Taxman's "pay up front" anti-avoidance measure held lawful

The UK tax authorities have survived a challenge in the High Court to the rules that require upfront payment by taxpayers whose tax avoidance arrangements are under investigation.

HM Revenue & Customs successfully defended at first instance the legality of its accelerated payment notice regime, introduced by the Finance Act 2014, which in HMRC's words "changes the underlying economics of tax avoidance".

A number of users of an avoidance scheme brought a judicial review challenge to notices issued under the regime. They claimed that HMRC’s actions were unreasonable, breached natural justice and represented an abuse of their rights under the European Convention on Human Rights to a fair trial and protection of property. They also claimed it took away the legitimate expectation they had when they joined the avoidance scheme that they would not have to pay tax before the dispute had been resolved.

On each point the court found in HMRC’s favour.

David Richardson, director of counter avoidance at HMRC, 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 upfront like everybody else.

“We expect to complete the issue of around 64,000 notices by the end of 2016, bringing forward £5.5bn in payments for the Exchequer by March 2020."

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