The case concerned three of many judicial review claims relating to APNs and PPNs, and looked specifically at the question of being granted interim relief so that HMRC could not enforce the APN before their claim was decided. [The Queen on the applications of VVB Engineering Services Ltd (and others), Mary Howard Sales Ltd (and others), and MKGH Ltd, and the Commissioners for Her Majesty’s Revenue and Customs, [2017] EWHC 506].

On 9 November 2016, the three sets of proceedings were stayed behind Rowe v R & C Commrs [2015] BTC 27 which is presently on appeal to the Court of Appeal. At the same time, the claimants were refused their application for interim relief, and in this subsequent case were seeking to vary that part of the order, submitting that interim relief should be granted without conditions.

HMRC told the High Court that in the event that interim relief was granted without conditions, it would be prevented from recovering a sum in excess of £11m in the three claims. In total there are 4,116 applicants or potential applicants seeking interim relief from APNs/PPNs which HMRC's records show amount to a total sum in excess of £756m.

HMRC said it had concerns about companies which are now in fact (despite their assertions to the contrary) in a position to pay, who may not be in a position to pay at the conclusion of the litigation. The judge agreed, saying that ‘in these circumstances the public interest favours HMRC being permitted to enforce payment of the sums due under the APNs before further changes in the companies' fortunes mean that this is no longer possible.’

In his ruling, the judge said the central issue was ‘where the balance of convenience lies’. He quoted the observation of the judge at the initial court hearing that: ‘Anyone who enters into a tax avoidance scheme takes the risk that the scheme will fail and that ultimately the tax will be payable. The legislation accelerates the requirement to make the “at risk” payment pending determination of the dispute but the risk was always there, and must have been anticipated.’

He also pointed out that APNs had been enacted by Parliament as ‘a statutory scheme intended to operate broadly across a wide range of tax avoidance schemes to remove the cash-flow advantage pending enquiry and appeal’.

The judge further agreed with HMRC’s position that ‘hardship’ was defined as a situation whereby if the claimant had to pay the amount specified in the APNs, even by instalments over the next year, it would be unable to trade/run its business in the manner in which it ordinarily operates, that is, it would be unable to meet its reasonable trading/business expenses.

Taking these points together, the judge ruled that the claimants were not entitled to interim relief without conditions. He also pointed out that they so far provided only ‘very limited’ evidence that they would suffer hardship such as to justify the grant of interim relief in their favour, but he did give them a short period in which to decide whether to supply such evidence to HMRC with a view to reaching agreement on interim relief.

Sarah Arnold, tax contributor at Wolters Kluwer said: ‘The High Court ruled that interim relief could not be granted without conditions and was conditional on establishing hardship. Furthermore, the evidence required to support relief being granted would have to show that the ordinary operation of the business would be significantly undermined if not placed in jeopardy by making payment (i.e. the claimant would be unable to meet its reasonable trading/business expenses and, therefore, unable to trade/run its business).

‘However, the claimants have been permitted to provide such evidence and then either agree the matter with HMRC or re-list the application for determination by the court.’

The Queen on the applications of VVB Engineering Services Ltd (and others), Mary Howard Sales Ltd (and others), and MKGH Ltd, and the Commissioners for Her Majesty’s Revenue and Customs, [2017] EWHC 506 is here.