Accelerated Payment Notices – Ingenious Media’s challenge sunk at High Court

As set out in our August 2014 newsletter, the 2014 Finance Act introduced significant new powers for HM Revenue and Customs (HMRC) that require taxpayers using avoidance schemes to pay the disputed tax upfront through the use of ‘accelerated payment notices’ (APN).

These measures are designed to remove the cash flow advantage which had previously been available to a taxpayer entering into tax mitigation schemes.

There is no right of appeal against an APN or a Partner Payment Notice (PPN). Put simply a PPN is another name for an APN but applies where the tax planning has been undertaken via a partnership.

In November 2014 HMRC issued PPNs to investors in various Ingenious Media film partnerships, requiring those partners to make up-front tax payments pending the resolution of enquiries into their investments.

Some 154 of those investors sought to challenge HMRC’s issue of the PPNs issued to them by way of a judicial review.

The claimants contended that the notices issued in their cases were unlawful and had no effect.

The High Court rejected all 5 of the reasons put forward by the claimants, finding in favour of HMRC.

In HMRC’s press release issued shortly after the decision, David Richardson, Director of Counter Avoidance at HMRC, said:

“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 upfront like everybody else.

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.
HMRC wins 80% of all avoidance cases that people litigate, and many more are settling before things get to that stage.”

Pinsent Masons LLP are the solicitors acting for the investors in Ingenious Media. Jason Collins (Head of Tax at Pinsent Masons LLP) said:

“We are disappointed by the judgment, which in our view does not does not adequately address a number of serious issues raised by this new legislation.  For many of the claimants, HMRC checked and repaid the tax in question over 10 years ago when it could have instead held on to the money pending any further investigations – yet it is now trying to use new legislation to claw money back.

In many cases, the claimants also say that HMRC has not followed proper procedures and is now out of time to recover any tax, whatever the merits of the underlying dispute.

We are taking instructions from the claimants. As this is a large group of claimants for whom this is also news today, we are unable to comment further at this time.”

Whilst this judgement does not preclude other taxpayers from making a similar claim, given the outcome of this case it is doubtful that anybody else will seek to challenge the issue of an APN or PPN.

Should you wish to discuss how the outcome of this case may impact upon you please contact either Simon Hopwood on 0191 2811292, or your usual Ryecroft Glenton contact.