High Court rejects challenge to the legality of PPNs (Rowe and Others v HMRC)

On 31 July 2015 the High Court decision in the case of Nigel Rowe and others v HMRC [2015] EWHC 2293 (31 July 2015) was issued. The case concerned the challenge, brought by a group of 154 taxpayers, against the legality of Partner Payment Notices (PPNs) and was dismissed on a number of grounds.


Nigel Rowe and Alec Worrall were nominated as lead cases from a group of 154 investors who had each participated in Ingenious Media schemes designed to generate tax losses. These losses were incurred by film partnerships and allocated to the individual partners who then claimed sideways loss relief by offsetting their losses against other income and gains in the year of the loss, or by carry back of the loss to the earlier year, or both. The substantive tax dispute as to whether these losses may be claimed is currently being litigated at the First-tier Tribunal (FTT).

FA 2014 introduced legislation allowing HMRC to issue Accelerated Payment Notices (APNs) in certain circumstances, requiring taxpayers to make an upfront payment of tax which remains in dispute. The groups of investors in this case each received a PPN, the version of an APN used where a partnership is concerned. There is no right of appeal against such a notice and the group therefore initiated judicial review proceedings.

Their grounds for claiming that the notices were invalid are as follows:

  1. The statutory scheme under which the PPNs were issued was unfair as the claimants had not been granted the opportunity to dispute whether the tax demanded under the notice was in fact due.
  2. The notices were ultra vires as Condition B S219 was not met, being that a tax advantage is gained from particular tax arrangements. The claimants argued that the condition could not be satisfied in relation to carry back or standalone claims.
  3. The notices were in breach of the taxpayers’ legitimate expectation that the tax would not be due until the dispute had been settled.
  4. The decision to issue the notices was unreasonable and irrational as HMRC had exercised no discretion in doing so.
  5. The issue of the notices had been in breach of the European Convention for the Protection of Human Rights (ECHR) Article 1 of the First Protocol (right to protection of property) and Article 6 (right to a fair trial).


The High Court found in favour of HMRC in respect of their responses on all points:

  1. The judge found that the PPNs had been lawfully issued and the scheme was neither unfair nor insufficient to achieve justice. The PPN did not determine the final liability and the taxpayers had recourse to appeal the underlying tax liabilities at the FTT, which in this case had already been done.
  2. It was decided that Condition B S219 had been met as the mechanics of the tax advantage did not alter the fact that losses had been claimed as a result of the arrangements used.
  3. The judge found that no legitimate expectation had been established as ‘there was simply no evidence of a practice that had been so unambiguous, so widespread, so well established and so well recognised as to carry within it a commitment to the taxpayers of continued treatment in accordance with it’. In addition, the new powers were contained in primary legislation and removed all pre-existing rights.
  4. The decision to issue the notices was neither unfair nor unreasonable but rather ‘represented a lawful exercise of the statutory discretion conferred by the Act’. The judge added that ‘there was nothing wrong with a general rule that, when the statutory criteria were met, the discretion would be exercised by issuing the notice, save in exceptional circumstances’. It was concluded that there had been no irrationality and HMRC had lawfully exercised their discretion.
  5. The judge found that there had been no breach of Article 1 in relation to property as it not yet been properly established that the claimants were entitled to the tax deductions which remained in dispute. In respect of Article 6 it was decided that the sums demanded under the PPN were in effect payments on account of tax and therefore did not relate to a criminal charge.

What now?

Given the amounts at stake, and the damaging financial impact of the PPNs, the claimants in this case intend to have their appeal heard at the Court of Appeal.

The High Court has strongly rejected a challenge against the legality of the PPNs and those expecting to receive such a notice, or APN, should prepare themselves for the eventuality that the tax demanded will be due.

For further information regarding this settlement opportunity and others currently offered by HMRC, please call TaxDesk on 0845 4900 509 and ask for Isobel Clift.