Nigel Barklem v The Commissioners for HMRC
[2024] EWHC 651 (Ch)
Ian Austick v The Commissioners for HMRC
21 August 2024
[2024] EWHC 2175 (Ch)
High Court
Mr. Austick got a tax refund, but HMRC later said he owed money because they found a mistake in the claim. The court decided Mr. Austick should have challenged HMRC's process differently (through judicial review, not a regular lawsuit). Even though he used the wrong method, the court looked at the case anyway and decided HMRC was right – Mr. Austick does owe more tax, but the exact amount needs to be figured out separately.
Key Facts
- •Mr. Austick claimed a tax repayment of £35,000 based on losses from a partnership in a film scheme.
- •HMRC enquired into the partnership's tax return and reduced the allowable losses, resulting in a demand for repayment of over £50,000.
- •Austick argued that HMRC's procedure for disallowing the losses did not create an enforceable tax liability.
- •HMRC argued that the claim should have been brought via judicial review and sought to strike out the claim.
- •The central issue was whether HMRC's procedure, including a Partner Notice under Section 28B(4) Taxes Management Act 1970 (TMA), created a valid tax liability.
Legal Principles
It is an abuse of process to bring a claim by ordinary proceedings which should be brought by judicial review to take advantage of longer limitation periods.
White Book, paragraph 3.4.3.7; Clark v University of Lincolnshire and Humberside [2000] 1 WLR 1988
Claims primarily concerning public law issues, not private rights, should be brought via judicial review. Exceptions exist, such as when a public authority initiates enforcement proceedings.
Knibbs v HMRC [2019] EWCA Civ 1719; Barklem v HMRC [2024] EWHC 651 (Ch)
A carry-back claim for trading losses must be included in the tax return for the year the loss arose (year 2), per De Silva, even though Schedule 1B TMA disapplies Section 42(2) TMA.
R (De Silva) v HMRC [2017] UKSC 74; sections 381 Income and Corporation Taxes Act 1988, s 42 TMA, Schedule 1B TMA
HMRC can recover wrongly paid tax relief by adjusting the amount chargeable to income tax (per De Silva), even if the Partner notice doesn't explicitly quantify additional income.
R (De Silva) v HMRC [2017] UKSC 74
Outcomes
Claim struck out as an abuse of process.
The claim challenged HMRC's procedure, a public law issue, and should have been brought via judicial review. The threat of enforcement action does not change this.
HMRC's Partner Notice under s 28B(4) TMA created an enforceable tax liability.
The notice implicitly adjusted the amount chargeable to income tax, effectively amending Austick's tax return and resulting in a tax debt, even without explicit quantification of additional income.
No declarations made regarding the precise amount of tax due.
Insufficient evidence available to determine the current tax due given the lack of information about self-assessment account movements since 2011; not requested by parties.