Glencore Energy UK Ltd, R (On the Application Of) v Revenue And Customs, England and Wales Court of Appeal (Civil Division), Judgment, Law, casemine.com

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Attorney(S)

Sam Grodzinski QC, James Henderson and James Segan (instructed by Freshfields Bruckhaus Deringer) for the Appellant
Timothy Brennan QC and Georgia Hicks (instructed by HMRC Solicitor's Office) for the Respondent

Judges

LORD JUSTICE SINGH
LORD JUSTICE SALES
LADY JUSTICE GLOSTER

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Glencore Energy UK Ltd, R (On the Application Of) v. Revenue And Customs

Smart Summary

Factual and Procedural Background

This case concerns the relationship between judicial review in the High Court and the tax appeal system involving the First-tier Tribunal (Tax Chamber) ("FTT") in the context of the Diverted Profits Tax ("DPT") introduced by Part 3 of the Finance Act 2015 ("FA 2015"). The respondent tax authority ("HMRC") issued a Preliminary Notice and subsequently a Charging Notice to the appellant company ("Company A") alleging liability to DPT for profits diverted to its parent company ("Company B") under a contractual arrangement ("the RSA"). Company A paid the tax and engaged in the statutory review process under section 101 FA 2015 but also sought judicial review of the Charging Notice on four grounds challenging the lawfulness of its issuance.

The High Court refused Company A permission to apply for judicial review, finding that suitable alternative remedies existed in the statutory review and appeal process and that the judicial review claim did not meet the threshold for intervention. The Court of Appeal granted permission to apply for judicial review and retained the case for substantive hearing. The present judgment addresses the substantive judicial review claim, considering both the availability of alternative remedies and the merits of Company A's grounds for judicial review.

Legal Issues Presented

Whether the statutory review under section 101 FA 2015, combined with the right of appeal to the FTT under section 102 FA 2015, constitutes a suitable alternative remedy to judicial review of a Charging Notice issued under the DPT regime.
Whether the Designated Officer applied the correct legal test when issuing the Charging Notice, specifically whether the "reason to believe" test applicable to Preliminary Notices was incorrectly applied instead of the stricter "considers that" test applicable to Charging Notices under the FA 2015.
Whether the Designated Officer failed to properly consider Company A's representations made after the Preliminary Notice and before the Charging Notice.
Whether the Designated Officer failed to give adequate reasons for the decision to issue the Charging Notice, particularly regarding the effective tax mismatch outcome and related tax rate concessions.
Whether the calculation of DPT in the Charging Notice, specifically the deductions for working capital (deduction (i)) and non-routine services (deduction (ii)), was irrational.

Arguments of the Parties

Appellant's Arguments

The Designated Officer wrongly applied the "reason to believe" test appropriate to Preliminary Notices rather than the stricter "considers that" test required for Charging Notices.
The Designated Officer failed to take into account Company A's representations submitted after the Preliminary Notice.
The Charging Notice failed to provide adequate or any reasons for the calculation of DPT and the rejection of Company A's representations.
The calculation of DPT was irrational, particularly the reduction of the working capital deduction by a factor of four and the nil valuation of non-routine services, both of which were challenged as lacking evidential basis.
The statutory review and appeal procedures are not a suitable alternative remedy because Company A had to pay a large sum upfront and could be out of its money for an extended period without the possibility of immediate judicial intervention to quash an unlawful Charging Notice.

Respondent's Arguments

The statutory review under section 101 FA 2015 and the right of appeal to the FTT under section 102 provide a suitable alternative remedy, consistent with established principles that judicial review is a remedy of last resort.
The Designated Officer applied the correct legal test in issuing the Charging Notice, as evidenced by the language of the notice and supporting evidence.
The Designated Officer did consider Company A's representations, and the statutory scheme does not require full reasons beyond what is specified in section 95(5) FA 2015.
The common law does not impose an additional duty to give full reasons in this context, and the statutory framework balances the interests of tax collection and taxpayer rights.
The challenged deductions in the DPT calculation were rationally made based on the evidence and information available, including the absence of sufficient detail from Company A regarding non-routine services.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Carltona Ltd v Commissioners of Works [1943] 2 All ER 560, CA	Principle on attribution of decision-making within public authorities.	The court held that the Carltona principle did not apply to attribute the reasoning of the HMRC team to the Designated Officer; however, it inferred that the Designated Officer adopted the reasoning in the team’s letter.
In re Preston [1985] 1 AC 835	Judicial review is generally not available to challenge appealable tax decisions except in exceptional cases involving abuse of power or fundamental unfairness.	The court applied Preston to confirm that the statutory review and appeal process is the suitable alternative remedy, and judicial review should be refused absent exceptional circumstances.
R (Veolia ES Landfill Ltd) v Revenue and Customs Commissioners [2015] EWCA Civ 747	Recognition of exceptional cases where judicial review of tax decisions is appropriate.	Referenced as an example of exceptional cases where judicial review is permitted, distinguished from the present case.
Harley Development Inc. v Comr of Inland Revenue [1996] 1 WLR 727, PC	Support for the principle that judicial review of tax decisions requires an additional element of impropriety or unfairness.	Supported the court's approach that ordinary tax disputes are to be resolved by appeal, not judicial review.
CC & C Ltd v Revenue and Customs Commissioners [2014] EWCA Civ 1653; [2015] 1 WLR 4043	Judicial review of tax decisions requires an additional element beyond ordinary errors of law.	Reinforced the principle that judicial review is limited to exceptional circumstances involving abuse of power.
Oakley v South Cambridgeshire DC [2017] EWCA Civ 71; [2017] 2 P&CR 4	Common law duty to give reasons and its context-dependent application.	The court rejected a broader common law duty to give reasons in the context of issuing Charging Notices under the DPT regime.
Lloyd v McMahon [1987] 1 AC 625	Fairness and the duty to give reasons depend on the nature of the decision and statutory framework.	Applied to support that the statutory scheme governs the duty to give reasons in this context.
R v Secretary of State for the Home Department, ex p. Doody [1994] 1 AC 531	Common law duty to act fairly and give reasons varies with context.	Supported the conclusion that no additional duty to give full reasons arises beyond the statutory requirements.
R (Corner House Research) v Director of the Serious Fraud Office [2008] UKHL 60; [2009] 1 AC 756	Discretionary consideration of representations beyond mandatory grounds.	Supported the interpretation that the Designated Officer may consider representations beyond those mandatory under section 94(3) FA 2015.
R v Hallstrom, ex p. W [1986] QB 824	Factors to consider in assessing suitability of alternative remedies include relative speed.	Referenced in discussion of whether statutory appeal procedures are suitable alternatives to judicial review despite delay.

Court's Reasoning and Analysis

The court first addressed whether the statutory review and appeal procedures under the DPT regime provide a suitable alternative remedy to judicial review. It acknowledged the general principle that judicial review is a remedy of last resort and that where Parliament has provided a comprehensive statutory scheme for review and appeal, courts should be slow to intervene by judicial review unless exceptional circumstances exist. The court found no exceptional circumstances in this case. The statutory regime balances the public interest in timely tax collection with the taxpayer's right to challenge the assessment, including repayment with interest if the taxpayer ultimately succeeds.

The court rejected the appellant's argument that the mandatory review period and upfront payment made the statutory remedy unsuitable. It held that the review period serves a legitimate purpose of facilitating information exchange and dispute resolution prior to appeal, and that Parliament’s choice to require early payment with subsequent review and appeal is reasonable and fair.

On the merits, the court found that the Designated Officer applied the correct legal test in issuing the Charging Notice, despite some overlapping language with the Preliminary Notice. The explicit statement that the conditions of section 80 were "considered to be met" demonstrated the requisite state of mind.

The court accepted that the Designated Officer did consider the taxpayer's representations, although the Charging Notice did not explicitly reflect this. It concluded that the statutory obligation to provide reasons (section 95(5)(b)) was satisfied by setting out the basis on which the tax was charged and that no additional common law duty to give fuller reasons arose in this context. The court emphasized that imposing such a duty could undermine the statutory regime and encourage premature judicial review challenges.

Regarding the alleged irrationality in the calculation of the tax, the court held that the appellant's objections were challenges to principle rather than arithmetical errors and that the Designated Officer had a discretion to make best estimates based on available information. The appellant failed to provide sufficient evidence to demonstrate irrationality, particularly given the absence of the PwC report and the limited detail on non-routine services. The court found the estimates rational and consistent with the statutory framework.

Holding and Implications

The court's final decision is DISMISSED. It refused to grant relief by way of judicial review, holding that the statutory review and appeal mechanisms provide a suitable and sufficient alternative remedy. Furthermore, the appellant's grounds for judicial review were not made out on their merits.

The direct effect of this decision is that Company A must continue to pursue its challenges to the DPT assessment through the statutory review and appeal process rather than by judicial review. The court reaffirmed the principle that judicial review is a remedy of last resort in tax matters where Parliament has provided a full merits appeal procedure. No new precedent was set beyond confirming the application of established principles to the DPT context.