R (on the application of William Graham) v Revenue & Customs Commisioners (2016)
Accelerated payment notices and partner payment notices had been validly issued by the Revenue pursuant to the Finance Act 2014 in respect of partnerships which were notifiable under the applicable disclosure of tax avoidance schemes (DOTAS) provisions, having regard to the transitional provisions in the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006 reg.1.
The claimants sought to challenge the legality of accelerated payment notices and partner payment notices issued by the respondent Revenue pursuant to the Finance Act 2014.
The claimants were individuals who had participated in tax avoidance schemes, namely Liberty Partnerships 5-8 and 6-8 or Liberty Syndicates schemes. The Revenue issued the notices on the basis that the claimants had avoided the payment of tax by their use of those schemes. The court had to determine whether any of the Liberty Fund Partnerships were notifiable under the applicable disclosure of tax avoidance schemes (DOTAS) provisions, having regard to the transitional provisions in the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006 reg.1.
The claimants submitted that none of the partnerships were notifiable. They argued that Condition C in s.219(1) of the 2014 Act was not satisfied because for all the partnerships the relevant first date for notifying any notifiable arrangements under the Finance Act 2004 s.308(3) fell before 1 August 2006.
The Revenue submitted that, for the purposes of s.308(3), the promoter of each partnership had a duty to notify when he became aware of any transaction forming part of the particular arrangements for each specific partnership. For each of partnerships 5-8 that date inevitably fell after 1 August 2006, because no relevant transactions in respect of any of those partnerships had been implemented before August 2006.
(1) For fiscal purposes, the focus had to be on each specific partnership. Section 219(3) of the 2014 Act referred to a particular tax advantage resulting from particular arrangements, being DOTAS arrangements. The chosen DOTAS arrangements could only be the particular arrangements for each partnership, with the particular tax advantage being the alleged trading loss for each individual partnership. Under s.313(1)(b) of the 2004 Act a person who was party to any notifiable arrangements had to provide the Board with prescribed information relating to "The time when he obtains or expects to obtain by virtue of the arrangements an advantage in relation to any relevant tax." In the circumstances of the instant case, that provision could sensibly apply only if the "arrangements" in question comprised the particular partnership that the taxpayer had entered, or firmly intended to enter. It was clearly essential that the Revenue should know when a taxpayer had entered, or intended to enter, into particular arrangements and the specific characteristics of those arrangements, in the instant case the individual partnership. Before the 2006 Regulations were introduced, any arrangements implementing proposals that pre-dated 18 March 2004 were not notifiable. That constituted favourable treatment of some taxpayers, because other arrangements, being substantially the same and having the same alleged tax advantages, were notifiable simply because they implemented "proposals" made on or after 18 March 2004. The position had since changed, in that "arrangements" were notifiable where they were implemented on or after 1 August 2006, even if the proposal was made before that date but on or after 18 March 2004. That result was less favourable to certain taxpayers, but it was not difficult to see why it might be considered more effective in terms of legislative policy, a greater number of individual tax avoidance arrangements being made notifiable; and as promoting greater equality of treatment of taxpayers seeking to exploit tax avoidance opportunities (see paras 35, 37-38, 41 of judgment).
(2) In respect of the relevant Liberty Fund Partnerships 5-8, there was a duty to notify prescribed information about the first partnership under s.308(3), because (a) such a partnership constituted "notifiable arrangements" under s.308(3); and (b) the promoter first became aware of a transaction forming part of such arrangements after 1 August 2006 when those arrangements began to be implemented; and (c) those arrangements did not implement a proposal in respect of which notice had been given under s.308(1) of the 2004 Act. As regards Liberty Fund Partnerships 6-8, each constituted notifiable arrangements under s.308(5) of the 2004 Act, 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. In any event, each of the Liberty Fund Partnerships 5-8 fell within s.219(5) of the 2014 Act as "DOTAS arrangements". Condition C was, therefore, satisfied in each case (paras 42-44).