Ian Austick v The Commissioners for HMRC
[2024] EWHC 2175 (Ch)
Nigel Barklem v The Commissioners for HMRC
22 March 2024
[2024] EWHC 651 (Ch)
High Court
Someone invested in a dodgy tax scheme. The taxman investigated and changed their tax return. The investor tried to sue, but the judge said the wrong type of legal action was used and that the taxman's changes were valid because of a prior agreement.
Key Facts
- •Nigel Barklem invested in the Film 2K Partnership, a film partnership tax scheme.
- •Film 2K filed partnership tax returns claiming large losses, which Barklem claimed on his personal returns.
- •HMRC investigated and issued closure notices amending Film 2K's returns to remove the claimed losses.
- •Barklem, representing himself and six other investors, appealed the closure notices, which were upheld by agreement under s.54 TMA.
- •HMRC then amended Barklem's personal tax returns under s.28B(4) TMA, resulting in a substantial tax liability.
- •Barklem claimed declaratory relief arguing Film 2K was never a valid partnership, rendering the s.28B(4) notices invalid.
Legal Principles
Sideways tax relief is only available to partners in transparent partnerships carrying on a trade for profit.
Sections 380 and 381 of the Income and Corporation Taxes Act 1988 (ICTA 1988), ss. 381(4), 384(1) ICTA 1988
A notice of enquiry into a partnership return under s.12AC TMA is deemed to include a notice of enquiry under s.9A TMA into each partner's personal return.
Sections 12AC(6) and 9A TMA 1970
Section 28B TMA mandates amending partners' returns to reflect amendments made to a partnership return.
Section 28B TMA 1970
A s.54 TMA agreement upholding a decision without variation has the same effect as a judicial determination.
Section 54 TMA 1970
Challenges to s.28B(4) notices are usually made via judicial review, not Part 7 claims.
R (Amrolia) v Revenue and Customs Commissioners [2020] EWCA Civ 488; Knibbs v Revenue and Customs Commissioners [2019] EWCA Civ 1719
A finding that a partnership is not carrying on a business with a view to profit does not invalidate prior notices of enquiry or closure notices.
Revenue and Customs Commissioners v Inverclyde Property Renovation LLP [2020] UKUT 161 (TCC)
Outcomes
Claim struck out as an abuse of process.
The claim should have been brought as judicial review; the s.54 agreement upheld the closure notices, precluding a challenge; and the argument that s.28B(4) notices were invalid due to the lack of a partnership failed.