Defeat for the taxpayer on APN’s

The High Court has dismissed an application for judicial review of accelerated payment notices (APNs) and partner payment notices (PPNs) issued by HMRC.

The facts

The claimants were individuals who participated in either Liberty Partnerships or Liberty Syndicates schemes. Members had been invited to join the Partnerships and Syndicates by way of an information memorandum was issued in April 2006. These set out details of the schemes.

There were eight individual partnerships implemented pursuant to the information memorandum, four being set up prior to August 2006 (the date SI 2006/1543 came into force) and four at various times between January 2007 and March 2007.  The last four that were the subject of this claim.

The APN’s

HMRC issued APNs and PPNs to the claimants pursuant to FA 2014, claiming payment of tax that it was said the claimants had avoided by use of tax avoidance schemes.

The claimants sought to challenge the legality of the APNs and PPNs on the basis that none of the partnerships were notifiable, and condition C in FA 2014, s.219(4) was not satisfied in respect of any PPN.

S.219(4) provides:

‘Condition C is that one or more of the following requirements are met–

…(b)the chosen arrangements are DOTAS arrangements;’

The Claimants’ arguments

The claimants contended that for all the partnerships the relevant first date for notifying any notifiable arrangements under FA 2004, s.308(3) was before 1 August 2006, because in reality there was just one set of arrangements, namely the arrangements for the Liberty Partnerships, being the April 2006 information memorandum.

The relevant parts of FA 2004 308(1), (2), (3) and (5) provide:

‘308(1) ‘A person who is a promoter in relation to a notifiable proposal must, within the prescribed period after the relevant date, provide the Board with prescribed information relating to the notifiable proposal.’

308(2) In subsection (1) “the relevant date” means the earliest of the following–

…….(b)the date on which the promoter first becomes aware of any transaction forming part of notifiable arrangements implementing the notifiable proposal.

308(3) ‘ A person who is a promoter in relation to notifiable arrangements must, within the prescribed period after the date on which he first becomes aware of any transaction forming part of the notifiable arrangements, provide the Board with prescribed information relating to those arrangements, unless those arrangements implement a proposal in respect of which notice has been given under subsection (1).’

308(5) Where a person is a promoter in relation to two or more notifiable proposals or sets of notifiable arrangements which are substantially the same (whether they relate to the same parties or different parties), he need not provide information under subsection (1) or (3) if he has already provided information under either of those subsections in relation to any of the other proposals or arrangements.’

The High Court did not accept the claimantsʼ submission. In the High Courtʼs view the relevant ‘arrangements’ for the purposes of FA 2004, s.308 had to be the specific arrangements for each particular partnership. Because of this, it was not possible to treat all the individual partnerships under a single umbrella arrangement under the information memorandum), where where each partnership had its own particular characteristics.

The High Court concluded that there was a duty to notify prescribed information about the first of the Liberty Fund Partnerships 5–8 under FA 2004, s.308(3) because:

  • Such a partnership constituted ‘notifiable arrangements’ under FA 2004, s.308(3);
  • The promoter first became aware of a transaction forming part of such arrangements after 1 August 2006 when those arrangements began to be implemented;
  • Those arrangements did not implement a proposal in respect of which notice had been given under FA 2004, s.308(1);
  • Each of the Liberty Fund Partnerships 6–8 constituted notifiable arrangements under FA 2004, s.308(5), being substantially the same as the arrangements constituted by Liberty Fund Partnership 5, and there was no separate duty to notify provided that the arrangements of Liberty Fund Partnership 5 had been duly notified;

Levy and Levy comment

The treatment meted out to the Claimants is a warning that the courts are favouring, in line with the modern purposive approach to legislation, a wide approach favourable to HMRC. A number of judicial reviews have been launched to test the APN legislation; thus far the taxpayers have not been successful. There are, no doubt, plenty of arguments to come.


Levy and Levy – the tax investigations and litigation specialists in London and Tunbridge Wells