Introduction

The case of Archer, R (on the application of) v. HM Revenue and Customs ([2019] EWCA Civ 1021) presents a pivotal decision by the England and Wales Court of Appeal (Civil Division) concerning the procedural prerequisites for challenging a tax assessment through judicial review. Mrs. Shirley Archer and her husband, Mr. William Archer, challenged the issuance of Accelerated Payment Notices (APNs) by HM Revenue and Customs (HMRC), which were issued under the Finance Act 2014 (FA 2014) pertaining to tax avoidance schemes.

The appeal primarily revolved around whether the taxpayers had adequately exhausted alternative remedies provided under section 222 of FA 2014 before seeking judicial review. The court's decision holds significant implications for taxpayers and legal practitioners navigating the complexities of tax avoidance regulations and the judicial review process.

Summary of the Judgment

The Archers received APNs from HMRC, alleging involvement in a Disclosure of Tax Avoidance Schemes (DOTAS) arrangement. They contested the validity and application of these notices, leading to prolonged negotiations and eventual judicial review proceedings. The Core issue was whether the taxpayers had first utilized the procedural remedy under section 222, which mandates making written representations to HMRC before escalating to judicial review.

The Court of Appeal upheld the decision that Mrs. Archer's initiation of judicial review was premature since she failed to exhaust the alternative remedies provided by section 222. Consequently, the court dismissed Mrs. Archer's appeal for costs, emphasizing that judicial review should remain a remedy of last resort, reserving it for situations where other procedural avenues have been duly pursued and exhausted.

Analysis

Precedents Cited

The judgment extensively referenced key cases that reinforce the principle that judicial review should be a last resort. Notable among these were:

These precedents collectively underpin the court's stance on ensuring that taxpayers utilize available procedural remedies before resorting to judicial intervention.

Legal Reasoning

The court's legal reasoning centered on interpreting section 222 of FA 2014, which mandates taxpayers to submit written representations to HMRC upon receiving an APN. The court underscored that:

• Judicial Review as a Last Resort: Aligning with established legal principles, the court reaffirmed that judicial review should only be pursued when alternative statutory remedies are inadequate or have been duly exhausted.
• Exhaustion of Section 222 Remedies: The Archers were obligated to fully engage with the section 222 process, which includes making detailed representations to HMRC. Their failure to do so before initiating judicial review constituted a procedural misstep.
• Distinction from DPT Regime: While acknowledging the differences between the APN and DPT regimes, the court maintained that the fundamental principle of prioritizing statutory remedies over judicial review remained consistent.
• Steps for Judicial Review: The court emphasized that taxpayers should not commence legal proceedings as a precautionary measure but should genuinely reserve judicial review for instances where the statutory procedures fail to provide adequate redress.

The Master’s decision was found to be sound in withholding costs from Mrs. Archer due to her premature initiation of judicial review without fully utilizing section 222.

Impact

This judgment has significant ramifications for both taxpayers and legal practitioners:

• Procedural Compliance: Taxpayers are now more clearly required to engage exhaustively with procedural remedies like section 222 before seeking judicial review, reinforcing the hierarchy of remedies.
• Judicial Efficiency: By mandating the use of alternative procedural mechanisms, the court aims to reduce unnecessary litigation, thereby conserving judicial resources.
• Legal Strategy: Lawyers advising clients on tax matters must ensure that all procedural avenues are explored and documented before considering judicial review, thus influencing litigation strategies and client advisories.
• HMRC Enforcement: Strengthens HMRC’s position in enforcing tax assessments, provided procedural requirements are met, while also holding taxpayers accountable for adhering to established remedies.

Complex Concepts Simplified

Accelerated Payment Notices (APNs)

APNs are statutory notices issued by HMRC to taxpayers, requiring immediate payment of disputed tax amounts while the dispute is ongoing. They aim to deter tax avoidance by ensuring that HMRC has financial leverage until the resolution of the dispute.

Section 222 of the Finance Act 2014

This section provides taxpayers with the right to make written representations to HMRC after receiving an APN. HMRC must consider these representations and either confirm the APN, amend it, or withdraw it based on the merits of the taxpayer’s objections.

Judicial Review

Judicial review is a legal process by which individuals can challenge the lawfulness of decisions or actions taken by public bodies, such as HMRC. However, it is considered a remedy of last resort, intended to be used only after all other internal or statutory remedies have been exhausted.

Remedy of Last Resort

This legal principle dictates that individuals should utilize all available internal or statutory procedures to resolve disputes before seeking judicial intervention. It helps prevent premature litigation and ensures that courts are reserved for cases where other remedies have failed.

Conclusion

The Archer v HMRC judgment reinforces the established legal doctrine that judicial review should be considered only after all procedural remedies, such as those provided under section 222 of FA 2014, have been fully engaged and exhausted. By mandating the use of these alternatives, the court aims to streamline dispute resolution, minimize unnecessary litigation, and uphold the integrity of statutory procedures.

This decision serves as a crucial precedent for future tax-related disputes, emphasizing the necessity for taxpayers to adhere strictly to procedural requirements before seeking judicial remedies. Legal practitioners must now place greater emphasis on guiding clients through the exhaustion of alternative remedies, ensuring compliance with statutory frameworks, and safeguarding against unnecessary costs associated with premature legal challenges.

Ultimately, Archer v HMRC underscores the judicial preference for resolving disputes through established procedural mechanisms, reserving judicial intervention for cases where these mechanisms prove insufficient, thereby promoting a more efficient and orderly legal system.