Case Law: High Court Rules on HMRC's Notice Publication in Easyway Umbrella Limited

Citation: [2023] EWHC 3368 (Admin)
Judgment on

Introduction

In the recent case of Easyway Umbrella Limited, R (on the application of) v HMRC [2023] EWHC 3368 (Admin), the High Court of Justice dealt with a judicial review challenge against the publication of a notice under section 86 of the Finance Act 2022 by HM Revenue & Customs (HMRC). The case addresses several key legal principles, including procedural fairness in administrative decisions, standards for giving reasons in administrative law, rationality of decision-making, and the protection of property rights under the European Convention on Human Rights (ECHR).

Key Facts

Easyway Umbrella Limited (the claimant) challenged HMRC’s decision to publish a notice on its website, which asserted that the claimant was enabling tax avoidance through arrangements that allowed employees to receive untaxed income. The claimant argued that it had not received the initial notification letter from HMRC and was therefore deprived of the chance to make representations against the publication, thereby breaching the requirement of procedural fairness.

The court’s analysis focused on four primary areas:

  1. Procedural Fairness: Any decision-making process must afford the affected parties the opportunity to make representations, as mandated by section 86(5) of the Finance Act 2022. This challenge was considered arguable, given the claimant’s contention of non-receipt of HMRC’s notification letter.

  2. Duty to Give Reasons: Derived from South Buckinghamshire District Council v Porter (No.2) [2004] 1 WLR 1953, where Lord Brown established that decision-makers must provide adequate reasons for their decisions, the claimant alleged that HMRC failed this standard. However, the court found HMRC’s reasoning sufficient and dismissed this argument.

  3. Rationality of the Decision to Publish: Invoking the principle from Shaaban bin Hussien v Chung Fook Kam [1970] AC 942, which sets a low bar of “suspicion” to justify action, the court found that HMRC had rational grounds for suspecting tax-deferral arrangements and subsequently publishing the notice.

  4. Violation of A1P1 (ECHR): The claimant argued that the publication infringed on its A1P1 right to the protection of its possessions. However, citing Lord Reed in AXA General Insurance Ltd & Ors. v The Lord Advocate [2012] 1 AC 868, the court concluded that the claimant’s future business opportunities were not possessions under A1P1 and that, even if they were, the legislative regime struck a fair balance between the community’s general interest and individual’s rights.

Additionally, the court explored if a different outcome would likely have occurred if the claimant had indeed received the letter and made representations, according to section 31(3C) and (3D) of the Senior Courts Act 1981. The court concluded that the outcome would not have been substantially different, resulting in refusal of permission to apply for judicial review.

Outcomes

The court granted permission for judicial review based on the argument related to procedural fairness but ultimately refused permission under the Senior Courts Act 1981 provisions by concluding that it was highly likely the outcome would not have been substantially different. Hence, the application for judicial review was refused on all grounds.

Conclusion

The Easyway Umbrella Limited case reaffirms significant legal principles within administrative law, emphasizing the low threshold for HMRC to act upon suspicion of tax avoidance arrangements and the circumscription of the duty of fairness and giving reasons to the provision of enabling statutes. Moreover, the case underscores that, within the context of A1P1 claims, the prospective economic interests of a business do not amount to possessions warranting the protection of property rights under ECHR. The case has important implications for businesses and their potential exposure to HMRC’s use of section 86 notices, as well as the scope of judicial review in challenging such administrative decisions.

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