This is a bit of a rant.

It is, however, quite a significant rant – as rants go.

I am currently instructed on behalf of a group of taxpayers who have availed themselves of a tax mitigation scheme. These are modest earners in the main, primarily self-employed, who entered the scheme when the then IR changed the rules on IR 35.

The scheme is subject to judicial scrutiny at the moment. One taxpayer utilising the scheme lost in the FTT and his application for permission to appeal is pending.

Over 100 of the scheme users have been given APNs (Accelerated Payment Notices) which require them to pay  huge sums of money which HMRC say is income tax but which hasn’t yet been proved to be income tax in each individual case.

I was instructed to draft pleadings challenging the giving of these APNS and, among other points, pleaded that HMRC had given them unlawfully because the conditions for giving them as set out in s219(2) – (4) (Conditions A – B) of the Finance Act 2014 were not fulfilled – HMRC had misinterpreted its own statutory powers.

I say HMRC’s “own” because they will have drafted this provision in the FA 2014.

Today I’ve been sent a copy of a letter sent to a client within this group which withdraws his APN – because Condition C is not fulfilled. That’s fantastic and I’m extremely pleased that he doesn’t now have to fund the Exchequer before he has been found liable to do so.

However, I am astounded by three things:


  1. Condition C is the requirement that the scheme used is or was a DOTAS scheme – that is one which was required to be notified to HMRC under anti-avoidance provisions. The scheme used by my client wasn’t a DOTAS scheme. It was registered by the promoter under protest following pressure from the then IR. It is incumbent upon HMRC to ensure they are exercising their powers lawfully, however, they didn’t review the scheme before issuing the APN. Consequently my client has incurred substantial fees in seeking to set it aside and absent a finding in his favour in the complaint he is about to lodge, he will not recover those fees other than by further costly litigation.
  2. In their letter withdrawing the APN, HMRC claim Conditions A – C are in the alternative, that is that they may give an APN if either A, B or C is satisfied. This is just wrong. An APN (or its partnership equivalent) can only  be issued if all three conditions are met. There is no “or” between the sub-sections. If either A, B or C in not satisfied the APN given is unlawful – simples.
  3. Further, the Officer delivering the good news has totally misrepresented the state of play in the similar cases that have been before the courts and tribunals. He correctly highlights where HMRC has been successful but fails to balance that with the fact that the UTT found that EU law on free movement of capital might be arguable in similar cases and the fact that there is one case currently seeking permission to appeal to the UTT because, among other reasons, the tax payer wasn’t permitted to raise EU law arguments in his appeal at first instance.

That HMRC Officers and presumably it Solicitor’s Office are unable to properly construe a primary taxing statute which gives such draconian power to the State and again which there is no right of appeal to an independent court or tribunal goes beyond worrying me – it frightens me.

That they are using scare tactics including severe spin on decided cases is just nasty.

If you receive an APN or a PPN, please, please read it carefully and utilise your right of challenge under s22 FA 2014 if you have any doubt that it is properly issued.

For those of you banging the current “morality” drum on tax mitigation, please remember the rule of law – there is nothing inherently wrong, immoral or otherwise unlawful in mitigating one’s tax liability.