The Government crackdown on tax avoidance is continuing apace and, nowadays, those faced with disputed tax demands are often required to pay now and appeal later. Exactly that happened in one case concerning partnerships that invested in commercial property with a view to taking advantage of business premises renovation allowances introduced by the Finance Act 2005.
Members of the partnerships sought to set off losses said to have been incurred on renovation projects against their personal tax bills. An example was the conversion of an office block into a hotel on which one of the partnerships claimed to have spent almost £12.5 million. Following an enquiry, however, HM Revenue and Customs (HMRC) disallowed almost £5.3 million of that sum.
HMRC took a similar stance in respect of other projects and members were issued with Partner Payment Notices (PPNs) under the accelerated payment provisions of the Finance Act 2014, requiring them to pay additional tax that HMRC assessed to be due. Appeals against those demands were lodged with the First-tier Tribunal, but they were payable immediately.
In ruling on a judicial review challenge brought by a group of members, the High Court found that the statutory conditions for the issue of PPNs had been met and that there was no public law reason – such as mistake of fact, abuse of power or irrationality – to impugn HMRC’s exercise of its powers. Other grounds of challenge to the PPNs would be considered at a further hearing.