs. As Mr Ripley said in his oral submissions, without examining the subjective belief of the taxpayer, it cannot be established that the strength of the argument in the JR Proceedings alone was causative; no matter how strong the argument on invalidity, the real reason for non-payment may be inability to pay the tax, which section 59C(10) TMA 1970 provides cannot amount to a reasonable excuse. Accordingly, Ms Brown’s submission that Mr Archer’s beliefs are irrelevant is, in our view, inconsistent with Sheiling Properties.

[145]...It is the actual reason or reasons for non-payment that is relevant. Only the taxpayer can say what those reasons were, based on his beliefs. The FTT in this case did not know and was not provided with any evidence as to what Mr Archer’s reasons for non-payment were or what his beliefs were as to the merits of the JR Proceedings and whether or not he should pay the tax" (Archer v. HMRC [2022] UKUT 61 (TCC), Joanna Smith J and Judge Cannan)

Must put forward evidence of subjective reason for non-compliance
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